Document:

Exhibit 10.1

SECOND AMENDMENT TO

CREDIT AGREEMENT

THIS SECOND
AMENDMENT TO CREDIT AGREEMENT (this “Second Amendment”),
dated as of June 8, 2006 (the “Second Amendment Closing Date”) is
among HILAND OPERATING, LLC, a
Delaware limited liability company (the “Borrower”), the banks and other
financial institutions listed on the signature pages hereto (together with
each other person who becomes a Lender, collectively the “Lenders”), and
MIDFIRST BANK, a federally
chartered savings association, individually as a Lender and as the
Administrative Agent (the “Administrative Agent”).

Preliminary Statement

WHEREAS, the
Borrower, the Administrative Agent and the Lenders are parties to that certain
Credit Agreement dated as of February 15, 2005 (as same may be further amended,
restated, increased and extended, the “Original Credit Agreement”),
under and subject to the terms of which the Lenders have committed to make
Revolving Loans and issue Letters of Credit to the Borrower; and

WHEREAS, the
Borrower, the Administrative Agent and the Lenders are parties to that certain
First Amendment to Credit Agreement dated as of September 26, 2005 (the “First
Amendment, and together with Original Credit Agreement, the “Credit
Agreement”); and

WHEREAS, the
Borrower has requested that the Administrative Agent and Lenders modify the
Credit Agreement to change certain terms thereof, including, among other
things, to increase the size of the Commitments from $125,000,000 to
$200,000,000, revise certain covenants, and to extend the maturity; and

WHEREAS, the
Administrative Agent and Lenders have agreed to modify the Credit Agreement in
accordance with the terms and conditions contained in this Second Amendment;
and

WHEREAS, the
Borrower, the Administrative Agent and the Lenders wish to execute this Second
Amendment to evidence such agreement;

NOW, THEREFORE, in
consideration of the premises and the mutual covenants herein contained and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Borrower, the Administrative Agent and the Lenders
hereby agree as follows (all capitalized terms used herein and not otherwise
defined shall have the meanings as defined in the Credit Agreement):

Section 1.               Amendment
to Section 1.01. Section 1.01 of the Credit Agreement is hereby
amended as follows:

(a)                                  The
following definition of “Adjusted EBITDA” is hereby added in proper
alphabetical order:

 

 

“Adjusted EBITDA” means, with respect to the
Parent, the Borrower and its Subsidiaries for any period, Consolidated Net
Income for such period plus, without duplication and to the extent
reflected as a charge in the statement of such Consolidated Net Income for such
period, the sum of (a) income tax expense, (b) interest expense,
amortization or write-off of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with Indebtedness
(including the Indebtedness in respect of the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles and organization
costs, (e) any extraordinary non-cash expenses or losses determined in
accordance with GAAP, (f) any extraordinary, unusual or non-recurring cash
losses, (g) non-cash
unit-based compensation expense and (h) non-cash loss on any Swap
Agreements and minus, (i) to the extent included in the
statement of such Consolidated Net Income for such period, any extraordinary,
unusual or non-recurring non-cash income or gains (including, whether or not otherwise includable as a separate item in
the statement of such Consolidated Net Income for such period, gains on the
sales of assets outside of the ordinary course of business and non-cash gains
on Swap Agreements) and (ii) any cash payments made during such
period in respect of non-cash expenses or losses and subsequent to the fiscal
quarter in which the relevant non-cash expenses or losses were reflected as a
charge in the statement of Consolidated Net Income, all as determined on a
consolidated basis.  For purposes of
calculating Adjusted EBITDA of the Parent, the Borrower and its Subsidiaries
for any period for the purposes of Section 6.17 and Section 6.18
of this Agreement, (i) the earnings before interest, taxes, depreciation
and amortization calculated as set forth above of any Person or assets acquired by the Borrower or its Subsidiaries (including but not
limited to the Bakken System and Kinta Area Gathering System) during such
period shall be included using the annualized historical financial results for
the period in which the Borrower or one of its Subsidiaries has owned such
Person or assets until such as time as the Borrower or one of its Subsidiaries
has owned such assets for a period of at least twelve (12) months) on a pro
forma basis for such period as if such acquisition, and the incurrence or
assumption of any Indebtedness in connection therewith, had occurred on the
first day of such period and based upon the financial statements and other
information delivered to the Administrative Agent pursuant to Section 5.01
hereof, and (ii) the earnings before interest, taxes, depreciation and
amortization calculated as set forth above of any Person or assets Disposed of
by the Borrower or its Subsidiaries during such period shall be excluded, on a pro
forma basis for such period (if positive) as if such Disposition, and the
payment of any Indebtedness in connection therewith, had occurred on the first
day of such period and based upon the financial statements and other
information delivered to the Administrative Agent pursuant to Section 5.01
hereof.”

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(b)                                 The
definition of “Applicable Rate” is hereby amended by deleting such
definition in its entirety and replacing it with the following:

““Applicable Rate” means, for any day during
any period between two successive Financial Statement Delivery Dates commencing
on the first Financial Statement Delivery Date in such period and ending on the
day before the next following Financial Statement Delivery Date, with respect
to any ABR Loan, Eurodollar Revolving Loan, and with respect to the commitment
fees payable hereunder, as the case may be, the applicable margin per annum set
forth in the appropriate column below under the caption “ABR Spread,” “Eurodollar
Spread” or “Unused Commitment Fee Rate,” as the case may be, for the Leverage
Ratio for the fiscal period for which such financial statements were delivered
as of the Financial Statement Delivery Date:

	
  Leverage Ratio:

  	
   

  	
  ABR

  Spread

  	
   

  	
  Eurodollar

  Spread

  	
   

  	
  Unused

  Commitment

  Fee Rate

  	
   

  
	
  Less than
  2.5:1.0

  	
   

  	
  0.50

  	
  %

  	
  1.50

  	
  %

  	
  0.25

  	
  %

  
	
  Greater than or
  equal to 2.5:1.0 but less than 3.0:1.0

  	
   

  	
  0.75

  	
  %

  	
  1.75

  	
  %

  	
  0.375

  	
  %

  
	
  Greater than or
  equal to 3.0:1.0 but less than 3.50:1.0

  	
   

  	
  1.00

  	
  %

  	
  2.00

  	
  %

  	
  0.375

  	
  %

  
	
  Greater than or equal
  to 3.50 to 1.0

  	
   

  	
  1.25

  	
  %

  	
  2.25

  	
  %

  	
  0.50

  	
  %

  

 

For purposes of the foregoing, (a) if sufficient
information does not exist to calculate the Applicable Rate, or the Borrower
has not delivered such information to the Administrative Agent in a timely
manner, Eurodollar Borrowings shall not be available to the Borrower and the
Applicable Rate for ABR Loans shall be 1.75% per annum and for the commitment
fee shall be 0.50% per annum; and (b) if the Leverage Ratio shall change
upon delivery of any financial statements required under Section 5.01,
such change in the Applicable Rate shall be effective as of the date on which
any such financial statement is delivered, irrespective of whether it is in the
middle of an Interest Period or when notice of such change shall have been
furnished by the Borrower to the Administrative Agent and the Lenders pursuant
to Section 5.01 hereof or otherwise. Each change in the Applicable
Rate shall apply during the period commencing on the effective date of such
change and ending on the date immediately preceding the effective date of the
next such change. Notwithstanding the above, (i) the Applicable Rate from the
Effective Date (as such term is defined in the Second Amendment) through the
first Financial Statement Delivery Date occurring after June 30, 2006
shall be 0.75% for ABR Loans and 1.75% for Eurodollar Revolving Loans and the
commitment fee rate shall be 0.375% and (ii) the Applicable Rate during
any Step-Up Period shall be increased by 0.35% for ABR Loans and for Eurodollar
Revolving Loans and the commitment fee shall be increased by 0.125%.”

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(c)                                  The
definition of “Change in Control” is hereby amended by deleting such
definition in its entirety and replacing it with the following:

““Change in Control” means the occurrence of
any of the following events:  (a) the
Hamm Parties cease to own and control, directly or indirectly, more than 50% of
the voting interests in the General Partner; (b) the General Partner shall
cease to own and control, of record and beneficially, directly, 100% of the
general partner interests in the Parent; (c) the Parent shall cease to own
and control, of record and beneficially, 100% of the membership interests of
the Borrower; or (d) any “person” or “group” (as such terms are used in Sections
13(d) and 14(d) under the Exchange Act), other than  the Hamm Parties, shall become, or obtain
rights (whether by means or warrants, options or otherwise) to become, the “beneficial
owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act) directly or indirectly, of, in the aggregate, more than 20% of
the total number of Outstanding Units or Outstanding Partnership Securities (as
defined in the Partnership Agreement).”

(d)                                 The
following definition of “Commitment Increase Agreement” is hereby added
in proper alphabetical order:

““Commitment Increase Agreement” has the
meaning assigned to such term in Section 2.20.”

(e)                                  The
following definition of “Commitment Increase Notice” is hereby added in
proper alphabetical order:

““Commitment
Increase Notice” has the meaning assigned to such term in Section 2.20.”

(f)                                    The
following definition of “Common Units” is hereby added in proper alphabetical
order:

““Common Units”
has the meaning assigned to such term in the Partnership Agreement.”

(g)                                 The
definition of “Consolidated EDITDA” is hereby deleted in its entirety.

(h)                                 The
following definition of “Consolidated Funded Debt” is hereby added in
proper alphabetical order:

““Consolidated Funded Debt” means, as of any
date of determination, all interest bearing Indebtedness of the Borrower and
its Subsidiaries which is evidenced by promissory notes, indentures, loan
agreements, bonds or similar instruments, as such amount is required to be
shown on the Borrower’s consolidated balance sheet as of that date prepared in
accordance with GAAP (including, without limitation, all Capital Lease
Obligations and all subordinated Indebtedness).”

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(i)                                     The
definition of “Consolidated Indebtedness” is hereby deleted in its
entirety.

(j)                                     The
definition of “Consolidated Tangible Net Worth” is hereby deleted in its
entirety.

(k)                                  The
definition of “Interest Coverage Ratio” is hereby amended by deleting
such definition in its entirety and replacing it with the following:

““Interest Coverage Ratio” means, at any date,
the ratio of (i) Adjusted EBITDA to (ii) Consolidated Interest
Expense, in each case for the period of four consecutive fiscal quarters most
recently ended on or prior to such date for which financial information is
available.”

(l)                                     The
following definition of “Kinta Area Gas Gathering System” is hereby
added in proper alphabetical order:

““Kinta Area Gas Gathering System” means the
Kinta-area pipeline system and gas gathering systems located in eastern
Oklahoma.”

(m)                               The
definition of “Leverage Ratio” is hereby amended by deleting such
definition in its entirety and replacing it with the following:

““Leverage Ratio” means, at any date, the ratio
of (i) Consolidated Funded Debt at such date to (ii) Adjusted EBITDA
for the four consecutive fiscal quarters most recently ended on or prior to
such date for which financial information is available.”

(n)                                 The
definition of “Maturity Date” is hereby amended by deleting such
definition in its entirety and replacing it with the following:

““Maturity Date” means May 31, 2011.”

(o)                                 The
following definition of “New Lender” is hereby added in proper
alphabetical order:

““New Lender” has the meaning assigned to such
term in Section 2.20(c).”

(p)                                 The
following definition of “New Lender Agreement” is hereby added in proper
alphabetical order:

““New Lender Agreement” has the meaning
assigned to such term in Section 2.20(c).”

(q)                                 The
following definition of “Re-Allocation Date” is hereby added in proper
alphabetical order:

““Re-Allocation Date” has the meaning assigned
to such term in Section 2.20.”

 

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(r)                                    The
definition of “Required Lenders” is hereby amended by deleting such
definition in its entirety and replacing it with the following:

““Required Lenders” means, at any time, Lenders
having Revolving Credit Exposures representing more than fifty-one percent
(51%) of the sum of the total Revolving Credit Exposures or, if at such time no
Lenders have Revolving Credit Exposure, Lenders having unused Commitments
representing more than fifty-one percent (51%) of the unused Commitments at
such time.”

(s)                                  The
definition of “Revolver A Commitment” is hereby amended by deleting such
definition in its entirety and replacing it with the following:

““Revolver A Commitment” means, with respect to
each Lender, the commitment of such Lender to make Revolver A Loans and to
acquire participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender’s Revolver A Credit
Exposure hereunder, as such commitment may be (a) reduced from time to
time pursuant to Section 2.09, (b) increased from time to time
pursuant to Section 2.20, and (c) reduced or increased from
time to time pursuant to assignments by or to such Lender pursuant to Section 9.04.
The initial amount of each Lender’s Revolver A Commitment is set forth on Schedule
2.01, or in the Assignment and Assumption pursuant to which such Lender
shall have assumed its Commitment, as applicable. The initial aggregate amount
of the Lenders’ Revolver A Commitments is $191,000,000.”

(t)                                    The
definition of “Revolver B Commitment” is hereby amended by deleting such
definition in its entirety and replacing it with the following:

““Revolver B Commitment” means, with
respect to each Lender, the commitment of such Lender to make Revolver B
Loans, expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolver B Credit Exposure hereunder, as such commitment may be (a) reduced
from time to time pursuant to Section 2.09, and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04. The initial amount of each Lender’s
Revolver B Commitment is set forth on Schedule 2.01, or in the
Assignment and Assumption pursuant to which such Lender shall have assumed its
Commitment, as applicable. The aggregate amount of the Lenders’ Revolver B
Commitments is $9,000,000.”

(u)                                 The
following definition of “Second Amendment” is hereby added in proper
alphabetical order:

““Second Amendment” means that certain Second
Amendment to Credit Agreement by and between the Borrower, the Administrative
Agent and 

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the Lenders dated as of the Second Amendment Closing
Date, amending this Agreement.”

(v)                                 The
following definition of “Second Amendment Closing Date” is hereby added
in proper alphabetical order:

““Second Amendment Closing Date” shall mean June 8,
2006.”

(w)                               The
following definition of “Secondary Offering” is hereby added in proper
alphabetical order:

““Secondary Offering” means a secondary
offering and sale of Common Units to the public.”

(x)                                   The
definition of “Security Documents” is hereby deleted in its entirety and
replaced with the following:

““Security Documents” means the guaranty of
each of the Guarantors, together with any guaranty delivered pursuant to Section 5.16
hereof, and any and all other security agreements, pledge agreements,
mortgages, deeds of trust, leasehold mortgages, leasehold deeds of trust,
guaranty agreements, landlord’s consents, estoppels, assignments, UCC financing
statements and all similar documents executed by any Person in connection
herewith, including, without limitation, all documents and instruments listed
on Schedule 1.01 attached hereto, together with any agreements delivered
pursuant to Section 5.12 hereof, granting to the Administrative
Agent for the benefit of the Lenders a first Lien and security interest in
substantially all of the Collateral of the Borrower and its Subsidiaries as
security for the Obligations, including, without limitation, any such documents
or agreements delivered with respect to the Bakken System pursuant to the First
Amendment or with respect to the Kinta Area Gas Gathering System pursuant to
the Second Amendment, in each case subject only to Liens permitted by Section 6.02
hereof.”

(y)                                 The
following definition of “Specified Acquisition” is hereby added in
proper alphabetical order:

““Specified Acquisition” shall have the meaning
set forth in Section 6.18.”

(z)                                   The
following definition of “Step-Up Period” is hereby added in proper
alphabetical order:

““Step-Up Period” shall have the meaning set
forth in Section 6.18.”

Section 2.               Amendment to Section 2.06(b).
The last sentence of Section 2.06(b) of the Credit Agreement is
hereby deleted in its entirety and replaced with the following:

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“A Letter of Credit shall be issued, amended, renewed
or extended only if (and upon issuance, amendment, renewal or extension of each
Letter of Credit the Borrower shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or extension (i) the
LC Exposure shall not exceed $15,000,000 and (ii) the sum of the total
Revolver A Credit Exposures shall not exceed the total Revolver A Commitments.”

Section 3.               Amendment to Section 2.20.
Section 2.20 of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:

“SECTION 2.20.    Increase
of Revolver A Commitments. (a) If, prior to and after giving
effect to any increase in the Revolver A Commitments pursuant to this Section 2.20,
no Default, Event of Default or Material Adverse Effect shall have occurred and
be continuing, the Borrower may at any time and from time to time, but in no
event more than one (1) time in any fiscal year, request an increase of
the aggregate Revolver A Commitments by notice to the Administrative Agent in
writing of the amount of such proposed increase (such notice, a “Commitment
Increase Notice”); provided, however, that (i) each such
increase shall be at least $10,000,000, (ii) the cumulative increase in
Revolver A Commitments pursuant to this Section 2.20 shall not
exceed $150,000,000, (iii) the Revolver A Commitment of any Lender
may not be increased without such Lender’s consent, (iv) the aggregate
amount of the Lenders’ Revolver A Commitments shall not exceed
$341,000,000 and (v) such proposed increase shall be further conditioned
upon the Borrower’s delivery to the Administrative Agent, who shall distribute
such information to the Lenders, of the following, in each case reasonably
acceptable to the Required Lenders, both in form and substance: (x) reasonable
evidence that collateral, in addition to any and all Collateral securing the
Obligations as of the date of the Commitment Increase Notice, has been
acquired, or will be acquired with Borrowings made in connection with such
increase in the Revolver A Commitments, to secure the full amount of the
Obligations, as increased as contemplated by the Commitment Increase Notice and
(y) cash flow projections, including with respect to such acquired or to
be acquired collateral, which projections shall be prepared in good faith,
based on reasonable assumptions as of the date of the Commitment Increase
Notice and if requested by the Required Lenders, verified by independent
third-parties selected by the Administrative Agent. Each Lender will notify the
Administrative Agent within fifteen (15) days after receipt of the evidence
described in clause (v) immediately above whether or not the
additional collateral, and the evidence thereof, is acceptable to such Lender
provided that if such notice is not received by the Administrative Agent within
such time, such Lender shall be deemed to be satisfied with such evidence. If
the conditions in clauses (i) through (v) above have been satisfied,
the Administrative Agent shall, within five (5) Business Days after the 

 8
 

 

 

Administrative Agent is aware that such conditions have
been satisfied, notify each Lender thereof. Each Lender desiring to increase
its Revolver A Commitment shall notify the Administrative Agent in writing
no later than fifteen (15) days after receipt by the Lender of such notice from
the Administrative Agent. Any Lender that accepts an offer to it by the
Borrower to increase its Revolver A Commitment pursuant to this Section 2.20
shall, in each case, execute an agreement (a “Commitment Increase Agreement”),
in substantially the form attached hereto as Exhibit B, with the
Borrower and the Administrative Agent, whereupon such Lender shall be bound by
and entitled to the benefits of this Agreement with respect to the full amount
of its Revolver A Commitment as so increased, and the definition of
Revolver A Commitment in Section 1.01 and Schedule 2.01
hereof shall be deemed to be amended to reflect such increase. Any Lender that
does not notify the Administrative Agent within such period that it will
increase its Revolver A Commitment shall be deemed to have rejected such
offer to increase its Revolver A Commitment. No Lender shall have any
obligation whatsoever to agree to increase its Revolver A Commitment. Any
agreement to increase a Lender’s pro rata share of the increased
Revolver A Commitment shall be irrevocable and shall be effective upon
notice thereof by the Administrative Agent at the same time as that of all
other increasing Lenders.

(b)         If any portion of the increased
Revolver A Commitments is not subscribed for by such Lenders, the Borrower
may, in its sole discretion, but with the consent of the Administrative Agent
as to any Person that is not at such time a Lender (which consent shall not be
unreasonably withheld or delayed), offer to any existing Lender or to one or
more additional banks or financial institutions the opportunity to participate
in all or a portion of such unsubscribed portion of the increased
Revolver A Commitments pursuant to paragraph (c) below by
notifying the Administrative Agent. Promptly and in any event within five (5) Business
Days after receipt of notice from the Borrower of its desire to offer such
unsubscribed commitments to certain existing Lenders, to the additional banks
or to financial institutions identified therein or such additional banks or
financial institutions identified by the Administrative Agent and approved by
the Borrower, the Administrative Agent shall notify such proposed lenders of
the opportunity to participate in all or a portion of such unsubscribed portion
of the increased Revolver A Commitments.

(c)          Any additional bank or financial
institution that the Borrower selects to offer participation in the increased
Revolver A Commitments shall execute and deliver to the Administrative
Agent a New Lender Agreement (a “New Lender Agreement”), in substantially
the form attached hereto as Exhibit C, setting forth its Revolver A
Commitment, and upon the effectiveness of such New Lender Agreement 

 9
 

 

 

such bank or financial institution (a “New Lender”)
shall become a Lender for all purposes and to the same extent as if originally
a party hereto and shall be bound by and entitled to the benefits of this
Agreement, and the signature pages hereof shall be deemed to be amended to
add the name of such New Lender and the definition of Revolver A
Commitment in Section 1.01 and Schedule 2.01 hereof
shall be deemed amended to increase the aggregate Revolver A Commitments
of the Lenders by the Revolver A Commitment of such New Lender, provided
that the Revolver A Commitment of any New Lender shall be an amount not
less than $5,000,000. Each New Lender Agreement shall be irrevocable and shall
be effective upon notice thereof by the Administrative Agent at the same time
as that of all other New Lenders.

(d)         The effectiveness of any New Lender
Agreement or Commitment Increase Agreement shall be contingent upon (i) receipt
by the Administrative Agent of (x) such corporate resolutions of the
Borrower and legal opinions of counsel to the Borrower as the Administrative
Agent shall reasonably request with respect thereto, in each case in form and
substance reasonably satisfactory to the Administrative Agent, and (y) mortgages,
deeds of trust, security agreements and other documents (including, without
limitation, those described in Article IV applicable to such additional
collateral) in form and substance reasonably acceptable to the Administrative
Agent, granting a first priority perfected Lien, subject to the Liens permitted
by Section 6.02 hereof, on and otherwise relating to the additional
collateral securing the Obligations increased as contemplated in clause (v) of
Section 2.20(a) above, and (ii) there not having occurred
any event that would cause a material diminution in value of the additional
collateral. Once a New Lender Agreement or Commitment Increase Agreement
becomes effective, the Administrative Agent shall reflect the increases in the
Commitments effected by such agreements by appropriate entries in the Register.

(e)          If any bank or financial institution
becomes a New Lender pursuant to Section 2.20(c) or any Lender’s
Revolver A Commitment is increased pursuant to Section 2.20(a),
additional Revolver A Loans made on or after the effectiveness thereof
(the “Re-Allocation Date”) shall be made pro rata based on their
respective Revolver A Commitments in effect on or after such Re-Allocation
Date (except to the extent that any such pro rata borrowings would result in
any Lender making an aggregate principal amount of Loans in excess of its
Revolver A Commitment, in which case such excess amount will be allocated
to, and made by, such New Lender and/or Lenders with such increased
Revolver A Commitments to the extent of, and pro rata based on, their
respective Revolver A Commitments), and continuations of Loans outstanding
on such Re-Allocation Date shall be effected by repayment of such Loans on the
last day of the Interest Period applicable

 

 10

 

thereto or, in the case of ABR Loans, on the date of
such increase, and the making of new Loans of the same Type pro rata based on
the respective Revolver A Commitments in effect on and after such Re-Allocation
Date.

(f)          If on any Re-Allocation Date there is
an unpaid principal amount of Eurodollar Loans, such Eurodollar Loans shall
remain outstanding with the respective holders thereof until the expiration of
their respective Interest Periods (unless the Borrower elects to prepay any
thereof in accordance with the applicable provisions of this Agreement), and
interest on and repayments of such Eurodollar Loans will be paid thereon to the
respective Lenders holding such Eurodollar Loans pro rata based on the
respective principal amounts thereof outstanding.”

Section 4.               Amendment to Section 3.09.
Section 3.09 of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:

“SECTION 3.09. Investment and Holding Company
Status. No Loan Party is an “investment company” as defined in, or subject
to regulation under, the Investment Company Act of 1940.”

Section 5.               Amendment to Section 3.18.
Section 3.18 of the Credit Agreement is hereby deleted in its entirety.

Section 6.               Amendment to Section 4.01(e).
The parenthetical in the first clause of Section 4.01(e) of the
Credit Agreement which reads “(as such term is defined in the Partnership
Agreement)” is hereby deleted in its entirety.

Section 7.               Amendment to Section 6.16.
Section 6.16 of the Credit Agreement is hereby deleted in its entirety and
all references to Section 6.16 and requirements to be in compliance
therewith contained in the Credit Agreement or any Loan Document are hereby
deleted in their entirety.

Section 8.               Amendment to Section 6.18.
Section 6.18 of the Credit Agreement is hereby deleted in its entirety and
replaced by the following:

“SECTION 6.18.    Maximum
Leverage Ratio. The Borrower shall not permit the Leverage Ratio as
of the last day of any fiscal quarter, beginning with the fiscal quarter
ending June 30, 2006, to exceed 4.0 to 1.0; provided that in the event the
Borrower shall make a Specified Acquisition (defined below), the Borrower shall
not permit the Leverage Ratio as of the last day of any fiscal quarter
ending after June 30, 2006, to exceed 4.75 to 1.00 until the earlier of (i) a
Secondary Offering of the Parent or (ii) the conclusion of the three
fiscal quarters next following the fiscal quarter in which such Specified
Acquisition (a “Step-Up Period”) occurred. After the conclusion of any
such Step-Up Period, the Borrower shall not permit the Leverage Ratio as
of the last day of any fiscal quarter to exceed 4.0 to 1.0.

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As used herein, “Specified Acquisition” means,
at the election of the Borrower, one or more acquisitions of, or Capital
Expenditures with respect to, assets or Persons or operating lines or divisions
of any Person (in each case as permitted hereunder) in any rolling 12-month
period for an aggregate purchase price or expenditure of not less than
$40,000,000; provided, in the event the Leverage Ratio exceeds the
required Leverage Ratio at the end of any fiscal quarter in which one or more
acquisitions otherwise qualifying as a Specified Acquisition but for the
Borrower’s failure to so elect shall have occurred, the Borrower shall be
deemed to have so elected a Specified Acquisition with respect thereto; provided,
further, that the Borrower shall be entitled to elect only one Specified
Acquisition during each four quarter period ending September 30 in any
calendar year. For the avoidance of doubt, a Permitted Acquisition may qualify
as a Specified Acquisition.

Section 9.               Amendment to Exhibit B.
The text of Exhibit B to the Credit Agreement is hereby deleted in its
entirety and replaced by Exhibit B attached hereto.

Section 10.             Amendment to Exhibit C.
The text of Exhibit C to the Credit Agreement is hereby deleted in its
entirety and replaced by Exhibit C attached hereto.

Section 11.             Amendment to Schedule 1.01. Schedule
1.01 to the Credit Agreement is hereby deleted in its entirety and replaced by
Schedule 1.01 attached hereto.

Section 12.             Amendment to Schedule 2.01. Schedule
2.01 to the Credit Agreement is hereby deleted in its entirety and replaced by
Schedule 2.01 attached hereto.

Section 13.             Amendment to Schedule 3.06(b).
Schedule 3.06(b) to the Credit Agreement is hereby deleted in its entirety
and replaced by Schedule 3.06(b) attached hereto.

Section 14.             Amendment to Schedule
3.24. Schedule 3.24 to the Credit Agreement is hereby deleted in its
entirety and replaced by Schedule 3.24 attached hereto.

Section 15.             Amendment to Schedule 5.18. Schedule
5.18 to the Credit Agreement is hereby deleted in its entirety and replaced by
Schedule 5.18 attached hereto.

Section 16.             Re-allocation of Commitments.
On the Effective Date there shall either be no Loans outstanding or
arrangements satisfactory to the Administrative Agent shall have been made to
prepay all outstanding Loans, together with accrued interest thereon; provided,
however, that the Borrower shall not be required to make any payments required
under Section 2.16 of the Credit Agreement in connection with the increase
adjustments in the Commitments as are evidenced by this Second Amendment. Any
prepayment made by the Borrower in accordance with the preceding sentence of
this Section 16 may be made with the proceeds of an Advance made by each
of the Lenders in connection with the increase and adjustment of the
Commitments pursuant to this Section 16. The Borrower and all Lenders
hereby instruct and irrevocably authorize the Administrative Agent to accept
such prepayments, affect such offsets, and distribute the proceeds of each Loan
made by any Lender on the 

 12
 

 

 

Effective Date as are necessary to effect the
adjustments in the Commitments as are evidenced by this Second Amendment.

Section 17.             Representations True; No Default.
The Borrower represents and warrants that:

(a)                                  this
Second Amendment has been duly authorized, executed and delivered on its
behalf; the Credit Agreement, as amended hereby, together with the other Loan
Documents to which the Borrower is a party, constitute valid and legally
binding agreements of the Borrower enforceable in accordance with their terms;

(b)                                 the
representations and warranties of the Borrower contained in Article III of
the Credit Agreement are true and correct in all material respects on and as of
the date hereof as though made on and as of the date hereof except to the
extent such representations and warranties specifically relate to an earlier
date, in which case they were true and correct in all material respects on and
as of such earlier date; and

(c)                                  no
Default or Event of Default under the Credit Agreement has occurred and is
continuing.

Section 18.             Expenses, Additional Information.
The Borrower shall pay to the Administrative Agent all reasonable expenses
incurred in connection with the execution of this Second Amendment, including
all reasonable expenses incurred in connection with any previous negotiation
and loan documentation. The Borrower shall furnish to the Administrative Agent
and Lenders all such other documents, consents and information relating to the
Borrower and each other Loan Party as the Administrative Agent or any Lender
may reasonably require to accomplish the purposes hereof.

Section 19.             Conditions to Effectiveness.
This Second Amendment shall become effective on the date (the “Effective
Date”) when, and only when:

(a)                                  The
Borrower, the Guarantors, the Administrative Agent and each Lender shall have
executed and delivered to the Administrative Agent a counterpart of this Second
Amendment;

(b)                                 The
Administrative Agent shall have received resolutions, in form and substance
reasonably satisfactory to the Administrative Agent, of the Borrower and each
Guarantor authorizing the execution, delivery and performance of this Second
Amendment, each such copy being attached to an original certificate of an
authorized officer of the Borrower and each Guarantor, dated as of the Second
Amendment Closing Date certifying (i) that the resolutions attached
thereto are true, correct and complete copies of resolutions duly adopted by
the Borrower and each Guarantor, as applicable, (ii) that such resolutions
constitute all resolutions adopted with respect to the transactions
contemplated hereby, (iii) that such resolutions have not been amended,
modified, revoked or rescinded as of the Second Amendment Closing Date, (iv) that
the articles of organization and regulations of the Borrower and each
Guarantor, as applicable, have not been 

 13
 

 

 

amended or otherwise modified since the
effective date of the Credit Agreement, except pursuant to any amendments
attached thereto, and (v) as to the incumbency and signature of the
officers of the Borrower and each Guarantor executing this Second Amendment;

(c)                                  Each
of the representations and warranties made by the Borrower and each Guarantor
in or pursuant to the Loan Documents shall be true and correct in all material
respects on and as of the Second Amendment Closing Date, except to the extent
such representation and warranties specifically relate to an earlier date, in
which case they were true and correct in all material respects on and as of
such earlier date;

(d)                                 No
Default or Event of Default shall have occurred and be continuing;

(e)                                  No
event shall have occurred with respect to the Parent, the Borrower and its
Subsidiaries, taken as a whole, which, in the reasonable opinion of any of the
Lenders, has had, or could reasonably be expected to have, a Material Adverse
Effect;

(f)                                    The
Administrative Agent shall have received a fully executed copy of that certain
fee letter between the Borrower and the Administrative Agent pertaining to
certain fees and expenses payable by the Borrower to such parties as set forth
in such letter and all fees and other amounts due and payable on or prior to
the Effective Date, including, to the extent invoiced, reimbursement or payment
of all out of pocket expenses required to be reimbursed or paid by the Borrower
hereunder;

(g)                                 The
Administrative Agent shall have received each of the Security Documents, duly
executed and completed in sufficient number of counterparts for recording, if
necessary, and they shall constitute satisfactory security documentation to
create first priority security interests in the Collateral, including, without
limitation, all assets comprising the Kinta Area Gas Gathering System (free and
clear of all Liens, other than Liens permitted by Section 6.02 of the
Credit Agreement);

(h)                                 The
Administrative Agent shall have received the following:

(i)                                     Uniform
Commercial Code Financing Statements (Form UCC-1) and such evidence
of filing or arrangements for filing as may be acceptable to the Administrative
Agent, naming the relevant Loan Party as the debtor and the Administrative
Agent as the secured party, or other similar instruments or documents, filed or
to be filed under the Uniform Commercial Code of all jurisdictions as may be
necessary or, in the opinion of the Administrative Agent, desirable to perfect
the security interest of the Administrative Agent pursuant to the Security
Documents;

(ii)                                  certified
copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11),
or a similar search report certified by a party acceptable to the
Administrative Agent, dated a date reasonably near to the 

 14
 

 

 

Effective Date, listing all effective
financing statements which name any Loan Party (under its present name and any
previous names) as the debtor and which are filed in the jurisdictions in which
filings of any Security Documents are made pursuant to this Agreement, together
with copies of such financing statements none of which (other than those (i) securing
the Obligations, if such Form UCC-11 or search report, as the case
may be, is current enough to list such financing statements, or (ii) that
are terminated as of the Effective Date or within a time frame otherwise
acceptable to the Administrative Agent) shall cover any Collateral described in
the Security Documents; and

(iii)                               copies
of tax Lien searches for each jurisdiction in which a Security Document is
filed or recorded pursuant to this Agreement, certified by a party acceptable
to the Administrative Agent, listing all tax Liens imposed on any Loan Party or
any of its assets (none of which shall cover any Collateral described in the
Security Documents);

(i)                                     The
Administrative Agent shall have received, and be satisfied with, the title
information with respect to the Collateral and shall, in its sole and absolute
discretion, be satisfied with the status of title to the Collateral;

(j)                                     The
Administrative Agent shall have received a reliance letter from EnviroTech
Engineering & Consulting, Inc. with respect to the Phase I
Environmental Site Assessment for the Kinta Area Gas Gathering System, which
reliance letter entitles the Administrative Agent and Lenders to rely on such
report as if such report had been issued directly to the Administrative Agent
for the benefit of the Lenders;

(k)                                  The
Administrative Agent or any Lender or counsel to the Administrative Agent shall
receive such other instruments or documents as they may reasonably request;

(l)                                     The Administrative
Agent shall have received, and shall be satisfied in its sole discretion with
the contents, results and scope of, the report by Barnes & Click with
respect to the Borrower’s existing assets and FlatFock Energy Advisors for the
Kinta Area Gas Gathering System;

(m)                               The
Administrative Agent shall have received a favorable written opinion (addressed
to the Administrative Agent and the Lenders and dated the Effective Date) of
McAfee & Taft, counsel for the Borrower, relating to the Parent, the
Borrower and its Subsidiaries, this Second Amendment and the Transactions and
any other matters as any Lender shall reasonably request. The Borrower hereby
requests such counsel to deliver such opinion;

(n)                                 The
Administrative Agent shall have received a favorable written opinion (addressed
to the Administrative Agent and the Lenders and dated the Effective Date) of
Vinson & Elkins LLP, outside counsel for the Borrower, relating to 

 15
 

 

 

certain of the Loan Parties and any other
matters as any Lender shall reasonably request. The Borrower hereby requests
such counsel to deliver such opinion;

(o)                                 The
Administrative Agent shall have received favorable written opinions (addressed
to the Administrative Agent and the Lenders and dated the Effective Date) of
each local counsel of the Borrower approved by the Administrative Agent, for
each state where any portion of the Collateral is located, relating to the
enforceability of the Security Documents in such state and any other matters as
any Lender shall reasonably request;

(p)                                 The
Administrative Agent shall have received such documents and certificates as the
Administrative Agent or its counsel may reasonably request relating to the
organization, existence and good standing of the Borrower, the Guarantors, the
Parent and the General Partner, the authorization of the Transactions and any
other legal matters relating to the Borrower, the Guarantors, Parent and the
General Partner, this Second Amendment, the Credit Agreement or the
Transactions, all in form and substance satisfactory to the Administrative
Agent and its counsel; and

(q)                                 The
Administrative Agent shall have received a certificate, dated the Effective
Date and signed by the President, a Vice President or a Financial Officer of
the Borrower, confirming compliance with the conditions set forth in paragraphs
(a) and (b) of Section 4.02 of the Credit Agreement.

The Administrative Agent shall notify the Borrower and
the Lenders of the Effective Date upon the satisfaction of all of the foregoing
conditions, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the rights and obligations of the parties hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or
waived pursuant to Section 9.02 of the Credit Agreement) at or prior to
3:00 p.m. Oklahoma City, Oklahoma time, on June 30, 2006 (and, in the
event such conditions are not so satisfied or waived, this Second Amendment
shall be null and void and of no further force and effect.

Section 20.             Miscellaneous Provisions.

(a)                                  From
and after the execution and delivery of this Second Amendment, the Credit
Agreement shall be deemed to be amended and modified as herein provided, and
except as so amended and modified the Credit Agreement shall continue in full
force and effect.

(b)                                 The
Credit Agreement, the First Amendment and this Second Amendment shall be read
and construed as one and the same instrument.

(c)                                  Any
reference in any of the Loan Documents to the Credit Agreement shall be a
reference to the Credit Agreement as amended by the First Amendment and this
Second Amendment.

(d)                                 This
Second Amendment shall be construed in accordance with and governed by the laws
of the State of Oklahoma and of the United States of America.

 16
 

 

 

(e)                                  This
Second Amendment may be signed in any number of counterparts and by different
parties in separate counterparts and may be in original or facsimile form, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

(f)                                    The
headings herein shall be accorded no significance in interpreting this Second
Amendment.

Section 21.             Binding Effect. This Second
Amendment shall be binding upon and inure to the benefit of the Borrower,
Lenders and the Administrative Agent and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein except as contemplated by the Credit
Agreement.

 [The remainder of this page intentionally
left blank.]

 17

 

IN WITNESS WHEREOF, the parties have caused this
Second Amendment to be executed by their respective duly authorized officers on
the Second Amendment Closing Date, to be effective as of the Effective Date.

 

	
   

  	
  HILAND OPERATING, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Randy Moeder

  
	
   

  	
   

  	
  Randy Moeder

  
	
   

  	
   

  	
  Chief Executive Officer and President

  

 

 

 

	
  

  	
  MIDFIRST BANK,

  
	
   

  	
  in its capacity as the Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ James P. Boggs

  
	
   

  	
  By:

  	
  James P. Boggs

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
  Address:

  
	
   

  	
  MidFirst Bank

  
	
   

  	
  MidFirst Plaza

  
	
   

  	
  501 N.W. Grand Blvd., Suite 100

  
	
   

  	
  Oklahoma City, Oklahoma 73118

  
	
   

  	
  Attention: James P. Boggs

  
	
   

  	
  Telephone No. (405) 767-7115

  
	
   

  	
  Telecopy No. (405) 767-7120

  
	
   

  	
  e-mail: james.boggs@midfirst.com

  

 

 

 

	
  

  	
  MIDFIRST BANK,

  
	
   

  	
  in its capacity as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ James P. Boggs

  
	
   

  	
  By:

  	
  James P. Boggs

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
  Address:

  
	
   

  	
  MidFirst Bank

  
	
   

  	
  MidFirst Plaza

  
	
   

  	
  501 N.W. Grand Blvd., Suite 100

  
	
   

  	
  Oklahoma City, Oklahoma 73118

  
	
   

  	
  Attention: James P. Boggs

  
	
   

  	
  Telephone No. (405) 767-7115

  
	
   

  	
  Telecopy No. (405) 767-7120

  
	
   

  	
  e-mail: james.boggs@midfirst.com

  

 

 

 

	
  

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gregory B. Hanson

  
	
   

  	
  Name:

  	
  Gregory B. Hanson

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

 

	
  

  	
  SOCIETE GENERALE

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Elena Robeiuc

  
	
   

  	
  Name:

  	
  Elena Robeiuc

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

 

	
  

  	
  BANK OF SCOTLAND

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Karen Weich

  
	
   

  	
  Name:

  	
  Karen Weich

  
	
   

  	
  Title:

  	
  Assistant Vice President

  

 

 

 

	
  

  	
  FORTIS CAPITAL CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Darrell Holley

  
	
   

  	
  Name:

  	
  Darrell Holley

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Montgomery

  
	
   

  	
  Name:

  	
  David Montgomery

  
	
   

  	
  Title:

  	
  Senior Vice President

  

 

 

 

	
  

  	
  COMPASS BANK

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kathleen J. Bowen

  
	
   

  	
  Name:

  	
  Kathleen J. Bowen

  
	
   

  	
  Title:

  	
  Senior Vice President

  

 

 

 

	
  

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Justin M. Alexander

  
	
   

  	
  Name:

  	
  Justin M. Alexander

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

 

	
  

  	
  BANK OF OKLAHOMA

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark Morris

  
	
   

  	
  Name:

  	
  Mark Morris

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

Exhibit A

ACKNOWLEDGMENT OF GUARANTORS

 

 

 

EXHIBIT
B

FORM OF COMMITMENT INCREASE AGREEMENT

 

 

 

EXHIBIT
C

FORM OF NEW LENDER AGREEMENTExhibit 10.1

 

EXECUTION COPY

 

$280,000,000

CREDIT
AGREEMENT

among

MSC
INDUSTRIAL DIRECT CO., INC.,

as Borrower,

The Several Lenders from Time to Time Parties Hereto,

BANK OF
AMERICA, N.A., HSBC BANK USA, NATIONAL ASSOCIATION and SOVEREIGN

BANK,

as Co-Documentation Agents,

CITIBANK,
N.A.,

as Syndication Agent,

and

JPMORGAN
CHASE BANK, N.A.,

as Administrative Agent

Dated as of
June 8, 2006

 

J.P.
MORGAN SECURITIES INC., as Sole Lead Arranger and Bookrunner

 

TABLE OF
CONTENTS

	
  Section 1. DEFINITIONS

  
	
   

  
	
  1.1.

  	
  Defined Terms

  
	
  1.2.

  	
  Other Definitional Provisions

  
	
   

  	
   

  
	
  Section 2. AMOUNT AND TERMS OF TERM COMMITMENTS

  
	
   

  
	
  2.1.

  	
  Term Commitments

  
	
  2.2.

  	
  Procedure for Term Loan Borrowing

  
	
  2.3.

  	
  Repayment of Term Loans

  
	
   

  	
   

  
	
  Section 3. AMOUNTS AND TERMS OF REVOLVING
  COMMMITMENTS

  
	
   

  
	
  3.1.

  	
  Revolving Commitments

  
	
  3.2.

  	
  Procedure for Revolving Loan Borrowing

  
	
  3.3.

  	
  Swingline Commitment

  
	
  3.4.

  	
  Procedure for Swingline Borrowing; Refunding of
  Swingline Loans

  
	
  3.5.

  	
  Facility Fees, etc.

  
	
  3.6.

  	
  Termination or Reduction of Revolving Commitments

  
	
  3.7.

  	
  L/C Commitment

  
	
  3.8.

  	
  Procedure for Issuance of Letter of Credit

  
	
  3.9.

  	
  Fees and Other Charges

  
	
  3.10.

  	
  L/C Participations

  
	
  3.11.

  	
  Reimbursement Obligation of the Borrower

  
	
  3.12.

  	
  Obligations Absolute

  
	
  3.13.

  	
  Letter of Credit Payments

  
	
  3.14.

  	
  Applications

  
	
   

  	
   

  
	
  Section 4. GENERAL PROVISIONS APPLICABLE TO
  LOANS AND LETTERS OF CREDIT

  
	
   

  
	
  4.1.

  	
  Optional Prepayments

  
	
  4.2.

  	
  Conversion and Continuation Options

  
	
  4.3.

  	
  Limitations on Eurodollar Tranches

  
	
  4.4.

  	
  Interest Rates and Payment Dates

  
	
  4.5.

  	
  Computation of Interest and Fees

  
	
  4.6.

  	
  Inability to Determine Interest Rate

  
	
  4.7.

  	
  Pro Rata Treatment and Payments

  
	
  4.8.

  	
  Requirements of Law

  
	
  4.9.

  	
  Taxes

  
	
  4.10.

  	
  Indemnity

  
	
  4.11.

  	
  Change of Lending Office

  
	
  4.12.

  	
  Replacement of Lenders

  
	
   

  	
   

  
	
  Section 5. REPRESENTATIONS AND WARRANTIES

  
	
   

  
	
  5.1.

  	
  Financial Condition

  
	
  5.2.

  	
  No Change

  
	
  5.3.

  	
  Existence; Compliance with Law

  
	
  5.4.

  	
  Power; Authorization; Enforceable Obligations

  
	
  5.5.

  	
  No Legal Bar

  

 

 i
 

 

 

	
  5.6.

  	
  Litigation

  
	
  5.7.

  	
  No Default

  
	
  5.8.

  	
  Ownership of Property; Liens

  
	
  5.9.

  	
  Intellectual Property

  
	
  5.10.

  	
  Taxes

  
	
  5.11.

  	
  Federal Regulations

  
	
  5.12.

  	
  Labor Matters

  
	
  5.13.

  	
  ERISA

  
	
  5.14.

  	
  Investment Company Act; Other Regulations

  
	
  5.15.

  	
  Subsidiaries

  
	
  5.16.

  	
  Use of Proceeds

  
	
  5.17.

  	
  Environmental Matters

  
	
  5.18.

  	
  Accuracy of Information, etc

  
	
  5.19.

  	
  Solvency

  
	
  5.20.

  	
  Certain Documents

  
	
   

  	
   

  
	
  Section 6. CONDITIONS PRECEDENT

  
	
   

  
	
  6.1.

  	
  Conditions to Initial Extension of Credit

  
	
  6.2.

  	
  Conditions to Each Extension of Credit

  
	
   

  	
   

  
	
  Section 7. AFFIRMATIVE COVENANTS

  
	
   

  
	
  7.1.

  	
  Financial Statements

  
	
  7.2.

  	
  Certificates; Other Information

  
	
  7.3.

  	
  Payment of Obligations

  
	
  7.4.

  	
  Maintenance of Existence; Compliance

  
	
  7.5.

  	
  Maintenance of Property; Insurance

  
	
  7.6.

  	
  Inspection of Property; Books and Records;
  Discussions

  
	
  7.7.

  	
  Notices

  
	
  7.8.

  	
  Environmental Laws

  
	
  7.9.

  	
  Additional Guarantors

  
	
   

  	
   

  
	
  Section 8. NEGATIVE COVENANTS

  
	
   

  
	
  8.1.

  	
  Financial Condition Covenants

  
	
  8.2.

  	
  Indebtedness

  
	
  8.3.

  	
  Liens

  
	
  8.4.

  	
  Fundamental Changes

  
	
  8.5.

  	
  Disposition of Property

  
	
  8.6.

  	
  Investments

  
	
  8.7.

  	
  Transactions with Affiliates

  
	
  8.8.

  	
  Changes in Fiscal Periods

  
	
  8.9.

  	
  Clauses Restricting Subsidiary Distributions

  
	
   

  	
   

  
	
  Section 9. EVENTS OF DEFAULT

  
	
   

  
	
  Section 10. THE AGENTS

  
	
   

  
	
  10.1.

  	
  Appointment

  
	
  10.2.

  	
  Delegation of Duties

  
	
  10.3.

  	
  Exculpatory Provisions

  
	
  10.4.

  	
  Reliance by Administrative Agent

  

 

 ii
 

 

 

	
  10.5.

  	
  Notice of Default

  
	
  10.6.

  	
  Non-Reliance on Agents and Other Lenders

  
	
  10.7.

  	
  Indemnification

  
	
  10.8.

  	
  Agent in Its Individual Capacity

  
	
  10.9.

  	
  Successor Administrative Agent

  
	
  10.10.

  	
  Securitizations

  
	
  10.11.

  	
  Co-Documentation Agents and Syndication Agent

  
	
   

  	
   

  
	
  Section 11. MISCELLANEOUS

  
	
   

  
	
  11.1.

  	
  Amendments and Waivers

  
	
  11.2.

  	
  Notices

  
	
  11.3.

  	
  No Waiver; Cumulative Remedies

  
	
  11.4.

  	
  Survival of Representations and Warranties

  
	
  11.5.

  	
  Payment of Expenses and Taxes

  
	
  11.6.

  	
  Successors and Assigns; Participations and
  Assignments

  
	
  11.7.

  	
  Adjustments; Set-off

  
	
  11.8.

  	
  Counterparts

  
	
  11.9.

  	
  Severability

  
	
  11.10.

  	
  Integration

  
	
  11.11.

  	
  GOVERNING LAW

  
	
  11.12.

  	
  Submission To Jurisdiction; Waivers

  
	
  11.13.

  	
  Acknowledgements

  
	
  11.14.

  	
  Releases of Guarantees

  
	
  11.15.

  	
  Confidentiality

  
	
  11.16.

  	
  WAIVERS OF JURY TRIAL

  
	
  11.17.

  	
  USA PATRIOT Act.

  

 

SCHEDULES:

	
  1.1A

  	
  Commitments

  
	
  5.1(a)(i)

  	
  Financial Condition

  
	
  5.1(b)

  	
  Guarantee Obligations

  
	
  5.3

  	
  Compliance with Law

  
	
  5.4

  	
  Consents, Authorizations, Filings and Notices

  
	
  5.6

  	
  Litigation

  
	
  5.15

  	
  Subsidiaries

  
	
  8.3(f)

  	
  Existing Liens

  

 

EXHIBITS:

	
  A

  	
  Form of Guarantee

  
	
  B

  	
  Form of Compliance Certificate

  
	
  C

  	
  Form of Closing Certificate

  
	
  D

  	
  Form of Assignment and Assumption

  
	
  E-1

  	
  Form of Legal Opinion of Katten Muchin Rosenman
  LLP

  
	
  E-2

  	
  Form of Legal Opinion of Honigman Miller
  Schwartz and Cohn LLP

  
	
  F

  	
  Form of Exemption Certificate

  
	
  G

  	
  Form of Revolving Commitment Increase
  Supplement

  
	
  H

  	
  Form of Augmenting Lender Supplement

  

 

 iii

CREDIT AGREEMENT (this “Agreement”),
dated as of June 8, 2006, among MSC INDUSTRIAL DIRECT CO., INC., a New
York corporation (the “Borrower”), the several banks and other financial
institutions or entities from time to time parties to this Agreement (the “Lenders”),
BANK OF AMERICA, N.A., HSBC BANK USA, NATIONAL ASSOCIATION and SOVEREIGN BANK,
as co-documentation agents (in such capacity, the “Co-Documentation Agents”),
CITIBANK, N.A., as syndication agent (in such capacity, the “Syndication
Agent”), and JPMORGAN CHASE BANK, N.A., as administrative agent.

The parties hereto hereby
agree as follows:

SECTION 1.
DEFINITIONS

1.1.          Defined Terms. As used in this
Agreement, the terms listed in this Section 1.1 shall have the respective
meanings set forth in this Section 1.1.

“ABR”:  for any day, a rate per annum equal to the
greater of (a) the Prime Rate in effect on such day, and (b) the
Federal Funds Effective Rate in effect on such day plus 1⁄2 of 1%. For purposes
hereof:  “Prime Rate” shall mean
the rate of interest per annum publicly announced from time to time by JPMorgan
Chase Bank, N.A. as its prime rate in effect at its principal office in New
York City (the Prime Rate not being intended to be the lowest rate of interest
charged by JPMorgan Chase Bank, N.A. in connection with extensions of credit to
debtors). Any change in the ABR due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective as of the opening of business
on the effective day of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.

“ABR Loans”:  Loans the rate of interest applicable to
which is based upon the ABR.

“Acquisition”:  as defined in Section 6.1.

“Acquisition Agreement”:  the Stock Purchase Agreement, dated as of
March 15, 2006, among JLK Direct Distribution, Inc., Kennametal Inc.,
the Borrower and MSC Acquisition Corp. VI.

“Acquisition
Documentation”:  collectively, the
Acquisition Agreement and all schedules, exhibits and annexes thereto and all
side letters and agreements affecting the terms thereof or entered into in
connection therewith.

“Adjustment Date”:  as defined in the Pricing Grid.

“Administrative Agent”:  JPMorgan Chase Bank, N.A., together with its
affiliates, as the arranger of the Commitments and as the administrative agent
for the Lenders under this Agreement and the other Loan Documents, together
with any of its successors.

“Affiliate”:  as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. For purposes of this definition, “control” of a
Person means the power, directly or indirectly, either to (a) vote 10% or
more of the securities having ordinary voting power for the election of
directors (or persons performing similar functions) of such Person or
(b) direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.

“Agents”:  the collective reference to the Syndication
Agent, the Co-Documentation Agents and the Administrative Agent.

 

“Aggregate Exposure”:  with respect to any Lender at any time, an
amount equal to (a) until the Closing Date, the aggregate amount of such
Lender’s Commitments at such time and (b) thereafter, the sum of
(i) the aggregate then unpaid principal amount of such Lender’s Term Loans
and (ii) the amount of such Lender’s Revolving Commitment then in effect
or, if the Revolving Commitments have been terminated, the amount of such
Lender’s Revolving Extensions of Credit then outstanding.

“Aggregate Exposure
Percentage”:  with respect to any
Lender at any time, the ratio (expressed as a percentage) of such Lender’s
Aggregate Exposure at such time to the Aggregate Exposure of all Lenders at
such time.

“Agreement”:  as defined in the preamble hereto.

“Applicable Margin”:  for each Type of Loan, the rate per annum
determined pursuant to the Pricing Grid.

“Application”:  an application, in such form as the Issuing
Lender may specify from time to time, requesting the Issuing Lender to open a
Letter of Credit.

“Approved Fund”:  as defined in Section 11.6(b).

“Assignee”:  as defined in Section 11.6(b).

“Assignment and
Assumption”:  an Assignment and
Assumption, substantially in the form of Exhibit D.

“Augmenting Lender”:  as defined in Section 3.1(c).

“Available Revolving Commitment”:  as to any Revolving Lender at any time, an
amount equal to the excess, if any, of (a) such Lender’s Revolving
Commitment then in effect over (b) such Lender’s Revolving
Extensions of Credit then outstanding.

“Benefitted Lender”:  as defined in Section 11.7(a).

“Board”:  the Board of Governors of the Federal Reserve
System of the United States (or any successor).

“Borrower”:  as defined in the preamble hereto.

“Borrower EBITDA
Statement”:  as defined in
Section 5.1(a).

“Borrowing Date”:  any Business Day specified by the Borrower as
a date on which the Borrower requests the relevant Lenders to make Loans
hereunder.

“Business”:  as defined in Section 5.17(b).

“Business Day”:  a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by
law to close, provided, that with respect to notices and determinations
in connection with, and payments of principal and interest on, Eurodollar
Loans, such day is also a day for trading by and between banks in Dollar
deposits in the interbank eurodollar market.

“Capital Lease
Obligations”:  as to any Person, the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal

 2
 

 

property, or a combination thereof, which obligations are required to
be classified and accounted for as capital leases on a balance sheet of such
Person under GAAP and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such time
determined in accordance with GAAP.

 

“Capital Stock”:  any and all shares, interests, participations
or other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants, rights or options to purchase any of the
foregoing.

“Cash Equivalents”:  (a) marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition;
(b) certificates of deposit, time deposits, eurodollar time deposits or
overnight bank deposits having maturities of six months or less from the date
of acquisition issued by any Lender or by any commercial bank organized under
the laws of the United States or any state thereof having combined capital and
surplus of not less than $500,000,000; (c) commercial paper of an issuer
rated at least A-1 by Standard & Poor’s Ratings Services (“S&P”)
or P-1 by Moody’s Investors Service, Inc. (“Moody’s”), or
carrying an equivalent rating by a nationally recognized rating agency, if both
of the two named rating agencies cease publishing ratings of commercial paper
issuers generally, and maturing within six months from the date of acquisition;
(d) repurchase obligations of any Lender or of any commercial bank
satisfying the requirements of clause (b) of this definition, having a
term of not more than 30 days, with respect to securities issued or fully
guaranteed or insured by the United States government; (e) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by
Moody’s; (f) securities with maturities of six months or less from the
date of acquisition backed by standby letters of credit issued by any Lender or
any commercial bank satisfying the requirements of clause (b) of this
definition; (g) money market mutual or similar funds that invest
exclusively in assets satisfying the requirements of clauses (a) through
(f) of this definition; or (h) money market funds that
(i) comply with the criteria set forth in SEC Rule 2a-7 under
the Investment Company Act of 1940, as amended, (ii) are rated AAA by
S&P and Aaa by Moody’s and (iii) have portfolio assets of at least
$5,000,000,000.

“Closing Date”:  the date on which the conditions precedent
set forth in Section 6.1 shall have been satisfied, which date is
June 8, 2006.

“Co-Documentation Agents”:  as defined in the preamble hereto.

“Code”:  the Internal Revenue Code of 1986, as amended
from time to time.

“Commitment”:  as to any Lender, the sum of the Term
Commitment and the Revolving Commitment of such Lender.

“Commonly Controlled
Entity”:  an entity, whether or not
incorporated, that is under common control with the Borrower or any Group
Member within the meaning of Section 4001 of ERISA or is part of a group
that includes the Borrower or any Group Member and that is treated as a single
employer under Section 414 of the Code.

 3
 

 

“Compliance Certificate”:  a certificate duly executed by a Responsible
Officer substantially in the form of Exhibit B.

“Conduit Lender”:  any special purpose corporation organized and
administered by any Lender for the purpose of making Loans otherwise required
to be made by such Lender and designated by such Lender in a written
instrument; provided, that the designation by any Lender of a Conduit
Lender shall not relieve the designating Lender of any of its obligations to
fund a Loan under this Agreement if, for any reason, its Conduit Lender fails
to fund any such Loan, and the designating Lender (and not the Conduit Lender)
shall have the sole right and responsibility to deliver all consents and
waivers required or requested under this Agreement with respect to its Conduit
Lender, and provided, further, that no Conduit Lender shall
(a) be entitled to receive any greater amount pursuant to
Section 4.8, 4.9, 4.10 or 11.5 than the designating Lender would have been
entitled to receive in respect of the extensions of credit made by such Conduit
Lender or (b) be deemed to have any Commitment.

“Confidential Information
Memorandum”:  the Confidential
Information Memorandum dated May 10, 2006 and furnished to certain
Lenders.

“Consolidated EBITDA”:  for any period, Consolidated Net Income for
such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period, the
sum of (a) income tax expense, (b) interest expense, amortization or
writeoff of debt discount and debt issuance costs and commissions, discounts
and other fees and charges associated with Indebtedness (including the Loans),
(c) depreciation and amortization expense, (d) amortization of
intangibles (including, but not limited to, goodwill) and organization costs
and (e) any non-cash employee stock compensation charges or expenses, and minus,
(a) to the extent included in the statement of such Consolidated Net
Income for such period, the sum of (i) interest income, (ii) any
extraordinary, unusual or non-recurring income or gains (including, whether or
not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, gains on the sales of assets outside
of the ordinary course of business), (iii) income tax credits (to the
extent not netted from income tax expense) and (iv) any other non-cash
income and (b) any cash payments made during such period in respect of
items described in clause (e) above subsequent to the fiscal quarter in
which the relevant non-cash expenses or losses were reflected as a charge in
the statement of Consolidated Net Income, all as determined on a consolidated
basis. For the purposes of calculating Consolidated EBITDA for any period of
four consecutive fiscal quarters (each, a “Reference Period”) pursuant
to any determination of the Consolidated Leverage Ratio, (i) if at any
time during such Reference Period the Borrower or any Subsidiary shall have
made any Material Disposition, the Consolidated EBITDA for such Reference
Period shall be reduced by an amount equal to the Consolidated EBITDA (if
positive) attributable to the property that is the subject of such Material
Disposition for such Reference Period or increased by an amount equal to the
Consolidated EBITDA (if negative) attributable thereto for such Reference
Period and (ii) if during such Reference Period the Borrower or any
Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such
Reference Period shall be calculated after giving pro  forma
effect thereto as if such Material Acquisition occurred on the first day of
such Reference Period and after giving pro  forma effect to any
adjustments (including, without limitation, operating and expense reductions)
as would be permitted to be reflected in pro forma financial information
complying with the requirements of Article 11 of Regulation S-X under
the Securities Act of 1933, as amended (and the interpretations of the SEC
thereunder). As used in this definition, “Material Acquisition” means any
acquisition of property or series of related acquisitions of property that
(a) constitutes assets comprising all or substantially all of an operating
unit of a business or constitutes all or substantially all of the common stock
of a Person and (b) involves the payment of consideration by the Borrower
and its Subsidiaries in excess of $10,000,000; and “Material Disposition” means
any Disposition of property or series of related Dispositions of property that
yields gross proceeds to the Borrower or any of its Subsidiaries in excess of
$10,000,000. For purposes of this Agreement, including without limitation in

 4
 

 

connection with the calculation of Consolidated EBITDA
for any Reference Period hereunder, Consolidated EBITDA shall be deemed to be
$53,157,000, $63,356,000 and $69,328,000 for the fiscal quarters ended
August 27, 2005, November 26, 2005 and February 25, 2006, respectively.

“Consolidated Interest
Coverage Ratio”:  for any period, the
ratio of (a) Consolidated EBITDA for such period to (b) Consolidated
Interest Expense for such period.

“Consolidated Interest
Expense”:  for any period, total cash
interest expense (including that attributable to Capital Lease Obligations) of
the Borrower and its Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP (including all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers’ acceptance
financing and Securitizations and net costs under Swap Agreements in respect of
interest rates to the extent such net costs are allocable to such period in
accordance with GAAP).

“Consolidated Leverage
Ratio”:  as at the last day of any
period, the ratio of (a) Consolidated Total Debt on such day to
(b) Consolidated EBITDA for such period.

“Consolidated Net Income”:  for any period, the consolidated net income
(or loss) of the Borrower and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) except as provided in the definition of Consolidated EBITDA,
the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary
of the Borrower or is merged into or consolidated with the Borrower or any of
its Subsidiaries, (b) the income (or deficit) of any Person (other than a
Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries
has an ownership interest, except to the extent that any such income is
actually received by the Borrower or such Subsidiary in the form of dividends
or similar distributions and (c) the undistributed earnings of any
Subsidiary of the Borrower to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.

“Consolidated Tangible
Assets”:  at any date, the total
assets of the Borrower and its consolidated Subsidiaries at such date, as
determined on a consolidated basis in accordance with GAAP, less their
consolidated Intangible Assets. For purposes of this definition, “Intangible
Assets” means the amount of (i) all write-ups in the book value of any
asset owned by the Borrower or a Subsidiary and (ii) all unamortized debt
discount and expense, unamortized deferred charges, goodwill, patents,
trademarks, service marks, trade names, copyrights and other intangible assets,
determined on a consolidated basis in accordance with GAAP.

“Consolidated Total Debt”:  at any date, the aggregate principal amount
of all Indebtedness of the Borrower and its consolidated Subsidiaries at such
date, determined on a consolidated basis in accordance with GAAP.

“Continuing Directors”:  the directors of the Borrower on the Closing
Date, after giving effect to the Acquisition and the other transactions
contemplated hereby, and each other director, if, in each case, such other
director’s nomination for election to the board of directors of the Borrower is
recommended by at least 66-2/3% of the then Continuing Directors.

“Contractual Obligation”:  as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

 5
 

 

“Default”:  any of the events specified in
Section 9, whether or not any requirement for the giving of notice, the
lapse of time, or both, has been satisfied.

“Disposition”:  with respect to any property, any sale,
lease, sale and leaseback, assignment, conveyance, transfer or other
disposition thereof. The terms “Dispose” and “Disposed of” shall
have correlative meanings.

“Dollars” and “$”:  dollars in lawful currency of the United
States.

“Domestic Subsidiary”:  any Subsidiary of the Borrower organized
under the laws of any jurisdiction within the United States.

“Environmental Laws”:  any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of
Law (including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment.

“ERISA”:  the Employee Retirement Income Security Act
of 1974, as amended from time to time.

“Eurocurrency Reserve
Requirements”:  for any day as
applied to a Eurodollar Loan, the aggregate (without duplication) of the
maximum rates (expressed as a decimal fraction) of reserve requirements in
effect on such day (including basic, supplemental, marginal and emergency
reserves) under any regulations of the Board or other Governmental Authority having
jurisdiction with respect thereto dealing with reserve requirements prescribed
for eurocurrency funding (currently referred to as “Eurocurrency Liabilities”
in Regulation D of the Board) maintained by a member bank of the Federal
Reserve System.

“Eurodollar Base Rate”:  with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum determined on the
basis of the rate for deposits in Dollars for a period equal to such Interest
Period commencing on the first day of such Interest Period appearing on
Page 3750 of the Telerate screen as of 11:00 A.M., London time, two
Business Days prior to the beginning of such Interest Period. In the event that
such rate does not appear on Page 3750 of the Telerate screen (or otherwise
on such screen), the “Eurodollar Base Rate” shall be determined by
reference to such other comparable publicly available service for displaying
eurodollar rates as may be selected by the Administrative Agent or, in the
absence of such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 11:00 A.M.,
New York City time, two Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where its eurodollar and foreign
currency and exchange operations are then being conducted for delivery on the
first day of such Interest Period for the number of days comprised therein.

“Eurodollar Loans”:  Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.

“Eurodollar Rate”:  with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such
day in accordance with the following formula (rounded upward to the nearest
1/100th of 1%):

	
  

  	
  Eurodollar Base Rate

  	
   

  
	
   

  	
  1.00 - Eurocurrency Reserve Requirements

  	
   

  

 

 6
 

 

 

“Eurodollar Tranche”:  the collective reference to Eurodollar Loans
under a particular Facility the then current Interest Periods with respect to
all of which begin on the same date and end on the same later date (whether or
not such Loans shall originally have been made on the same day).

“Event of Default”:  any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied.

“Facility”:  each of (a) the Term Commitments and the
Term Loans made thereunder (the “Term Facility”) and (b) the
Revolving Commitments and the extensions of credit made thereunder (the “Revolving
Facility”).

“Facility Fee Rate”:  the rate per annum determined pursuant to the
Pricing Grid.

“Federal Funds Effective
Rate”:  for any day, the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for the day of such transactions received by JPMorgan
Chase Bank, N.A. from three federal funds brokers of recognized standing
selected by it.

“Fee Payment Date”:  (a) the third Business Day following the
last day of each March, June, September and December and (b) the
last day of the Revolving Commitment Period.

“Funding Office”:  the office of the Administrative Agent
specified in Section 11.2 or such other office as may be specified from
time to time by the Administrative Agent as its funding office by written
notice to the Borrower and the Lenders.

“GAAP”:  generally accepted accounting principles in
the United States as in effect from time to time.

“Governmental Authority”:  any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization (including the National Association of Insurance Commissioners).

“Group Members”:  the collective reference to the Borrower and
its Subsidiaries.

“Guarantee”:  the Guarantee to be executed and delivered by
each Subsidiary Guarantor, substantially in the form of Exhibit A.

“Guarantee Obligation”:  as to any Person (the “guaranteeing person”),
any obligation, including a reimbursement, counterindemnity or similar
obligation, of the guaranteeing Person that guarantees or in effect guarantees,
or which is given to induce the creation of a separate obligation by another
Person (including any bank under any letter of credit) that guarantees or in
effect guarantees, any Indebtedness, leases, dividends or other obligations
(the “primary obligations”) of any other third Person (the “primary
obligor”) in any manner, whether directly or indirectly, including any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for
the purchase or payment of any such primary obligation or (2) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to 

 7
 

 

purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or (iv) otherwise
to assure or hold harmless the owner of any such primary obligation against
loss in respect thereof; provided, however, that the term Guarantee
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum
amount for which such guaranteeing person may be liable pursuant to the terms
of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person’s maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith.

“Increasing Lender”:  as defined in Section 3.1(c).

“Indebtedness”:  of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services (other than current trade payables incurred in the ordinary course of
such Person’s business), (c) all obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e) all
Capital Lease Obligations of such Person, (f) all obligations of such
Person, contingent or otherwise, as an account party or applicant under or in
respect of acceptances, letters of credit, surety bonds or similar
arrangements, (g) all Guarantee Obligations of such Person in respect of
obligations of the kind referred to in clauses (a) through (f), (h) all
obligations of the kind referred to in clauses (a) through (g) above
secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including
accounts and contract rights) owned by such Person, whether or not such Person
has assumed or become liable for the payment of such obligation, (i) all
Indebtedness incurred in connection with any Securitization in which such
Person participates, and (j) for the purposes of Section 9(e) only,
all obligations of such Person in respect of Swap Agreements. The Indebtedness
of any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such
Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such entity, except to the extent the terms of such
Indebtedness expressly provide that such Person is not liable therefor.

“Insolvency”:  with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section 4245
of ERISA.

“Insolvent”:  pertaining to a condition of Insolvency.

“Intellectual Property”:  the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, and all rights to sue at law or
in equity for any infringement or other impairment thereof, including the right
to receive all proceeds and damages therefrom.

“Interest Payment Date”:  (a) as to any ABR Loan (other than any
Swingline Loan), the last day of each March, June, September and December to
occur while such Loan is outstanding and the final maturity date of such Loan, (b) as
to any Eurodollar Loan having an Interest Period of three months 

 8
 

 

or less, the last day of such Interest Period, (c) as
to any Eurodollar Loan having an Interest Period longer than three months, each
day that is three months, or a whole multiple thereof, after the first day of
such Interest Period and the last day of such Interest Period, (d) as to
any Loan (other than any Revolving Loan that is an ABR Loan and any Swingline
Loan), the date of any repayment or prepayment made in respect thereof and (e) as
to any Swingline Loan, the day that such Loan is required to be repaid.

“Interest Period”:  as to any Eurodollar Loan, (a) initially,
the period commencing on the borrowing or conversion date, as the case may be,
with respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to the
Administrative Agent not later than 11:00 A.M., New York City time, on the
date that is three Business Days prior to the last day of the then current
Interest Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following:

(i)            if any
Interest Period would otherwise end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period shall end on the
immediately preceding Business Day;

(ii)           the Borrower
may not select an Interest Period under a particular Facility that would extend
beyond the Revolving Termination Date or beyond the date final payment is due
on the Term Loans;

(iii)          any Interest
Period that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of a
calendar month; and

(iv)          the Borrower
shall select Interest Periods so as not to require a payment or prepayment of
any Eurodollar Loan during an Interest Period for such Loan.

“Investments”:  as defined in Section 8.6.

“Issuing Lender”:  JPMorgan Chase Bank, N.A. or any affiliate
thereof, in its capacity as issuer of any Letter of Credit.

“J&L”:  J&L America, Inc., doing business as
J&L Industrial Supply, a Michigan corporation.

“L/C Commitment”:  $25,000,000.

“L/C Obligations”:  at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit
that have not then been reimbursed pursuant to Section 3.11.

“L/C Participants”:  the collective reference to all the Revolving
Lenders other than the Issuing Lender.

“Lenders”:  as defined in the preamble hereto; provided,
that unless the context otherwise requires, each reference herein to the
Lenders shall be deemed to include any Conduit Lender.

 9
 

 

“Letters of Credit”:  as defined in Section 3.7(a).

“Lien”:  any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), charge
or other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
capital lease having substantially the same economic effect as any of the
foregoing).

“Loan”:  any loan made by any Lender pursuant to this
Agreement.

“Loan Documents”:  this Agreement, the Guarantee, the Notes and
any amendment, waiver, supplement or other modification to any of the
foregoing.

“Loan Parties”:  each Group Member that is a party to a Loan
Document.

“Majority Facility
Lenders”:  with respect to any
Facility, the holders of more than 50% of the aggregate unpaid principal amount
of the Term Loans or the Total Revolving Extensions of Credit, as the case may
be, outstanding under such Facility (or, in the case of the Revolving Facility,
prior to any termination of the Revolving Commitments, the holders of more than
50% of the Total Revolving Commitments).

“Material Adverse Effect”:  a material adverse effect on (a) the
business, property, operations, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole or (b) the validity
or enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Administrative Agent or the Lenders hereunder or
thereunder.

“Material Domestic
Subsidiary”:  (a) as of the
Closing Date, Sid Tool Co., Inc., Enco Manufacturing Co., Inc. and
J&L and (b) thereafter, any Domestic Subsidiary of the Borrower the
annual revenues of which exceed $25,000,000 as of the end of the most recently
completed fiscal quarter for which financial statements have been delivered
pursuant to Section 7.1; provided that the aggregate annual
revenues of all non-Material Domestic Subsidiaries shall not exceed 10%
of the aggregate annual revenues of the Borrower and its Subsidiaries as of the
end of the most recently completed fiscal quarter for which financial
statements have been delivered pursuant to Section 7.1.

“Materials of
Environmental Concern”:  any gasoline
or petroleum (including crude oil or any fraction thereof) or petroleum
products or any hazardous or toxic substances, materials or wastes, defined or
regulated as such in or under any Environmental Law, including asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.

“Multiemployer Plan”:  a Plan that is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.

“Non-Excluded Taxes”:  as defined in Section 4.9(a).

“Non-U.S. Lender”:  as defined in Section 4.9(d).

“Notes”:  the collective reference to any promissory
note evidencing Loans.

“Obligations”:  the unpaid principal of and interest on
(including interest accruing after the maturity of the Loans and Reimbursement
Obligations and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, 

 10
 

 

relating to the Borrower, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) the Loans
and all other obligations and liabilities of the Borrower to the Administrative
Agent or to any Lender (or, in the case of Specified Swap Agreements, any affiliate
of any Lender), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, this Agreement, any other Loan Document, the Letters
of Credit, any Specified Swap Agreement or any other document made, delivered
or given in connection herewith or therewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including all fees, charges and disbursements of counsel to the Administrative
Agent or to any Lender that are required to be paid by the Borrower pursuant
hereto) or otherwise.

“Other Taxes”:  any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
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; provided, however, that Other Taxes shall not include any
such taxes if such taxes arise due to a Lender changing the office where it
holds or owns its Loans, unless such change in lending office is pursuant to Section 4.11
of this Agreement.

“Participant”:  as defined in Section 11.6(c).

“PBGC”:  the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA (or any successor).

“Permitted Investors”:  the collective reference to (a) Mitchell
Jacobson, (b) Majorie Gershwind, (c) the heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of Mitchell
Jacobson or Majorie Gershwind including, but not limited to, such one or more
organizations to which transfers are deductible for Federal, estate, gift or
income tax purposes, and (d) any trust, the beneficiaries of which include
only Mitchell Jacobson, Majorie Gershwind, their spouses, their lineal
descendants and any other members of their families, and such one or more
organizations to which transfers are deductible for Federal, estate, gift, or
income tax purposes.

“Person”:  an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
charitable organization, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.

“Plan”:  at a particular time, any employee pension
benefit plan (within the meaning of Section 3(2) of ERISA) that is
covered by ERISA and in respect of which the Borrower or in the case of a Plan
that is subject to Section 412 of the Code or Section 302 of ERISA,
any Group Member or a Commonly Controlled Entity is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed to
be) an “employer” as defined in Section 3(5) of ERISA.

“Pricing Grid”:  the table set forth below.

 11
 

 

 

	
   

  	
  Consolidated

  Leverage Ratio

  	
   

  	
   

  	
  Applicable

  Margin for Term

  Loans that are

  Eurodollar Loans

  	
   

  	
  Applicable

  Margin for Term

  Loans that are

  ABR Loans

  	
   

  	
  Applicable Margin

  for Revolving

  Loans that are

  Eurodollar Loans

  	
   

  	
  Applicable

  Margin for

  Revolving Loans

  that are ABR

  Loans

  	
   

  	
  Facility Fee

  Rate

  	
   

  
	
  Equal to or
  higher than 2.25 to 1.00

  	
   

  	
  0.875%

  	
   

  	
  0%

  	
   

  	
  0.70%

  	
   

  	
  0%

  	
   

  	
  0.175%

  	
   

  
	
  Less than 2.25
  to 1.00, but equal to or higher than 1.50 to 1.00

  	
   

  	
  0.75%

  	
   

  	
  0%

  	
   

  	
  0.625%

  	
   

  	
  0%

  	
   

  	
  0.125%

  	
   

  
	
  Less than 1.50 to 1.00

  	
   

  	
  0.50%

  	
   

  	
  0%

  	
   

  	
  0.40%

  	
   

  	
  0%

  	
   

  	
  0.10%

  	
   

  

 

For the purposes of the
Pricing Grid, changes in the Applicable Margin resulting from changes in the
Consolidated Leverage Ratio shall become effective on the date (the “Adjustment
Date”) that is three Business Days after the date on which financial
statements are delivered to the Lenders pursuant to Section 7.1 and shall
remain in effect until the next change to be effected pursuant to this
paragraph. If any financial statements pursuant to Section 7.1 are not
delivered within the time periods specified in Section 7.1, then, until
the date that is three Business Days after the date on which such financial
statements are delivered, the highest rate set forth in each column of the
Pricing Grid shall apply. In addition, at all times while an Event of Default
shall have occurred and be continuing, the highest rate set forth in each
column of the Pricing Grid shall apply. Each determination of the Consolidated
Leverage Ratio pursuant to the Pricing Grid shall be made in a manner
consistent with the determination thereof pursuant to Section 8.1.

“Priority Debt”:  without duplication, (a) all
Indebtedness of Subsidiaries which are not Subsidiary Guarantors, (b) all
Indebtedness of the Borrower or any of its Subsidiaries secured by a Lien other
than Liens permitted by Section 8.3(a) through Section 8.3(f) and
Section 8.3(h) and (c) all Indebtedness of the Borrower or any
of its Subsidiaries incurred in connection with any Securitization.

“Properties”:  as defined in Section 5.17(a).

“Refunded Swingline Loans”:  as defined in Section 3.4.

“Register”:  as defined in Section 11.6(b).

“Regulation U”:  Regulation U of the Board as in effect from
time to time.

“Reimbursement Obligation”:  the obligation of the Borrower to reimburse
the Issuing Lender pursuant to Section 3.11 for amounts drawn under
Letters of Credit.

“Reorganization”:  with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning of Section 4241
of ERISA.

“Reportable Event”:  any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg.
§ 4043.

“Required Lenders”:  at any time, the holders of more than 50% of (a) until
the Closing Date, the Commitments then in effect and (b) thereafter, the
sum of (i) the aggregate unpaid principal 

 12
 

 

amount of the Term Loans then outstanding and (ii) the
Total Revolving Commitments then in effect or, if the Revolving Commitments
have been terminated, the Total Revolving Extensions of Credit then
outstanding.

“Requirement of Law”:  as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation or determination
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 or to which
such Person or any of its property is subject.

“Responsible Officer”:  the chief executive officer, president or
chief financial officer of the Borrower, but in any event, with respect to
financial matters, the chief financial officer of the Borrower.

“Restricted Payment”:  any payment of dividends, any payment on
account of the purchase, redemption, defeasance, retirement or other
acquisition of any Capital Stock and any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
any Group Member.

“Revolving Commitment”:  as to any Lender, the obligation of such
Lender, if any, to make Revolving Loans and participate in Swingline Loans and
Letters of Credit in an aggregate principal and/or face amount not to exceed
the amount set forth under the heading “Revolving Commitment” opposite such
Lender’s name on Schedule 1.1A or in the Assignment and Assumption pursuant to
which such Lender became a party hereto, as the same may be changed from time
to time pursuant to the terms hereof. The original amount of the Total
Revolving Commitments is $75,000,000.

“Revolving Commitment
Period”:  the period from and
including the Closing Date to the Revolving Termination Date.

“Revolving Extensions of
Credit”:  as to any Revolving Lender
at any time, an amount equal to the sum of (a) the aggregate principal
amount of all Revolving Loans held by such Lender then outstanding, (b) such
Lender’s Revolving Percentage of the L/C Obligations then outstanding and (c) such
Lender’s Revolving Percentage of the aggregate principal amount of Swingline
Loans then outstanding.

“Revolving Lender”:  each Lender that has a Revolving Commitment
or that holds Revolving Loans.

“Revolving Loans”:  as defined in Section 3.1(a).

“Revolving Percentage”:  as to any Revolving Lender at any time, the
percentage which such Lender’s Revolving Commitment then constitutes of the
Total Revolving Commitments or, at any time after the Revolving Commitments
shall have expired or terminated, the percentage which the aggregate amount of
such Lender’s Revolving Extensions of Credit then outstanding constitutes of
the aggregate amount of the Revolving Extensions of Credit then outstanding.

“Revolving Termination
Date”:  June 8, 2011 or such
earlier date on which the Revolving Commitments may terminate pursuant to Section 9
or Section 3.6.

“SEC”:  the Securities and Exchange Commission, any
successor thereto and any analogous Governmental Authority.

 13
 

 

“Securitization”:  any transaction or series of transactions
entered into by the Borrower or any Subsidiary pursuant to which the Borrower
or such Subsidiary, as the case may be, sells, conveys or otherwise transfers
to a Securitization Vehicle Securitization Assets of the Borrower or such
Subsidiary (or grants a security interest in such Securitization Assets
transferred or purported to be transferred to such Securitization Vehicle), and
which Securitization Vehicle finances the acquisition of such Securitization
Assets (i) with proceeds from the issuance of Third Party Interests, (ii) with
Sellers’ Retained Interests or (iii) with proceeds from the sale or collection
of Securitization Assets previously purchased by such Securitization Vehicle.

“Securitization Assets”:  any accounts receivable owed to or owned by
the Borrower or any Subsidiary (whether now existing or arising or acquired in
the future) arising in the ordinary course of business from the sale of goods
or services, all collateral securing such accounts receivable, all contracts
and contract rights and all guarantees or other obligations in respect of such
accounts receivable, all proceeds of such accounts receivable and other assets
(including contract rights) which are of the type customarily transferred in
connection with securitizations of accounts receivable and which are sold,
transferred or otherwise conveyed by the Borrower or a Subsidiary to a
Securitization Vehicle in connection with a Securitization permitted by Section 8.5.

“Securitization Vehicle”:  a Person that is a direct wholly owned
Subsidiary of the Borrower or a Subsidiary formed for the purpose of effecting
one or more Securitizations to which the Borrower or its Subsidiaries transfer
Securitization Assets and which, in connection therewith, issues Third Party
Interests or Sellers’ Retained Interests; provided that such
Securitization Vehicle shall engage in no business other than the purchase of
Securitization Assets pursuant to Securitizations permitted by Section 8.5,
the issuance of Third Party Interests or other funding of such Securitizations
and any activities reasonably related thereto, and provided  further
that:

(x)  no portion of the Indebtedness or any other obligations
(contingent or otherwise) of such Securitization Vehicle (i) is guaranteed
by the Borrower or any Subsidiary (excluding guarantees of obligations (other
than the principal of and interest on Indebtedness) pursuant to Standard
Securitization Undertakings), (ii) is with recourse to or obligates the
Borrower or any other Subsidiary of the Borrower in any way other than pursuant
to Standard Securitization Undertakings, or (iii) subjects any property or
asset of the Borrower or any other Subsidiary of the Borrower, directly or
indirectly, contingently or otherwise, to the satisfaction thereof, other than
pursuant to Standard Securitization Undertakings;

(y)  neither the Borrower nor any Subsidiary has any material contract,
agreement, arrangement or understanding with such Securitization Vehicle other
than on terms which the Borrower reasonably believes to be no less favorable to
the Borrower or such Subsidiary than those that might be obtained at the time
from Persons that are not Affiliates of the Borrower; and

(z)  neither the Borrower nor any Subsidiary has any obligation to
maintain or preserve such Securitization Vehicle’s financial condition or cause
such Securitization Vehicle to achieve certain levels of operating results.

“Sellers’ Retained
Interests”:  the debt or equity
interests held by the Borrower or any Subsidiary in a Securitization Vehicle to
which Securitization Assets have been transferred in a Securitization permitted
by Section 8.5, including any such debt or equity received in
consideration for the Securitization Assets transferred.

“Single Employer Plan”:  any Plan that is covered by Title IV of
ERISA, but that is not a Multiemployer Plan.

 14
 

 

“Solvent”:  when used with respect to any Person, means that,
as of any date of determination, (a) the amount of the “present fair
saleable value” of the assets of such Person will, as of such date, exceed the
amount of all “liabilities of such Person, contingent or otherwise”, as of such
date, as such quoted terms are determined in accordance with applicable federal
and state laws governing determinations of the insolvency of debtors, (b) the
present fair saleable value of the assets of such Person will, as of such date,
be greater than the amount that will be required to pay the liability of such
Person on its debts as such debts become absolute and matured, (c) such
Person will not have, as of such date, an unreasonably small amount of capital
with which to conduct its business, and (d) such Person will be able to
pay its debts as they mature. For purposes of this definition, (i) “debt”
means liability on a “claim”, and (ii) “claim” means any (x) right to
payment, whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured or (y) right to an equitable remedy
for breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

“Specified Swap Agreement”:  any Swap Agreement entered into by the
Borrower or any Guarantor and any Lender or affiliate thereof in respect of
interest rates, currency exchange rates or commodity prices.

“Standard Securitization
Undertakings”:  representations,
warranties, covenants, indemnities and guarantees of performance entered into
by the Borrower or any Subsidiary which the Borrower has determined in good faith
to be customary in a Securitization, including those relating to the servicing
of the assets of a Securitization Vehicle.

“Subsidiary”:  as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of the happening of
a contingency) to elect a majority of the board of directors or other managers
of such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall
refer to a Subsidiary or Subsidiaries of the Borrower.

“Subsidiary Guarantor”:  each Material Domestic Subsidiary of the
Borrower, other than any Securitization Vehicle.

“Swap Agreement”:  any
agreement with respect to any swap, forward, future or derivative transaction
or option or similar agreement involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities,
or economic, financial or pricing indices or measures of economic, financial or
pricing risk or value or any similar transaction or any combination of these
transactions; provided that no phantom stock or similar plan
providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or any of
its Subsidiaries shall be a “Swap Agreement”.

“Swingline Commitment”:  the obligation of the Swingline Lender to
make Swingline Loans pursuant to Section 3.3 in an aggregate principal amount
at any one time outstanding not to exceed $10,000,000.

“Swingline Lender”:  JPMorgan Chase Bank, N.A., in its capacity as
the lender of Swingline Loans.

 15
 

 

“Swingline Loans”:  as defined in Section 3.3.

“Swingline Participation
Amount”:  as defined in Section 3.4.

“Syndication Agent”:  as defined in the preamble hereto.

“Term Commitment”:  as to any Lender, the obligation of such
Lender, if any, to make a Term Loan to the Borrower in a principal amount not
to exceed the amount set forth under the heading “Term Commitment” opposite
such Lender’s name on Schedule 1.1A. The original aggregate amount of the Term
Commitments is $205,000,000.

“Term Lender”:  each Lender that has a Term Commitment or
that holds a Term Loan.

“Term Loan”:  as defined in Section 2.1.

“Term Percentage”:  as to any Term Lender at any time, the
percentage which such Lender’s Term Commitment then constitutes of the
aggregate Term Commitments (or, at any time after the Closing Date, the
percentage which the aggregate principal amount of such Lender’s  Term Loans then outstanding constitutes of
the aggregate principal amount of the Term Loans then outstanding).

“Third Party Interests”:  with respect to any Securitization, notes,
bonds or other debt instruments, beneficial interests in a trust, undivided
ownership interests in receivables or other securities issued for cash
consideration by the relevant Securitization Vehicle to banks, financing
conduits, investors or other financing sources (other than the Borrower and its
Subsidiaries) the proceeds of which are used to finance, in whole or in part,
the purchase by such Securitization Vehicle of Securitization Assets in a
Securitization. The amount of any Third Party Interests shall be deemed to
equal the aggregate principal, stated or invested amount of such Third Party
Interests which are outstanding at such time.

“Total Revolving
Commitments”:  at any time, the
aggregate amount of the Revolving Commitments then in effect.

“Total Revolving
Extensions of Credit”:  at any time,
the aggregate amount of the Revolving Extensions of Credit of the Revolving
Lenders outstanding at such time.

“Transferee”:  any Assignee or Participant.

“Type”:  as to any Loan, its nature as an ABR Loan or
a Eurodollar Loan.

“United States”:  the United States of America.

“Wholly Owned Subsidiary”:  as to any Person, any other Person all of the
Capital Stock of which (other than directors’ qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.

“Wholly Owned Subsidiary
Guarantor”:  any Subsidiary Guarantor
that is a Wholly Owned Subsidiary of the Borrower.

1.2.          Other Definitional Provisions.
(a)  Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the other Loan Documents
or any certificate or other document made or delivered pursuant hereto or
thereto.

 

 16

 

(b)           As used herein and
in the other Loan Documents, and any certificate or other document made or
delivered pursuant hereto or thereto, (i) accounting terms relating to any
Group Member not defined in Section 1.1 and accounting terms partly
defined in Section 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP, (ii) the words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”, (iii) the word “incur” shall be construed to mean incur,
create, issue, assume, become liable in respect of or suffer to exist (and the
words “incurred” and “incurrence” shall have correlative meanings), (iv) the
words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, Capital Stock, securities, revenues, accounts,
leasehold interests and contract rights, and (v) references to agreements
or other Contractual Obligations shall, unless otherwise specified, be deemed
to refer to such agreements or other Contractual Obligations as amended,
supplemented, restated or otherwise modified from time to time.

(c)           The words “hereof”, “herein”
and “hereunder” and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.

(d)           The meanings given
to terms defined herein shall be equally applicable to both the singular and
plural forms of such terms.

(e)           Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP; provided that, if the Borrower
notifies the Administrative Agent that the Borrower requests an amendment to
any provision hereof to eliminate the effect of any change occurring after the
date hereof in GAAP or in the application thereof on the operation of such
provision (or if the Administrative Agent notifies the Borrowers that the
Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

SECTION 2. AMOUNT
AND TERMS OF TERM COMMITMENTS

2.1.            Term Commitments. Subject to
the terms and conditions hereof, each Term Lender severally agrees to make a
term loan (a “Term Loan”) to the Borrower on the Closing Date in an
amount not to exceed the amount of the Term Commitment of such Lender. The Term
Loans may from time to time be Eurodollar Loans or ABR Loans, as determined by
the Borrower and notified to the Administrative Agent in accordance with
Sections 2.2 and 4.2.

2.2.          Procedure for Term Loan Borrowing.
The Borrower shall give the Administrative Agent irrevocable notice (which
notice must be received by the Administrative Agent prior to 10:00 A.M.,
New York City time, on the anticipated Closing Date) requesting that the Term
Lenders make the Term Loans on the Closing Date and specifying the amount to be
borrowed. The Term Loans made on the Closing Date shall initially be ABR Loans.
Upon receipt of such notice the Administrative Agent shall promptly notify each
Term Lender thereof. Not later than 12:00 Noon, New York City time, on the
Closing Date each Term Lender shall make available to the Administrative Agent
at the Funding Office an amount in immediately available funds equal to the
Term Loan or Term Loans to be made by such Lender. The Administrative Agent
shall credit the account of the Borrower on the books of such office of the
Administrative Agent with the aggregate of the amounts made available to the
Administrative Agent by the Term Lenders in immediately available funds.

 17
 

 

2.3.          Repayment of Term Loans. The Term Loan of each
Lender shall mature in 16 consecutive quarterly installments beginning June 30,
2007, each of which shall be in an amount equal to such Lender’s Term
Percentage multiplied by the amount set forth below opposite such installment:

	
  Installment

  	
   

  	
   

  	
   

  	
  Principal Amount

  
	
  June 30, 2007

  	
   

  	
  $7,687,500

  
	
  September 30, 2007

  	
   

  	
  $7,687,500

  
	
  December 31, 2007

  	
   

  	
  $7,687,500

  
	
  March 31, 2008

  	
   

  	
  $7,687,500

  
	
  June 30, 2008

  	
   

  	
  $10,250,000

  
	
  September 30, 2008

  	
   

  	
  $10,250,000

  
	
  December 31, 2008

  	
   

  	
  $10,250,000

  
	
  March 31, 2009

  	
   

  	
  $10,250,000

  
	
  June 30, 2009

  	
   

  	
  $12,812,500

  
	
  September 30, 2009

  	
   

  	
  $12,812,500

  
	
  December 31, 2009

  	
   

  	
  $12,812,500

  
	
  March 31, 2010

  	
   

  	
  $12,812,500

  
	
  June 30, 2010

  	
   

  	
  $20,500,000

  
	
  September 30, 2010

  	
   

  	
  $20,500,000

  
	
  December 31, 2010

  	
   

  	
  $20,500,000

  
	
  June 8,
  2011

  	
   

  	
  $20,500,000

  

 

SECTION 3. AMOUNTS
AND TERMS OF REVOLVING COMMMITMENTS

3.1.          Revolving Commitments.
(a)  Subject to the terms and conditions hereof, each Revolving
Lender severally agrees to make revolving credit loans (“Revolving Loans”)
to the Borrower from time to time during the Revolving Commitment Period in an
aggregate principal amount at any one time outstanding which, when added to
such Lender’s Revolving Percentage of the sum of (i) the L/C Obligations
then outstanding and (ii) the aggregate principal amount of the Swingline
Loans then outstanding, does not exceed the amount of such Lender’s Revolving
Commitment. During the Revolving Commitment Period the Borrower may use the
Revolving Commitments by borrowing, prepaying the Revolving Loans in whole or
in part, and reborrowing, all in accordance with the terms and conditions
hereof. The Revolving Loans may from time to time be Eurodollar Loans or ABR
Loans, as determined by the Borrower and notified to the Administrative Agent
in accordance with Sections 3.2 and 4.2.

(b)           The Borrower shall
repay all outstanding Revolving Loans on the Revolving Termination Date.

(c)           The Borrower may
from time to time elect to increase the Revolving Commitments in a minimum
amount of $25,000,000 so long as, after giving effect thereto, the Total
Revolving Commitments do not exceed $150,000,000. The Borrower may arrange for
any such increase to be provided by one or more Lenders (each Lender so
agreeing to an increase in its Revolving Commitment, an “Increasing Lender”),
or by one or more banks, financial institutions or other entities (each such
bank, financial institution or other entity, an “Augmenting Lender”), to
increase their existing Revolving Commitments, or extend Revolving Commitments,
as the case may be, provided that (i) each Augmenting Lender, shall
be subject to the approval of the Borrower and the Administrative Agent and (ii) (x) in
the case of an Increasing Lender, the Borrower and such Increasing Lender
execute an agreement substantially in the form of Exhibit G hereto, and (y) in
the case of an Augmenting Lender, the Borrower and such Augmenting Lender
execute an agreement substantially in the form of Exhibit H 

 18
 

 

hereto. Increases and new Revolving Commitments
created pursuant to this clause shall become effective on the date agreed by
the Borrower, the Administrative Agent and the relevant Lenders and the
Administrative Agent shall notify each affected Lender thereof. Notwithstanding
the foregoing, no increase in the Revolving Commitments (or in the Revolving
Commitment of any Lender), shall become effective under this paragraph unless, (i) on
the proposed date of the effectiveness of such increase, the conditions set
forth in paragraphs (a) and (b) of Section 6.2 shall be
satisfied or waived by the Required Lenders and the Administrative Agent shall
have received a certificate to that effect dated such date and executed by a
Responsible Officer of the Borrower and (ii) the Administrative Agent
shall have received documents consistent with those delivered on the Closing
Date under Section 6.1(h) as to the corporate power and authority of
the Borrower to borrow hereunder after giving effect to such increase. On the
effective date of any increase in the Revolving Commitments, (i) each
relevant Increasing Lender and Augmenting Lender shall make available to the
Administrative Agent such amounts in immediately available funds as the
Administrative Agent shall determine, for the benefit of the other relevant
Revolving Lenders, as being required in order to cause, after giving effect to
such increase and the use of such amounts to make payments to such other
relevant Revolving Lenders, each Revolving Lender’s portion of the outstanding
Revolving Loans of all the Revolving Lenders to equal its Revolving Percentage
of such outstanding Revolving Loans, (ii) the Borrower shall be deemed to
have repaid and reborrowed all outstanding Revolving Loans as of the date of
any increase in the Revolving Commitments (with such reborrowing to consist of
the Types of Revolving Loans, with related Interest Periods if applicable,
specified in a notice delivered by the Borrower in accordance with the
requirements of Section 3.2), (iii) the risk participations in
outstanding Letters of Credit shall be automatically adjusted such that each
Revolving Lender shall have a risk participation in each outstanding Letter of
Credit equal to its Revolving Percentage and (iv) the Borrower shall pay
all outstanding accrued interest and fees through the effective date. The
deemed payments made pursuant to clause (ii) of the immediately preceding
sentence in respect of each Eurodollar Loan shall be subject to indemnification
by the Borrower pursuant to the provisions of Section 4.10 if the deemed
payment occurs other than on the last day of the related Interest Periods.

3.2.          Procedure for Revolving Loan
Borrowing.  The Borrower may borrow
under the Revolving Commitments during the Revolving Commitment Period on any
Business Day, provided that the Borrower shall give the Administrative
Agent irrevocable notice (which notice must be received by the Administrative
Agent prior to 11:00 A.M., New York City time, (a) three Business
Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or
(b) one Business Day prior to the requested Borrowing Date, in the case of
ABR Loans) (provided that any such notice of a borrowing of ABR Loans
under the Revolving Facility to finance payments required by Section 3.11
may be given not later than 10:00 A.M., New York City time, on the date of
the proposed borrowing), specifying (i) the amount and Type of Revolving
Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in
the case of Eurodollar Loans, the respective amounts of each such Type of Loan
and the respective lengths of the initial Interest Period therefor. Each
borrowing under the Revolving Commitments shall be in an amount equal to (x) in
the case of ABR Loans, $1,000,000 or a whole multiple thereof (or, if the then
aggregate Available Revolving Commitments are less than $1,000,000, such lesser
amount) and (y) in the case of Eurodollar Loans, $3,000,000 or a whole
multiple of $1,000,000 in excess thereof; provided, that the Swingline
Lender may request, on behalf of the Borrower, borrowings under the Revolving
Commitments that are ABR Loans in other amounts pursuant to Section 3.4. Upon
receipt of any such notice from the Borrower, the Administrative Agent shall
promptly notify each Revolving Lender thereof. Each Revolving Lender will make
the amount of its pro  rata share of each borrowing available to
the Administrative Agent for the account of the Borrower at the Funding Office
prior to 12:00 Noon, New York City time, on the Borrowing Date requested by the
Borrower in funds immediately available to the Administrative Agent. Such
borrowing will then be made available to the Borrower by the Administrative
Agent crediting the account of the Borrower on the books of such office with
the 

 19
 

 

aggregate of the amounts made available to the
Administrative Agent by the Revolving Lenders and in like funds as received by
the Administrative Agent.

3.3.          Swingline Commitment. (a)  Subject
to the terms and conditions hereof, the Swingline Lender agrees to make a
portion of the credit otherwise available to the Borrower under the Revolving
Commitments from time to time during the Revolving Commitment Period by making
swing line loans (“Swingline Loans”) to the Borrower; provided
that (i) the aggregate principal amount of Swingline Loans outstanding at
any time shall not exceed the Swingline Commitment then in effect (regardless
of whether the Swingline Loans outstanding at any time, when aggregated with
the Swingline Lender’s other outstanding Revolving Loans, may exceed the
Swingline Commitment then in effect) and (ii) the Borrower shall not request,
and the Swingline Lender shall not make, any Swingline Loan if, after giving
effect to the making of such Swingline Loan, the aggregate amount of the
Available Revolving Commitments would be less than zero. During the Revolving
Commitment Period, the Borrower may use the Swingline Commitment by borrowing,
repaying and reborrowing, all in accordance with the terms and conditions
hereof. Swingline Loans shall be ABR Loans only.

(b)           The Borrower shall
repay to the Swingline Lender the then unpaid principal amount of each
Swingline Loan on the earlier of the Revolving Termination Date and the first
date after such Swingline Loan is made that is the 15th or last day of a
calendar month and is at least two Business Days after such Swingline Loan is
made; provided that on each date that a Revolving Loan is borrowed, the
Borrower shall repay all Swingline Loans then outstanding.

3.4.          Procedure for Swingline Borrowing;
Refunding of Swingline Loans. (a)  Whenever the Borrower desires
that the Swingline Lender make Swingline Loans it shall give the Swingline
Lender irrevocable telephonic notice confirmed promptly in writing (which
telephonic notice must be received by the Swingline Lender not later than 1:00 P.M.,
New York City time, on the proposed Borrowing Date), specifying (i) the
amount to be borrowed and (ii) the requested Borrowing Date (which shall
be a Business Day during the Revolving Commitment Period). Each borrowing under
the Swingline Commitment shall be in an amount equal to $500,000 or a whole
multiple of $100,000 in excess thereof. Not later than 3:00 P.M., New York
City time, on the Borrowing Date specified in a notice in respect of Swingline
Loans, the Swingline Lender shall make available to the Administrative Agent at
the Funding Office an amount in immediately available funds equal to the amount
of the Swingline Loan to be made by the Swingline Lender. The Administrative
Agent shall make the proceeds of such Swingline Loan available to the Borrower
on such Borrowing Date by depositing such proceeds in the account of the
Borrower with the Administrative Agent on such Borrowing Date in immediately
available funds.

(b)           The Swingline
Lender, at any time and from time to time in its sole and absolute discretion
may, on behalf of the Borrower (which hereby irrevocably directs the Swingline
Lender to act on its behalf), on one Business Day’s notice given by the
Swingline Lender no later than 12:00 Noon, New York City time, request each
Revolving Lender to make, and each Revolving Lender hereby agrees to make, a
Revolving Loan, in an amount equal to such Revolving Lender’s Revolving
Percentage of the aggregate amount of the Swingline Loans (the “Refunded
Swingline Loans”) outstanding on the date of such notice, to repay the
Swingline Lender. Each Revolving Lender shall make the amount of such Revolving
Loan available to the Administrative Agent at the Funding Office in immediately
available funds, not later than 10:00 A.M., New York City time, one
Business Day after the date of such notice. The proceeds of such Revolving
Loans shall be immediately made available by the Administrative Agent to the
Swingline Lender for application by the Swingline Lender to the repayment of
the Refunded Swingline Loans. The Borrower irrevocably authorizes the Swingline
Lender to charge the Borrower’s accounts with the Administrative Agent (up to
the amount available in each such account) in order to immediately pay the
amount of such Refunded Swingline Loans to the extent amounts received from the
Revolving Lenders are not sufficient to repay in full such Refunded Swingline
Loans.

 20
 

 

(c)           If prior to the time
a Revolving Loan would have otherwise been made pursuant to Section 3.4(b),
one of the events described in Section 9(f) shall have occurred and
be continuing with respect to the Borrower or if for any other reason, as
determined by the Swingline Lender in its sole discretion, Revolving Loans may
not be made as contemplated by Section 3.4(b), each Revolving Lender
shall, on the date such Revolving Loan was to have been made pursuant to the
notice referred to in Section 3.4(b), purchase for cash an undivided
participating interest in the then outstanding Swingline Loans by paying to the
Swingline Lender an amount (the “Swingline Participation Amount”) equal
to (i) such Revolving Lender’s Revolving Percentage times (ii) the
sum of the aggregate principal amount of Swingline Loans then outstanding that
were to have been repaid with such Revolving Loans.

(d)           Whenever, at any
time after the Swingline Lender has received from any Revolving Lender such
Lender’s Swingline Participation Amount, the Swingline Lender receives any
payment on account of the Swingline Loans, the Swingline Lender will distribute
to such Lender its Swingline Participation Amount (appropriately adjusted, in
the case of interest payments, to reflect the period of time during which such
Lender’s participating interest was outstanding and funded and, in the case of
principal and interest payments, to reflect such Lender’s pro  rata
portion of such payment if such payment is not sufficient to pay the principal
of and interest on all Swingline Loans then due); provided, however,
that in the event that such payment received by the Swingline Lender is
required to be returned, such Revolving Lender will return to the Swingline
Lender any portion thereof previously distributed to it by the Swingline
Lender.

(e)           Each Revolving
Lender’s obligation to make the Loans referred to in Section 3.4(b) and
to purchase participating interests pursuant to Section 3.4(c) shall
be absolute and unconditional and shall not be affected by any circumstance,
including (i) any setoff, counterclaim, recoupment, defense or other right
that such Revolving Lender or the Borrower may have against the Swingline
Lender, the Borrower or any other Person for any reason whatsoever, (ii) the
occurrence or continuance of a Default or an Event of Default or the failure to
satisfy any of the other conditions specified in Section 6, (iii) any
adverse change in the condition (financial or otherwise) of the Borrower, (iv) any
breach of this Agreement or any other Loan Document by the Borrower, any other
Loan Party or any other Revolving Lender or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.

3.5.          Facility Fees, etc. (a)  
The Borrower agrees to pay to the Administrative Agent for the account of each
Revolving Lender a facility fee for the period from and including the date
hereof to the last day of the Revolving Commitment Period, computed at the
Facility Fee Rate on the average daily amount of the Revolving Commitment of
such Lender (whether used or unused) during the period for which payment is
made, provided that, if such Revolving Lender continues to have any
Revolving Extensions of Credit outstanding after its Revolving Commitment
terminates, then such facility fee shall continue to accrue on the daily amount
of such Revolving Lender’s Revolving Extensions of Credit from and including
the date on which its Revolving Commitment terminates to but excluding the date
on which such Lender ceases to have any Revolving Extensions of Credit
outstanding. Facility fees shall be payable quarterly in arrears on each Fee
Payment Date, commencing on the first such date to occur after the date hereof,
provided that any such fees accruing after the date on which the
Revolving Commitments terminate shall be payable on demand.

(b)           The Borrower agrees
to pay to the Administrative Agent the fees in the amounts and on the dates as
set forth in any fee agreements with the Administrative Agent and to perform
any other obligations contained therein.

3.6.          Termination or Reduction of
Revolving Commitments. The Borrower shall have the right, upon not less
than three Business Days’ notice to the Administrative Agent, to terminate the 

 21
 

 

Revolving Commitments or, from time to time, to reduce
the amount of the Revolving Commitments; provided that
no such termination or reduction of Revolving Commitments shall be permitted
if, after giving effect thereto and to any prepayments of the Revolving Loans
and Swingline Loans made on the effective date thereof, the Total Revolving
Extensions of Credit would exceed the Total Revolving Commitments. Any such
reduction shall be in an amount equal to $1,000,000, or a whole multiple
thereof, and shall reduce permanently the Revolving Commitments then in effect.

3.7.          L/C Commitment. (a)  Subject
to the terms and conditions hereof, the Issuing Lender, in reliance on the
agreements of the other Revolving Lenders set forth in Section 3.10(a),
agrees to issue letters of credit (“Letters of Credit”) for the account
of the Borrower on any Business Day during the Revolving Commitment Period in
such form as may be approved from time to time by the Issuing Lender; provided
that the Issuing Lender shall have no obligation to issue any Letter of Credit
if, after giving effect to such issuance, (i) the L/C Obligations would
exceed the L/C Commitment or (ii) the aggregate amount of the Available
Revolving Commitments would be less than zero. Each Letter of Credit shall (i) be
denominated in Dollars and (ii) expire no later than the earlier of (x) the
first anniversary of its date of issuance and (y) the date that is five
Business Days prior to the Revolving Termination Date, provided that any
Letter of Credit with a one-year term may provide for the renewal thereof for
additional one-year periods (which shall in no event extend beyond the date
referred to in clause (y) above).

(b)           The Issuing Lender
shall not at any time be obligated to issue any Letter of Credit if such issuance
would conflict with, or cause the Issuing Lender or any L/C Participant to
exceed any limits imposed by, any applicable Requirement of Law.

3.8.          Procedure for Issuance of Letter of
Credit. The Borrower may from time to time request that the Issuing Lender
issue a Letter of Credit by delivering to the Issuing Lender at its address for
notices specified herein an Application therefor, completed to the satisfaction
of the Issuing Lender, and such other certificates, documents and other papers
and information as the Issuing Lender may request. Upon receipt of any
Application, the Issuing Lender will process such Application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall
promptly issue the Letter of Credit requested thereby (but in no event shall
the Issuing Lender be required to issue any Letter of Credit earlier than three
Business Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed to by the Issuing Lender and the Borrower. The Issuing
Lender shall furnish a copy of such Letter of Credit to the Borrower promptly
following the issuance thereof. The Issuing Lender shall promptly furnish to
the Administrative Agent, which shall in turn promptly furnish to the Lenders,
notice of the issuance of each Letter of Credit (including the amount thereof).

3.9.          Fees and Other Charges.
(a)  The Borrower will pay a fee on all outstanding Letters of Credit
at a per annum rate equal to the Applicable Margin then in effect with respect
to Eurodollar Loans under the Revolving Facility, shared ratably among the
Revolving Lenders and payable quarterly in arrears on each Fee Payment Date
after the issuance date. In addition, the Borrower shall pay to the Issuing
Lender for its own account a fronting fee of 0.125% per annum on the undrawn
and unexpired amount of each Letter of Credit, payable quarterly in arrears on
each Fee Payment Date after the issuance date.

(b)            In addition to the
foregoing fees, the Borrower shall pay or reimburse the Issuing Lender for such
normal and customary costs and expenses as are incurred or charged by the
Issuing 

 22
 

 

Lender in issuing, negotiating, effecting payment
under, amending or otherwise administering any Letter of Credit.

3.10.        L/C Participations. (a)  The
Issuing Lender irrevocably agrees to grant and hereby grants to each L/C
Participant, and, to induce the Issuing Lender to issue Letters of Credit, each
L/C Participant irrevocably agrees to accept and purchase and hereby accepts
and purchases from the Issuing Lender, on the terms and conditions set forth
below, for such L/C Participant’s own account and risk an undivided interest
equal to such L/C Participant’s Revolving Percentage in the Issuing Lender’s
obligations and rights under and in respect of each Letter of Credit and the
amount of each draft paid by the Issuing Lender thereunder. Each L/C
Participant agrees with the Issuing Lender that, if a draft is paid under any
Letter of Credit for which the Issuing Lender is not reimbursed in full by the
Borrower in accordance with the terms of this Agreement, such L/C Participant
shall pay to the Issuing Lender upon demand at the Issuing Lender’s address for
notices specified herein an amount equal to such L/C Participant’s Revolving
Percentage of the amount of such draft, or any part thereof, that is not so
reimbursed. Each L/C Participant’s obligation to pay such amount shall be
absolute and unconditional and shall not be affected by any circumstance,
including (i) any setoff, counterclaim, recoupment, defense or other right
that such L/C Participant may have against the Issuing Lender, the Borrower or
any other Person for any reason whatsoever, (ii) the occurrence or
continuance of a Default or an Event of Default or the failure to satisfy any
of the other conditions specified in Section 6, (iii) any adverse
change in the condition (financial or otherwise) of the Borrower, (iv) any
breach of this Agreement or any other Loan Document by the Borrower, any other
Loan Party or any other L/C Participant or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing

(b)           If any amount
required to be paid by any L/C Participant to the Issuing Lender pursuant to Section 3.10(a) in
respect of any unreimbursed portion of any payment made by the Issuing Lender
under any Letter of Credit is paid to the Issuing Lender within three Business
Days after the date such payment is due, such L/C Participant shall pay to the
Issuing Lender on demand an amount equal to the product of (i) such
amount, times (ii) the daily average Federal Funds Effective Rate during
the period from and including the date such payment is required to the date on
which such payment is immediately available to the Issuing Lender, times (iii) a
fraction the numerator of which is the number of days that elapse during such
period and the denominator of which is 360. If any such amount required to be
paid by any L/C Participant pursuant to Section 3.10(a) is not made
available to the Issuing Lender by such L/C Participant within three Business
Days after the date such payment is due, the Issuing Lender shall be entitled
to recover from such L/C Participant, on demand, such amount with interest
thereon calculated from such due date at the rate per annum applicable to ABR
Loans under the Revolving Facility. A certificate of the Issuing Lender
submitted to any L/C Participant with respect to any amounts owing under this Section shall
be conclusive in the absence of manifest error.

(c)           Whenever, at any
time after the Issuing Lender has made payment under any Letter of Credit and
has received from any L/C Participant its pro  rata share of such
payment in accordance with Section 3.10(a), the Issuing Lender receives
any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by the
Issuing Lender), or any payment of interest on account thereof, the Issuing
Lender will distribute to such L/C Participant its pro  rata share
thereof; provided, however, that in the event that any such
payment received by the Issuing Lender shall be required to be returned by the
Issuing Lender, such L/C Participant shall return to the Issuing Lender the
portion thereof previously distributed by the Issuing Lender to it.

3.11.        Reimbursement Obligation of the
Borrower. If any draft is paid under any Letter of Credit, the Borrower
shall reimburse the Issuing Lender for the amount of (a) the draft so paid
and (b) any taxes, fees, charges or other costs or expenses incurred by
the Issuing Lender in connection with such 

 23
 

 

payment, not later than 12:00 Noon, New York City
time, on (i) the Business Day that the Borrower receives notice of such
draft, if such notice is received on such day prior to 10:00 A.M., New
York City time, or (ii) if clause (i) above does not apply, the
Business Day immediately following the day that the Borrower receives such
notice. Each such payment shall be made to the Issuing Lender at its address
for notices referred to herein in Dollars and in immediately available funds. Interest
shall be payable on any such amounts from the date on which the relevant draft
is paid until payment in full at the rate set forth in (x) until the
Business Day next succeeding the date of the relevant notice, Section 4.4(b) and
(y) thereafter, Section 4.4(c).

3.12.        Obligations Absolute. The
Borrower’s obligations under this Section 3 shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment that the Borrower may have or have had against
the Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The
Borrower also agrees with the Issuing Lender that the Issuing Lender shall not
be responsible for, and the Borrower’s Reimbursement Obligations under Section 3.11
shall not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even though such documents shall in
fact prove to be invalid, fraudulent or forged, or any dispute between or among
the Borrower and any beneficiary of any Letter of Credit or any other party to
which such Letter of Credit may be transferred or any claims whatsoever of the
Borrower against any beneficiary of such Letter of Credit or any such
transferee. The Issuing Lender shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except
for errors or omissions found by a final and nonappealable decision of a court
of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Issuing Lender. The Borrower agrees that any action taken or
omitted by the Issuing Lender under or in connection with any Letter of Credit
or the related drafts or documents, if done in the absence of gross negligence
or willful misconduct, shall be binding on the Borrower and shall not result in
any liability of the Issuing Lender to the Borrower.

3.13.        Letter of Credit Payments. If any
draft shall be presented for payment under any Letter of Credit, the Issuing
Lender shall promptly notify the Borrower of the date and amount thereof. The
responsibility of the Issuing Lender to the Borrower in connection with any
draft presented for payment under any Letter of Credit shall, in addition to
any payment obligation expressly provided for in such Letter of Credit, be
limited to determining that the documents (including each draft) delivered
under such Letter of Credit in connection with such presentment are substantially
in conformity with such Letter of Credit.

3.14.        Applications. To the extent that
any provision of any Application related to any Letter of Credit is
inconsistent with the provisions of this Section 3, the provisions of this
Section 3 shall apply.

SECTION 4. GENERAL
PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT

4.1.          Optional Prepayments. The
Borrower may at any time and from time to time prepay the Loans, in whole or in
part, without premium or penalty, upon irrevocable notice delivered to the
Administrative Agent no later than 11:00 A,M., New York City time, three
Business Days prior thereto, in the case of Eurodollar Loans, and no later than
11:00 A.M., New York City time, one Business Day prior thereto, in the
case of ABR Loans, which notice shall specify the date and amount of prepayment
and whether the prepayment is of Eurodollar Loans or ABR Loans; provided,
that if a Eurodollar Loan is prepaid on any day other than the last day of the
Interest Period applicable thereto, the Borrower shall also pay any amounts
owing pursuant to Section 4.10. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with 

 24
 

 

(except in the case of Revolving Loans that are ABR
Loans and Swingline Loans) accrued interest to such date on the amount prepaid.
Partial prepayments of Term Loans and Revolving Loans shall be in an aggregate principal
amount of $1,000,000 or a whole multiple thereof. Partial prepayments of
Swingline Loans shall be in an aggregate principal amount of $100,000 or a
whole multiple thereof.

4.2.          Conversion and Continuation Options. (a) The
Borrower may elect from time to time to convert Eurodollar Loans to ABR Loans
by giving the Administrative Agent prior irrevocable notice of such election no
later than 11:00 A.M., New York City time, on the Business Day preceding
the proposed conversion date, provided that any such conversion of Eurodollar
Loans may only be made on the last day of an Interest Period with respect
thereto. The Borrower may elect from time to time to convert ABR Loans to
Eurodollar Loans by giving the Administrative Agent prior irrevocable notice of
such election no later than 11:00 A.M., New York City time, on the third
Business Day preceding the proposed conversion date (which notice shall specify
the length of the initial Interest Period therefor), provided that no ABR Loan
under a particular Facility may be converted into a Eurodollar Loan when any
Event of Default has occurred and is continuing and the Administrative Agent or
the Majority Facility Lenders in respect of such Facility have determined in
its or their sole discretion not to permit such conversions. Upon receipt of
any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.

(b)           Any Eurodollar Loan
may be continued as such upon the expiration of the then current Interest
Period with respect thereto by the Borrower giving irrevocable notice to the
Administrative Agent, in accordance with the applicable provisions of the term “Interest
Period” set forth in Section 1.1, of the length of the next Interest
Period to be applicable to such Loans, provided that no Eurodollar Loan
under a particular Facility may be continued as such when any Event of Default
has occurred and is continuing and the Administrative Agent has or the Majority
Facility Lenders in respect of such Facility have determined in its or their sole
discretion not to permit such continuations, and provided, further,
that if the Borrower shall fail to give any required notice as described above
in this paragraph or if such continuation is not permitted pursuant to the
preceding proviso such Loans shall be automatically converted to ABR Loans on
the last day of such then expiring Interest Period. Upon receipt of any such
notice the Administrative Agent shall promptly notify each relevant Lender
thereof.

4.3.          Limitations on Eurodollar Tranches. Notwithstanding
anything to the contrary in this Agreement, all borrowings, conversions and
continuations of Eurodollar Loans and all selections of Interest Periods shall
be in such amounts and be made pursuant to such elections so that, (a) after
giving effect thereto, the aggregate principal amount of the Eurodollar Loans
comprising each Eurodollar Tranche shall be equal to $3,000,000 or a whole
multiple of $1,000,000 in excess thereof and (b) no more than ten
Eurodollar Tranches shall be outstanding at any one time.

4.4.          Interest Rates and Payment Dates.
(a) Each Eurodollar Loan shall bear interest for each day during each
Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Rate determined for such day plus the Applicable Margin.

(b)           Each ABR Loan shall
bear interest at a rate per annum equal to the ABR plus the Applicable Margin.

(c)           (i) If all or a
portion of the principal amount of any Loan or Reimbursement Obligation shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum equal
to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section plus
2% or (y) in the case of Reimbursement Obligations, the rate applicable to
ABR Loans under the Revolving Facility plus 2%, and (ii) if all or
a portion of any interest payable on any Loan or Reimbursement Obligation or 

 25
 

 

any facility fee or other amount payable hereunder
shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum equal
to the rate then applicable to ABR Loans under the relevant Facility plus 2% (or, in the case of any such other amounts that do
not relate to a particular Facility, the rate then applicable to ABR Loans
under the Revolving Facility plus 2%), in
each case, with respect to clauses (i) and (ii) above, from the date
of such non-payment until such amount is paid in full (as well after as
before judgment).

(d)           Interest shall be
payable in arrears on each Interest Payment Date, provided that interest
accruing pursuant to paragraph (c) of this Section shall be payable
from time to time on demand.

4.5.          Computation of Interest and Fees. (a)  Interest
and fees payable pursuant hereto shall be calculated on the basis of a 360-day
year for the actual days elapsed, except that, with respect to ABR Loans the
rate of interest on which is calculated on the basis of the Prime Rate, the
interest thereon shall be calculated on the basis of a 365- (or 366-,
as the case may be) day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower and the relevant Lenders
of each determination of a Eurodollar Rate. Any change in the interest rate on
a Loan resulting from a change in the ABR or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of the effective date
and the amount of each such change in interest rate.

(b)           Each determination
of an interest rate by the Administrative Agent pursuant to any provision of
this Agreement shall be conclusive and binding on the Borrower and the Lenders
in the absence of manifest error. The Administrative Agent shall, at the
request of the Borrower, deliver to the Borrower a statement showing the
quotations used by the Administrative Agent in determining any interest rate
pursuant to Section 4.4(a).

4.6.          Inability to Determine Interest Rate. If prior to
the first day of any Interest Period:

(a)     the Administrative Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, or

(b)   the Administrative Agent
shall have received notice from the Majority Facility Lenders in respect of the
relevant Facility that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period,

the Administrative Agent shall give telecopy or
telephonic notice thereof to the Borrower and the relevant Lenders as soon as
practicable thereafter. If such notice is given (x) any Eurodollar Loans
under the relevant Facility requested to be made on the first day of such
Interest Period shall be made as ABR Loans, (y) any Loans under the
relevant Facility that were to have been converted on the first day of such Interest
Period to Eurodollar Loans shall be continued as ABR Loans and (z) any
outstanding Eurodollar Loans under the relevant Facility shall be converted, on
the last day of the then-current Interest Period, to ABR Loans. Until such
notice has been withdrawn by the Administrative Agent, no further Eurodollar
Loans under the relevant Facility shall be made or continued as such, nor shall
the Borrower have the right to convert Loans under the relevant Facility to
Eurodollar Loans.

 26

 

4.7.          Pro Rata Treatment and Payments.
(a)  Each borrowing by the Borrower from the Lenders hereunder, each
payment by the Borrower on account of any facility fee and any reduction of the
Commitments of the Lenders shall be made pro  rata according to
the respective Term Percentages or Revolving Percentages, as the case may be,
of the relevant Lenders.

(b)           Each payment
(including each prepayment) by the Borrower on account of principal of and
interest on the Term Loans shall be made pro  rata according to
the respective outstanding principal amounts of the Term Loans then held by the
Term Lenders. The amount of each principal prepayment of the Term Loans shall
be applied to reduce the then remaining installments of the Term Loans pro
rata based upon the respective then remaining principal amounts thereof.
Amounts prepaid on account of the Term Loans may not be reborrowed.

(c)           Each payment
(including each prepayment) by the Borrower on account of principal of and
interest on the Revolving Loans shall be made pro  rata according
to the respective outstanding principal amounts of the Revolving Loans then
held by the Revolving Lenders.

(d)           All payments
(including prepayments) to be made by the Borrower hereunder, whether on
account of principal, interest, fees or otherwise, shall be made without setoff
or counterclaim and shall be made prior to 12:00 Noon, New York City time, on
the due date thereof to the Administrative Agent, for the account of the
Lenders, at the Funding Office, in Dollars and in immediately available funds. The
Administrative Agent shall distribute such payments to the Lenders promptly
upon receipt in like funds as received. If any payment hereunder (other than
payments on the Eurodollar Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day. If any payment on a Eurodollar Loan becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day. In the case of any extension of
any payment of principal pursuant to the preceding two sentences, interest
thereon shall be payable at the then applicable rate during such extension.

(e)           Unless the
Administrative Agent shall have been notified in writing by any Lender prior to
a borrowing that such Lender will not make the amount that would constitute its
share of such borrowing available to the Administrative Agent, the
Administrative Agent may assume that such Lender is making such amount
available to the Administrative Agent, and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. If such amount is not made available to the Administrative Agent by the
required time on the Borrowing Date therefor, such Lender shall pay to the
Administrative Agent, on demand, such amount with interest thereon, at a rate
equal to the greater of (i) the Federal Funds Effective Rate and (ii) a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation, for the period until such Lender makes
such amount immediately available to the Administrative Agent. A certificate of
the Administrative Agent submitted to any Lender with respect to any amounts
owing under this paragraph shall be conclusive in the absence of manifest error.
If such Lender’s share of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days after such
Borrowing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the rate per annum applicable to ABR Loans
under the relevant Facility, on demand, from the Borrower.

(f)            Unless the
Administrative Agent shall have been notified in writing by the Borrower prior
to the date of any payment due to be made by the Borrower hereunder that the
Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in 

 27
 

 

reliance upon such assumption, make available to the
Lenders their respective pro  rata shares of a corresponding amount. If such payment is
not made to the Administrative Agent by the Borrower within three Business Days
after such due date, the Administrative Agent shall be entitled to recover, on
demand, from each Lender to which any amount which was made available pursuant
to the preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing herein
shall be deemed to limit the rights of the Administrative Agent or any Lender
against the Borrower.

4.8.          Requirements of Law. (a)  If
the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof or 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 made subsequent to the date hereof:

(i)    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

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

and the result
of any of the foregoing is to increase the cost to such Lender, by an amount
that such Lender deems to be material, 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, the Borrower shall promptly pay such Lender, upon its demand,
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 paragraph, it shall promptly notify the
Borrower (with a copy to the Administrative Agent) of the event by reason of
which it has become so entitled.

(b)  If any
Lender shall have determined that 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 made subsequent
to the date hereof 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 such Lender’s or such
corporation’s policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then from time to time, after submission by such
Lender to the Borrower (with a copy to the Administrative Agent) of a written
request therefor, the Borrower shall pay to such Lender such additional amount
or amounts as will compensate such Lender or such corporation for such
reduction.

(c)           A certificate as to
any additional amounts payable pursuant to this Section submitted by any
Lender to the Borrower (with a copy to the Administrative Agent) shall be
conclusive in the absence of manifest error. Notwithstanding anything to the
contrary in this Section, the Borrower shall not be required to compensate a
Lender pursuant to this Section for any amounts incurred more than nine
months prior to the date that such Lender notifies the Borrower of such Lender’s
intention to claim compensation therefor; provided that, if the
circumstances giving rise to such claim have a retroactive effect, then such
nine-month period shall be extended to include the period of such retroactive
effect. The 

 28
 

 

obligations of the Borrower pursuant to this Section shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.

4.9.          Taxes. (a)  All
payments made by the Borrower under this Agreement shall be made free and clear
of, and without deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding (i) net
income taxes and franchise taxes (imposed in lieu of net income taxes) imposed
on the Administrative Agent or any Lender as a result of a present or former
connection between the Administrative Agent or such Lender and the jurisdiction
of the Governmental Authority imposing such tax or any political subdivision or
taxing authority thereof or therein (other than any such connection arising
solely from the Administrative 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) and (ii) any branch profits taxes
imposed by a jurisdiction referred to in clause (i) of this section 4.9(a).
If any such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings (“Non-Excluded Taxes”) or Other Taxes are
required to be withheld from any amounts payable to the Administrative Agent or
any Lender hereunder, the amounts so payable to the Administrative Agent or
such Lender shall be increased to the extent necessary to yield to the
Administrative Agent or such Lender (after payment of all Non-Excluded Taxes
and Other Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement, provided, however,
that the Borrower shall not be required to increase any such amounts payable to
any Lender (including, without limitation, any Non-U.S. Lender, as defined in Section 4.9(d))
with respect to any Non-Excluded Taxes or Other Taxes (i) that are
attributable to such Lender’s failure to comply with the requirements of
paragraph (d) or (e) of this Section or (ii) that are
withholding taxes imposed on amounts payable to such Lender at the time such
Lender becomes a party to this Agreement (or changes the office where it holds
or owns its Loans), except to the extent that such Lender’s assignor (if any)
was entitled, at the time of assignment (or change in lending office), to
receive additional amounts from the Borrower with respect to such Non-Excluded
Taxes pursuant to this paragraph.

(b)           In addition, the Borrower
shall pay any Other Taxes to the relevant Governmental Authority in accordance
with applicable law, unless such Other Taxes are excluded under the proviso in Section 4.9(a).

(c)           Whenever any
Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as
possible thereafter the Borrower shall send to the Administrative 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 the Borrower showing
payment thereof, a copy of the return reporting such payment or other evidence
of payment. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes
when due to the appropriate taxing authority, the Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as
a result of any such failure.

(d)            Each Lender (or
Transferee) that is not a “U.S. Person” as defined in Section 7701(a)(30)
of the Code (a “Non-U.S. Lender”) shall deliver to the Borrower and the
Administrative Agent (or, in the case of a Participant, to the Lender from
which the related participation shall have been purchased) two copies of either
U.S. Internal Revenue Service Form W-8BEN 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 statement substantially in the
form of Exhibit F and a 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 the Borrower under this Agreement and 

 29
 

 

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, in the case of any Participant, on or before the
date such Participant purchases the related participation). In addition, each
Non-U.S. Lender shall deliver such forms promptly upon the obsolescence
or invalidity of any form previously delivered by such Non-U.S. Lender. Each
Non-U.S. Lender shall promptly notify the Borrower at any time it determines
that it is no longer in a position to provide any previously delivered
certificate to the Borrower (or any other form of certification adopted by the
U.S. taxing authorities for such purpose). Notwithstanding any other provision
of this paragraph, a Non-U.S. Lender shall not be required to deliver any
form pursuant to this paragraph that such Non-U.S. Lender is not legally
able to deliver (but such inability shall not affect whether or not a
particular tax is an excluded tax under Section 4.9(a).

(e)           A Lender that is
entitled to an exemption from or reduction of non-U.S. withholding tax under
the law of the jurisdiction in which the Borrower is located, or any treaty to
which such jurisdiction is a party, with respect to payments under this
Agreement shall deliver to the Borrower (with a copy to the Administrative
Agent), at the time or times prescribed by applicable law or reasonably
requested by the Borrower, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate, provided that such Lender is legally
entitled to complete, execute and deliver such documentation and in such Lender’s
judgment such completion, execution or submission would not materially
prejudice the legal position of such Lender.

(f)            If the Administrative Agent or any Lender
determines, in its sole discretion, that it has received a refund of any
Non-Excluded Taxes or Other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section 4.9,
it shall pay over such refund to the Borrower (but only to the extent of
indemnity payments made, or additional amounts paid, by the Borrower under this
Section 4.9 with respect to the
Non-Excluded Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that the Borrower, upon the
request of the Administrative Agent or such Lender, agrees to repay the amount
paid over to the Borrower (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) to the Administrative Agent or
such Lender in the event and to the extent of the amount the Administrative
Agent or such Lender is required to repay such refund to such Governmental
Authority. This paragraph shall not be construed to require the Administrative
Agent or any Lender to make available its tax returns (or any other information
relating to its taxes which it deems confidential) to the Borrower or any other
Person.

(g)           The agreements in
this Section shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.

4.10.        Indemnity. The Borrower agrees to
indemnify each Lender for, 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 the Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Loans after the Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement, (b) default by the
Borrower in making any prepayment of or conversion from Eurodollar Loans after
the Borrower has given a notice thereof in accordance with the provisions of
this Agreement or (c) the making of a prepayment of Eurodollar Loans on a
day that is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest that would have accrued on the amount 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 

 30
 

 

continue, the Interest Period that would have
commenced on the date of such failure) in each case 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 interbank eurodollar market. A certificate as to any
amounts payable pursuant to this Section submitted to the Borrower by any
Lender shall be conclusive in the absence of manifest error. This covenant
shall survive the termination of this Agreement and the payment of the Loans
and all other amounts payable hereunder.

4.11.        Change of Lending Office. Each
Lender agrees that, upon the occurrence of any event giving rise to the
operation of Section 4.8 or 4.9(a) with respect to such Lender, it
will, if requested by the Borrower, use reasonable efforts (subject to overall
policy considerations of such Lender) to designate another lending office for
any Loans affected by such event with the object of avoiding the consequences
of such event; provided, that such designation is made on terms that, in
the reasonable judgment of such Lender, cause such Lender and its lending
office(s) to suffer no economic, legal or regulatory disadvantage for
which it is not indemnified by Borrower, and provided, further,
that nothing in this Section shall affect or postpone any of the
obligations of the Borrower or the rights of any Lender pursuant to Section 4.8
or 4.9(a).

4.12.        Replacement of Lenders. The
Borrower shall be permitted to replace any Lender that (a) requests
reimbursement for amounts owing pursuant to Section 4.8 or 4.9(a) or (b) defaults
in its obligation to make Loans hereunder, with a replacement financial
institution; provided that (i) such replacement does not conflict
with any Requirement of Law, (ii) no Event of Default shall have occurred
and be continuing at the time of such replacement, (iii) prior to any such
replacement, such Lender shall have taken no action under Section 4.11 so
as to eliminate the continued need for payment of amounts owing pursuant to Section 4.8
or 4.9(a), (iv) 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, (v) the Borrower shall be liable to such replaced
Lender under Section 4.10 if any Eurodollar Loan owing to such replaced
Lender shall be purchased other than on the last day of the Interest Period
relating thereto, (vi) the replacement financial institution shall be
reasonably satisfactory to the Administrative Agent, (vii) the replaced
Lender shall be obligated to make such replacement in accordance with the
provisions of Section 11.6 (provided that the Borrower shall be obligated
to pay the registration and processing fee referred to therein), (viii) until
such time as such replacement shall be consummated, the Borrower shall pay all
additional amounts (if any) required pursuant to Section 4.8 or 4.9(a), as
the case may be, and (ix) any such replacement shall not be deemed to be a
waiver of any rights that the Borrower, the Administrative Agent or any other
Lender shall have against the replaced Lender.

SECTION 5. REPRESENTATIONS
AND WARRANTIES

To induce the Administrative
Agent and the Lenders to enter into this Agreement and to make the Loans and
issue or participate in the Letters of Credit, the Borrower hereby represents
and warrants to the Administrative Agent and each Lender that:

5.1.          Financial Condition. (a)  Schedule
5.1(a)(i) sets forth a statement (the “Borrower EBITDA Statement”)
of the Borrower’s Consolidated EBITDA for the twelve months ended February 25,
2006. The Borrower EBITDA Statement, together with the audited and unaudited
financial statements of the Borrower set forth in Section 5.1(b) below,
present fairly the consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at the end of the fiscal periods identified in
each such financial statement, and the consolidated results of its operations
and its consolidated cash flows for the respective fiscal periods then ended
identified in each such financial statement. Schedule 5.1(a) also sets
forth J&L’s operating income for the twelve months ended March 31,
2006. The Borrower has also 

 31
 

 

provided each Lender with a copy of the Historical
Financials and the Interim Financials, as such terms are defined in the
Acquisition Documentation.

(b)           The audited
consolidated balance sheets of the Borrower and its consolidated Subsidiaries
as at August 30, 2003, August 28, 2004 and August 27, 2005, and
the related consolidated statements of income and of cash flows for the fiscal
years ended on such dates, reported on by and accompanied by an unqualified
report from Ernst & Young LLP, present fairly the consolidated
financial condition of the Borrower and its consolidated Subsidiaries as at
such date, and the consolidated results of its operations and its consolidated
cash flows for the respective fiscal years then ended. The unaudited
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as
at February 25, 2006, and the related unaudited consolidated statements of
income and cash flows for the 6-month period ended on such date, present
fairly the consolidated financial condition of the Borrower and its
consolidated Subsidiaries as at such date, and the consolidated results of its
operations and its consolidated cash flows for the 6-month period then
ended (subject to normal year-end audit adjustments). All such financial
statements, including the related schedules and notes thereto, have been
prepared in accordance with GAAP applied consistently throughout the periods
involved (except as approved by the aforementioned firm of accountants and
disclosed therein) and the omission in unaudited consolidated financial
statements of the information and footnotes not required under GAAP to be
included in interim unaudited financial information. Except as set forth on
Schedule 5.1(b), no Group Member has any material Guarantee Obligations,
contingent liabilities and liabilities for taxes, or any long-term leases
or unusual forward or long-term commitments, including any interest rate
or foreign currency swap or exchange transaction or other obligation in respect
of derivatives, that are not reflected in the most recent financial statements
referred to in this paragraph. During the period from August 27, 2005 to
and including the date hereof there has been no Disposition by any Group Member
of any material part of its business or property.

5.2.          No Change. Since August 27,
2005, there has been no development or event that has had or could reasonably
be expected to have a Material Adverse Effect.

5.3.          Existence; Compliance with Law.
Each Group Member (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has
the power and authority, and the legal right, to own and operate its property,
to lease the property it operates as lessee and to conduct the business in
which it is currently engaged, (c) is duly qualified as a foreign
corporation or other organization and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification, except where the failure to so
qualify, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect and (d) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect, or, with
respect to J&L, as set forth on Schedule 5.3 attached hereto.

5.4.          Power; Authorization; Enforceable
Obligations. Each Loan Party has the power and authority, and the legal
right, to make, deliver and perform the Loan Documents to which it is a party
and, in the case of the Borrower, to obtain extensions of credit hereunder. Each
Loan Party has taken all necessary organizational action to authorize the
execution, delivery and performance of the Loan Documents to which it is a
party and, in the case of the Borrower, to authorize the extensions of credit
on the terms and conditions of this Agreement. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the Acquisition
and the extensions of credit hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement or any of the Loan Documents,
except consents, authorizations, filings and notices described in Schedule 5.4,
and those filings required in connection with the consummation of the
Acquisition in accordance with the Securities Exchange Act of 1934 and the rules 

 32
 

 

and regulations promulgated thereunder and the rules of
the New York Stock Exchange, which consents, authorizations, filings and
notices have been obtained or made and are in full force and effect, or will be
made in accordance with the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder or applicable New York Stock Exchange rules.
Each Loan Document has been duly executed and delivered on behalf of each Loan
Party party thereto. This Agreement constitutes, and each other Loan Document upon
execution will constitute, a legal, valid and binding obligation of each Loan
Party party thereto, enforceable against each such Loan Party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors’ rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or at law).

5.5.          No Legal Bar. The execution,
delivery and performance of this Agreement and the other Loan Documents, the
issuance of Letters of Credit, the borrowings hereunder and the use of the
proceeds thereof will not violate any Requirement of Law or any Contractual
Obligation of any Group Member and will not result in, or require, the creation
or imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation. No
Requirement of Law or Contractual Obligation applicable to the Borrower or any
of its Subsidiaries could reasonably be expected to have a Material Adverse
Effect.

5.6.          Litigation. Except as set forth
on Schedule 5.6 attached hereto, no litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against any Group Member or against
any of their respective properties or revenues (a) with respect to any of
the Loan Documents or any of the transactions contemplated hereby or thereby,
or (b) that could reasonably be expected to have a Material Adverse
Effect.

5.7.          No Default. No Group Member is
in default under or with respect to any of its Contractual Obligations in any
respect that could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.

5.8.          Ownership of Property; Liens. Each
Group Member has title in fee simple to, or a valid leasehold interest in, all
its real property, and good title to, or a valid leasehold interest in, all its
other property, in each case material to its business and except for minor
defects in title that do not interfere with its ability to conduct its business
as currently conducted or to utilize such properties for their intended
purposes, and none of such property is subject to any Lien except as permitted
by Section 8.3.

5.9.          Intellectual Property. Each
Group Member owns, or is licensed to use, all Intellectual Property necessary
for the conduct of its business as currently conducted. No material claim has
been asserted and is pending by any Person challenging or questioning the use
of any such Intellectual Property or the validity or effectiveness of any such
Intellectual Property. The use of such Intellectual Property by each Group
Member does not infringe on the rights of any Person in any material respect,
except where such infringement, individually or in the aggregate, does not have
a Material Adverse Effect.

5.10.        Taxes. Each Group Member has
filed or caused to be filed all Federal, state and other material tax returns
that are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority, except (a) the amount or validity
of which are currently being contested in good faith by appropriate proceedings
and with respect to which reserves in conformity with GAAP have been provided
on the books of the relevant 

 33
 

 

Group Member or (b) to the extent that the
failure to do so could not reasonably be expected to result in a Material
Adverse Effect; no tax Lien has been filed (other than a tax Lien described in Section 8.3(a)),
and, to the knowledge of the Borrower, no claim is being asserted, with respect
to any such tax, fee or other charge.

5.11.        Federal Regulations. No part of
the proceeds of any Loans, and no other extensions of credit hereunder, will be
used (a) for “buying” or “carrying” any “margin stock” within the
respective meanings of each of the quoted terms under Regulation U as now and
from time to time hereafter in effect for any purpose that violates the
provisions of the Regulations of the Board or (b) for any purpose that
violates the provisions of the Regulations of the Board. If requested by any
Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form G-3 or FR Form U-1,
as applicable, referred to in Regulation U.

5.12.        Labor Matters. Except as, in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect:  (a) there are no strikes or
other labor disputes against any Group Member pending or, to the knowledge of
the Borrower, threatened; (b) hours worked by and payment made to
employees of each Group Member have not been in violation of the Fair Labor
Standards Act or any other applicable Requirement of Law dealing with such
matters; and (c) all payments due from any Group Member on account of
employee health and welfare insurance have been paid or accrued as a liability
on the books of the relevant Group Member.

5.13.        ERISA. Neither a Reportable Event
(in the case of any Single Employer Plan) nor, in the case of a Plan subject to
Section 412 of the Code or Section 302 of ERISA, an “accumulated
funding deficiency” (within the meaning of Section 412 of the Code or Section 302
of ERISA) has occurred with respect to any such Plan during the five-year
period prior to the date on which this representation is made or deemed made
and, except as has not resulted or is not likely to result in material
liability to the Group Members, each Plan has complied in all respects with the
applicable provisions of ERISA and the Code. No termination of a Single
Employer Plan has occurred that has resulted or is likely to result in material
liability to the Group Members with respect to the Group Members, and no Lien
in favor of the PBGC or such a Plan has arisen with respect to a Plan, during
such five-year period. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this representation
is made or deemed made, exceed the value of the assets of such Plan allocable
to such accrued benefits by an amount that is material to the Group Members. Neither
the Borrower, any Group Member nor any Commonly Controlled Entity has had a complete
or partial withdrawal from any Multiemployer Plan that has resulted or could
reasonably be expected to result in a material liability under ERISA with
respect to the Group Members, and the Group Members would not become subject to
any material liability under ERISA if the Borrower, any Group Member or any
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. To Borrower’s knowledge, no such
Multiemployer Plan is in Reorganization or Insolvent.

5.14.        Investment Company Act; Other
Regulations. No Loan Party is an “investment company”, or a company “controlled”
by an “investment company”, within the meaning of the Investment Company Act of
1940, as amended. No Loan Party is subject to regulation under any Requirement
of Law (other than Regulation X of the Board) that limits its ability to incur
Indebtedness.

5.15.        Subsidiaries. Except as disclosed
to the Administrative Agent by the Borrower in writing from time to time after
the Closing Date to reflect changes after the Closing Date, (a) Schedule
5.15 sets forth the name and jurisdiction of incorporation of each Subsidiary
and, as to each such 

 34
 

 

Subsidiary, the percentage of each class of Capital
Stock owned by any Loan Party and (b) there are no outstanding
subscriptions, options, warrants, calls, rights or other agreements or
commitments (other than stock options and/or restricted stock granted to
employees, consultants or directors and directors’ qualifying shares) of any
nature relating to any Capital Stock of the Borrower or any Subsidiary, except
as created by the Loan Documents.

5.16.        Use of Proceeds. The proceeds of
the Term Loans shall be used to finance a portion of the Acquisition and to pay
related fees and expenses. The proceeds of the Revolving Loans and the
Swingline Loans, and the Letters of Credit, shall be used (a) to finance a
portion of the Acquisition and to pay related fees and expenses and (b) for
general corporate purposes.

5.17.        Environmental Matters. Except as,
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect:

(a)           the facilities and
properties owned, leased or operated by any Group Member (the “Properties”)
do not contain, and have not previously contained, any Materials of
Environmental Concern in amounts or concentrations or under circumstances that
constitute or constituted a violation of, or could give rise to liability
under, any Environmental Law;

(b)           no Group Member has
received or is aware of any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the
Properties or the business operated by any Group Member (the “Business”),
nor does the Borrower have knowledge or reason to believe that any such notice
will be received or is being threatened;

(c)           Materials of
Environmental Concern have not been transported or disposed of from the Properties
in violation of, or in a manner or to a location that could give rise to
liability under, any Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at, on or under any of
the Properties in violation of, or in a manner that could give rise to
liability under, any applicable Environmental Law;

(d)           no judicial
proceeding or governmental or administrative action is pending or, to the
knowledge of the Borrower, threatened, under any Environmental Law to which any
Group Member is or will be named as a party with respect to the Properties or
the Business, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
the Properties or the Business;

(e)           there has been no
release or threat of release of Materials of Environmental Concern at or from
the Properties, or arising from or related to the operations of any Group
Member in connection with the Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that could give rise to
liability under Environmental Laws;

(f)            the Properties and
all operations at the Properties are in compliance, and have in the last five
years been in compliance, with all applicable Environmental Laws, and there is
no contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the Business; and

(g)           no Group Member has
assumed any liability of any other Person under Environmental Laws.

 35
 

 

5.18.        Accuracy of Information, etc. No
statement or information contained in this Agreement, any other Loan Document,
the Confidential Information Memorandum or any other document, certificate or
written statement furnished by or on behalf of any Loan Party to the
Administrative Agent or the Lenders, or any of them, for use in connection with
the transactions contemplated by this Agreement or the other Loan Documents,
contained as of the date such statement, information, document or certificate
was so furnished (or, in the case of the Confidential Information Memorandum,
as of the date of this Agreement), any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
The projections and pro  forma financial information contained in
the materials referenced above are based upon good faith estimates and
assumptions believed by management of the Borrower to be reasonable at the time
made, it being recognized by the Lenders that such financial information as it
relates to future events is not to be viewed as fact and that actual results
during the period or periods covered by such financial information may differ
from the projected results set forth therein by a material amount. To the
Borrower’s knowledge, as of the date hereof, the representations and warranties
contained in the Acquisition Documentation are true and correct in all material
respects.

5.19.        Solvency. Each Loan Party is, and
after giving effect to the Acquisition and the incurrence of all Indebtedness
and obligations being incurred in connection herewith and therewith will be and
will continue to be, Solvent.

5.20.        Certain Documents. The Borrower
has delivered to the Administrative Agent a complete and correct copy of the
Acquisition Documentation, including any amendments, supplements or modifications
with respect thereto.

SECTION 6. CONDITIONS
PRECEDENT

6.1.          Conditions to Initial Extension of
Credit. The agreement of each Lender to make the initial extension of
credit requested to be made by it is subject to the satisfaction, prior to or
concurrently with the making of such extension of credit on the Closing Date,
of the following conditions precedent:

(a) Credit
Agreement; Guarantee. The Administrative Agent shall have received (i) this
Agreement, executed and delivered by the Administrative Agent, the Borrower and
each Person listed on Schedule 1.1A and (ii) the Guarantee, executed and
delivered by each Subsidiary Guarantor.

(b) Acquisition.
The acquisition by MSC Acquisition Corp. VI of all of the outstanding Capital
Stock of J&L from JLK Direct Distribution Inc. pursuant to the Acquisition
Agreement (the “Acquisition”) shall have been consummated in accordance
with applicable law and on terms and conditions reasonably satisfactory to the
Lenders. The Acquisition Documentation shall have satisfactory terms and
conditions, and no provision thereof shall have been waived, amended,
supplemented or otherwise modified in any material respect without the approval
of the Lenders.

(c) Financial
Statements. The Lenders shall have received the Historical Financials and
Interim Financials described in Section 5.1 and such financial statements
shall comply in all material respects with the requirements set forth in
Schedule 2.02 of the Acquisition Documentation.

(d) Projections.
The Lenders shall have received satisfactory projections through 2011.

 36

 

(e) Approvals.
All governmental and third party approvals necessary in connection with the
Acquisition, the continuing operations of the Group Members and the
transactions contemplated hereby shall have been obtained and be in full force
and effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
restrain, prevent or otherwise impose adverse conditions on the Acquisition or
the financing contemplated hereby.

(f) Fees.
The Lenders and the Administrative Agent shall have received all fees required
to be paid, and all expenses for which invoices have been presented (including
the reasonable fees and expenses of legal counsel), on or before the Closing
Date. All such amounts will be paid with proceeds of Loans made on the Closing
Date and will be reflected in the funding instructions given by the Borrower to
the Administrative Agent on or before the Closing Date.

(g) Closing
Certificate; Certified Certificate of Incorporation; Good Standing Certificates.
The Administrative Agent shall have received (i) a certificate of each
Loan Party, dated the Closing Date, substantially in the form of Exhibit C,
with appropriate insertions and attachments, including the certificate of incorporation
of each Loan Party that is a corporation certified by the relevant authority of
the jurisdiction of organization of such Loan Party, and (ii) a long form
good standing certificate for each Loan Party from its jurisdiction of
organization.

(h) Legal Opinions. The Administrative
Agent shall have received the following executed legal opinions:

(i)    the legal opinion of Katten
Muchin Rosenman LLP, counsel to the Borrower and its Subsidiaries,
substantially in the form of Exhibit E-1; and

(ii)   the legal opinion of
Honigman Miller Schwartz and Cohn LLP, special Michigan counsel to Borrower and
J&L, substantially in the form of Exhibit E-2.

Each such legal opinion
shall cover such other matters incident to the transactions contemplated by
this Agreement as the Administrative Agent may reasonably require.

6.2           Conditions to Each Extension of
Credit. The agreement of each Lender to make any extension of credit
requested to be made by it on any date (including its initial extension of
credit) is subject to the satisfaction of the following conditions precedent:

(a) Representations
and Warranties. Each of the representations and warranties made by any Loan
Party in or pursuant to the Loan Documents shall be true and correct in all
material respects on and as of such date as if made on and as of such date, provided,
however, that for the initial extension of credit on the Closing Date
and any extension of credit prior to August 26, 2006, the representations
and warranties in Sections 5.1(a), 5.2, 5.3(d), 5.4 (but only with regard to
the third sentence thereof), 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.12, 5.13, 5.17
and 5.18, to the extent they relate to the business of J&L as conducted
prior to the Closing Date, shall be limited to the Borrower’s knowledge.

(b) No
Default. No Default or Event of Default shall have occurred and be
continuing on such date or after giving effect to the extensions of credit
requested to be made on such date.

Each borrowing
by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall
constitute a representation and warranty by the Borrower as of the date of such
extension of credit that the conditions contained in this Section 6.2 have
been satisfied.

 37
 

 

SECTION 7. AFFIRMATIVE COVENANTS

The Borrower hereby agrees
that, so long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or the
Administrative Agent hereunder, the Borrower shall and shall cause each of its
Subsidiaries to:

7.1           Financial Statements. Furnish
to the Administrative Agent and each Lender:

(a) as soon as available, but in any event within
90 days (or such shorter period as the SEC shall specify for the filing of
annual reports on Form 10-K) after the end of each fiscal year of
the Borrower, a copy of the audited consolidated balance sheet of the Borrower
and its consolidated Subsidiaries as at the end of such year and the related
audited consolidated statements of income and of cash flows for such year,
setting forth in each case in comparative form the figures for the previous
year, reported on without a “going concern” or like qualification or exception,
or qualification arising out of the scope of the audit, by Ernst &
Young LLP or other independent certified public accountants of nationally
recognized standing; and

(b) as soon as available, but in any event not
later than 45 days (or such shorter period as the SEC shall specify for the
filing of quarterly reports on Form 10-Q) after the end of each of
the first three quarterly periods of each fiscal year of the Borrower, the
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such quarter and the related unaudited
consolidated statements of income and of cash flows for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth in
each case in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects (subject to
normal year-end audit adjustments).

All such
financial statements shall be complete and correct in all material respects and
shall be prepared in reasonable detail and in accordance with GAAP applied
(except as approved by such accountants or officer, as the case may be, and
disclosed in reasonable detail therein) consistently throughout the periods
reflected therein and with prior periods.

Information
required to be delivered pursuant to this Section 7.1 shall be deemed to
have been delivered to the Lenders on the date on which the Borrower provides
written notice to the Lenders that such information has been posted on the
Borrower’s website on the Internet at http:/www.mscdirect.com or is available
on the website of the SEC at http:/www.sec.gov (to the extent such information
has been posted or is available as described in such notice). Information
required to be delivered pursuant to this Section 7.1 may also be
delivered by electronic communication pursuant to procedures approved by the
Administrative Agent pursuant to Section 11.2.

7.2           Certificates; Other Information.
Furnish to the Administrative Agent and each Lender (or, in the case of clause
(g), to the relevant Lender):

(a) concurrently with the delivery of the
financial statements referred to in Section 7.1(a), a certificate of the
independent certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;

(b) concurrently with the delivery of any
financial statements pursuant to Section 7.1, (i) a certificate of a
Responsible Officer stating that, to the best of each such Responsible Officer’s
knowledge, each Loan Party during such period has observed or performed all of
its covenants and other agreements, and satisfied every condition contained in
this Agreement and 

 38
 

 

the other Loan
Documents to which it is a party to be observed, performed or satisfied by it,
and that such Responsible Officer has obtained no knowledge of any Default or
Event of Default except as specified in such certificate and (ii) in the
case of quarterly or annual financial statements and (x) a Compliance
Certificate containing all information and calculations necessary for
determining compliance by each Group Member with the provisions of this
Agreement referred to therein as of the last day of the fiscal quarter or
fiscal year of the Borrower, as the case may be;

(c) within five days after the same are sent,
copies of all financial statements and reports that the Borrower sends to the
holders of any class of its debt securities or public equity securities and,
within five days after the same are filed, copies of all financial statements
and reports that the Borrower may make to, or file with, the SEC (it being
understood that information required to be delivered pursuant to this Section 7.2(c) (i) shall
be deemed to have been delivered to the Lenders on the date on which the
Borrower provides written notice to the Lenders that such information has been
posted on the Borrower’s website on the Internet at http:/www.mscdirect .com or
is available on the website of the SEC at http:/www.sec.gov (to the extent such
information has been posted or is available as described in such notice) and (ii) may
also be delivered by electronic communication pursuant to procedures approved
by the Administrative Agent pursuant to Section 11.2); and

(d) promptly, such additional financial and other
information as any Lender may from time to time reasonably request.

7.3           Payment of Obligations. Pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its material obligations of whatever
nature, except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of the relevant
Group Member or where such failure to pay, discharge or otherwise satisfy could
not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.

7.4           Maintenance of Existence;
Compliance. (a)(i)  Preserve, renew and keep in full force and effect its
organizational existence and (ii) take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business, except, in each case, as otherwise permitted by Section 8.4
and except to the extent that failure to do so could not reasonably be expected
to have a Material Adverse Effect; and (b) comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.

7.5           Maintenance of Property;
Insurance. (a)  Keep all property useful and necessary in its business in
good working order and condition, ordinary wear and tear excepted and (b) maintain
with financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but
including in any event public liability, product liability and business
interruption) as are usually insured against in the same general area by
companies engaged in the same or a similar business.

7.6           Inspection of Property; Books and
Records; Discussions. (a)  Keep proper books of records and account in
which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities and (b) permit representatives of any
Lender, upon reasonable prior notice, to visit and inspect any of its
properties and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be desired and to discuss
the business, operations, properties and 

 39
 

 

financial and other
condition of the Group Members with officers and employees of the Group Members
and with their independent certified public accountants.

7.7           Notices. Promptly give notice to
the Administrative Agent and each Lender of:

(a) the occurrence of any Default or Event of
Default;

(b) any (i) default or event of default
under any Contractual Obligation of any Group Member or (ii) litigation,
investigation or proceeding that may exist at any time between any Group Member
and any Governmental Authority, that in either case, if not cured or if
adversely determined, as the case may be, could reasonably be expected to have
a Material Adverse Effect;

(c)  any litigation or proceeding affecting any
Group Member (i) which, if adversely decided, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, (ii) in
which any material injunctive or similar relief is sought or (iii) which
relates to any Loan Document;

(d) the following events, as soon as possible and
in any event within 30 days after the Borrower knows or has reason to know
thereof:  (i) the occurrence of any
Reportable Event with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien with respect to a Plan in
favor of the PBGC or such a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC
against the Borrower or any Commonly Controlled Entity or any Multiemployer
Plan with respect to the withdrawal from, or the termination, Reorganization or
Insolvency of, any Plan; and

(e) any development or event that has had or could
reasonably be expected to have a Material Adverse Effect.

Each notice
pursuant to this Section 7.7 shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the relevant Group Member proposes to take with respect
thereto.

7.8           Environmental Laws. (a)  Comply
in all material respects with, and ensure compliance in all material respects
by all tenants and subtenants, if any, with, all applicable Environmental Laws,
and obtain and comply in all material respects with and maintain, and ensure
that all tenants and subtenants obtain and comply in all material respects with
and maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws, except to the extent failure
to do so could not reasonably be expected to have a Material Adverse Effect.

(b)           Conduct and complete
all investigations, studies, sampling and testing, and all remedial, removal
and other actions required under Environmental Laws and promptly comply in all
material respects with all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws, except to the extent failure to do so
could not reasonably be expected to have a Material Adverse Effect.

7.9           Additional Guarantors. With respect
to any Domestic Subsidiary (other than a Securitization Vehicle) that becomes a
Material Domestic Subsidiary after the Closing Date or any new Material
Domestic Subsidiary (other than a Securitization Vehicle) created or acquired
after the Closing Date, promptly (i) cause such Material Domestic
Subsidiary (A)  to execute and deliver to the Administrative Agent a
supplement to the Guarantee substantially in the form of Annex A to the

 40
 

 

Guarantee
and (B) to deliver to the Administrative Agent a certificate of such
Subsidiary, substantially in the form of Exhibit C, with appropriate
insertions and attachments, and (ii) if requested by the Administrative
Agent, deliver to the Administrative Agent a legal opinion relating to the
matters described above, which opinion shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.

SECTION 8. NEGATIVE
COVENANTS

The Borrower hereby agrees
that, so long as the Commitments remain in effect, any Letter of Credit remains
outstanding or any Loan or other amount is owing to any Lender or the
Administrative Agent hereunder, the Borrower shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly:

8.1           Financial Condition Covenants.

(a)           Consolidated
Leverage Ratio. Permit the Consolidated Leverage Ratio as at the last day
of any period of four consecutive fiscal quarters of the Borrower to exceed
3.00 to 1.00.

(b)           Consolidated
Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio
for any period of four consecutive fiscal quarters of the Borrower to be less
than 3.00 to 1.00; provided, that for the purposes of determining the
ratio described above for the four fiscal quarter period of the Borrower ending
August 26, 2006, November 25, 2006 and February 24, 2007,
Consolidated Interest Expense for the relevant period shall be deemed to equal
Consolidated Interest Expense for the fiscal quarters ending August 26,
2006, November 25, 2006 and February 24, 2007, respectively (and, in
the case of the latter two such determinations, the preceding three- or
six-month period, respectively, after the Closing Date) multiplied by 4,
2 and 4/3, respectively.

8.2           Indebtedness. (a)  Create, issue,
incur, assume, become liable in respect of or suffer to exist any Indebtedness
of the Borrower or any Subsidiary Guarantor if, after giving effect thereto, on
a pro forma basis, the Borrower would not be in compliance with Section 8.1(a) as of the last day of the immediately
preceding fiscal quarter for which financial statements have been delivered
pursuant to Section 7.1.

(b)           Create,
issue, assume, become liable in respect of or suffer to exist any Priority
Debt, except:

(i)    Indebtedness incurred in connection with
Securitizations permitted by Section 8.5; and

(ii)   other Priority Debt, provided that, at
the time of creation, issuance, incurrence, assumption, becoming liable in
respect thereof or existence thereof and after giving effect thereto, the
aggregate amount of Priority Debt (other than Priority Debt permitted by clause
(i) of this Section 8.2(b)) then outstanding does not exceed 10% of
Consolidated Tangible Assets as of the last day of the immediately preceding
fiscal quarter for which financial statements have been delivered pursuant to Section 7.1.

8.3           Liens. Create, incur, assume
or suffer to exist any Lien upon any of its property, whether now owned or
hereafter acquired, except:

 41
 

 

(a) Liens for taxes not yet due or that are being contested in
good faith by appropriate proceedings, provided that adequate reserves
with respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;

(b) carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business that are not overdue for a period of
more than 30 days or that are being contested in good faith by appropriate
proceedings;

(c) pledges
or deposits in connection with workers’ compensation, unemployment insurance
and other social security legislation;

(d) deposits
to secure the performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of
business;

(e) easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business that, in the aggregate, are not substantial in
amount and that do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Borrower or any of its Subsidiaries;

(f) Liens in
existence on the date hereof listed on Schedule 8.3(f), provided that no
such Lien is spread to cover any additional property after the Closing Date and
that the amount of Indebtedness secured thereby is not increased;

(g) Liens
securing Indebtedness of the Borrower or any Subsidiary (including, without
limitation, Capital Lease Obligations) permitted under Section 8.2(b) to
finance the acquisition of fixed or capital assets, provided that (i) such
Liens shall be created substantially simultaneously with the acquisition of
such fixed or capital assets, (ii) such Liens do not at any time encumber
any property other than the property financed by such Indebtedness and (iii) the
amount of Indebtedness secured thereby is not increased;

(h) any interest or title of a lessor under any lease entered into
by the Borrower or any Subsidiary in the ordinary course of its business and
covering only the assets so leased;

(i) Liens in favor of any Securitization
Vehicle or any collateral agent on Securitization Assets transferred or
purported to be transferred to such Securitization Vehicle in connection with
Securitizations permitted by Section 8.5; and

(j) Liens not
otherwise permitted by this Section so long as the Borrower is in
compliance with Section 8.2(b).

8.4           Fundamental Changes. Enter
into any merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or Dispose of all
or substantially all of its property or business, except that:

(a) any Subsidiary of the Borrower may be merged
or consolidated with or into the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or with or into any
Subsidiary Guarantor (provided that the Subsidiary Guarantor shall be
the continuing or surviving corporation);

 42
 

 

(b) any Subsidiary of the Borrower may Dispose of
any or all of its assets (i) to the Borrower or any Subsidiary Guarantor
(upon voluntary liquidation or otherwise) or (ii) pursuant to a
Disposition permitted by Section 8.5;

(c) any Investment expressly permitted by Section 8.6
may be structured as a merger, consolidation or amalgamation; and

(d) any Subsidiary (other than a Material
Domestic Subsidiary) may liquidate or dissolve if the Borrower determines in
good faith that such liquidation or dissolution is in the best interest of the
Borrower and is not materially disadvantageous to the Lenders.

8.5           Disposition of Property. Dispose
of any of its property, whether now owned or hereafter acquired, or, in the
case of any Subsidiary, issue or sell any shares of such Subsidiary’s Capital
Stock to any Person, except:

(a) the Disposition of obsolete or worn out
property in the ordinary course of business;

(b)  the sale of inventory in the ordinary course
of business;

(c) Dispositions permitted by clause (i) of Section 8.4(b);

(d) the sale or issuance of any Subsidiary’s
Capital Stock to the Borrower or any Subsidiary Guarantor;

(e) sales of Securitization
Assets to one or more Securitization Vehicles in Securitizations, provided that
(i) each such Securitization is effected on market terms as reasonably
determined by the management of the Borrower and (ii) the aggregate amount
of Third Party Interests in respect of all such Securitizations does not exceed
$100,000,000 at any time outstanding; and

(f) the Disposition of other
property, provided that, at the time of such Disposition, the fair
market value of the property so Disposed, together with the fair market value
of all other property Disposed under this Section 8.5(f) during such
fiscal year of the Borrower, shall not exceed 20% of Consolidated Tangible
Assets (determined as of the last day of the immediately preceding fiscal
quarter for which financial statements have been delivered pursuant to Section 7.1).

8.6           Investments. Make any advance,
loan, extension of credit (by way of guaranty or otherwise) or capital
contribution to, or purchase any Capital Stock, bonds, notes, debentures or
other debt securities of, or any assets constituting a business unit of, or
make any other investment in, any Person (all of the foregoing, “Investments”),
except:

(a) extensions of trade credit in the ordinary
course of business;

(b) investments in Cash Equivalents;

(c) Guarantee Obligations permitted by Section 8.2;

(d) the Acquisition;

 43
 

 

(e) Investments consisting of
Sellers’ Retained Interests in Securitizations permitted by Section 8.5;
and

(f) other Investments, provided that (i) no
Default or Event of Default shall have occurred and be continuing or would
result therefrom, (ii) the Borrower shall be in compliance with the
covenants set forth in Section 8.1 as of the last day of the immediately
preceding fiscal quarter for which financial statements have been delivered
pursuant to Section 7.1 after giving effect, on a pro forma basis, to such
Investment as if it had occurred on the first day of the relevant period and (iii) in
the case of Investments in excess of $25,000,000, the Borrower shall have
delivered to the Administrative Agent a certificate of a Responsible Officer
certifying the satisfaction of the foregoing conditions and setting forth in
reasonable detail the calculations necessary to determine compliance with
clause (ii) above.

8.7           Transactions with Affiliates. Enter
into any transaction, including any purchase, sale, lease or exchange of
property, the rendering of any service or the payment of any management,
advisory or similar fees, with any Affiliate (other than the Borrower or any
Subsidiary Guarantor) unless such transaction is (a) otherwise permitted
under this Agreement, (b) in the ordinary course of business of the
relevant Group Member, and (c) upon fair and reasonable terms no less
favorable to the relevant Group Member than it would obtain in a comparable arm’s
length transaction with a Person that is not an Affiliate, provided that this Section 8.7
shall not prohibit any sale of Securitization Assets to Securitization Vehicles
and other transactions effected as part of Securitizations permitted by Section 8.5.

8.8           Changes in Fiscal Periods. Permit
the fiscal year of the Borrower to end on a day other than the Saturday closest
to August 31 or change the Borrower’s method of determining fiscal
quarters.

8.9           Clauses Restricting Subsidiary
Distributions. Enter into or suffer to exist or become effective any
consensual encumbrance or restriction on the ability of any Subsidiary of the
Borrower to (a) make Restricted Payments in respect of any Capital Stock
of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or
any other Subsidiary of the Borrower, (b) make loans or advances to, or
other Investments in, the Borrower or any other Subsidiary of the Borrower or (c) transfer
any of its assets to the Borrower or any other Subsidiary of the Borrower,
except for such encumbrances or restrictions existing under or by reason of (i) any
restrictions existing under the Loan Documents, (ii) any restrictions with
respect to a Subsidiary imposed pursuant to an agreement that has been entered
into in connection with the Disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary and (iii) customary
restrictions contained in any documents relating to any Securitizations, provided
such restrictions only apply to the applicable Securitization Vehicle and its
assets.

Section 9.
EVENTS OF DEFAULT

If any of the following
events shall occur and be continuing:

(a) the Borrower shall fail to pay any principal
of any Loan or Reimbursement Obligation when due in accordance with the terms
hereof; or the Borrower shall fail to pay any interest on any Loan or
Reimbursement Obligation, or any other amount payable hereunder or under any
other Loan Document, within five days after any such interest or other amount
becomes due in accordance with the terms hereof; or

(b) any representation or warranty made or deemed
made by any Loan Party herein or in any other Loan Document or that is
contained in any certificate, document or financial or other statement
furnished by it at any time under or in connection with this Agreement or any
such 

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other Loan
Document shall prove to have been inaccurate in any material respect on or as
of the date made or deemed made (it being understood that, prior to August 26,
2006, the representations and warranties in Sections 5.1(a), 5.2, 5.3(d), 5.4
(but only with regard to the third sentence thereof), 5.5, 5.6, 5.7, 5.8, 5.9,
5.10, 5.12, 5.13, 5.17 and 5.18, to the extent they relate to the business of
J&L as conducted prior to the Closing Date, shall be made or deemed made by
the Borrower only to its knowledge); or

(c) any Loan Party shall default in the
observance or performance of any agreement contained in clause (i) or (ii) of
Section 7.4(a) (with respect to the Borrower only), Section 7.7(a) or
Section 8 of this Agreement; or

(d) any Loan
Party shall default in the observance or performance of any other agreement
contained in this Agreement or any other Loan Document (other than as provided
in paragraphs (a) through (c) of this Section), and such default
shall continue unremedied for a period of 30 days after notice to the Borrower
from the Administrative Agent or the Required Lenders; or

(e) any Group Member shall (i) default in
making any payment of any principal of any Indebtedness (including any
Guarantee Obligation, but excluding the Loans) on the scheduled or original due
date with respect thereto; or (ii) default in making any payment of any interest
on any such Indebtedness beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created; or (iii) default
in the observance or performance of any other agreement or condition relating
to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or beneficiary of such Indebtedness (or a
trustee or agent on behalf of such holder or beneficiary) to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity or (in the case of any such Indebtedness constituting a Guarantee
Obligation) to become payable; provided, that a default, event or
condition described in clause (i), (ii) or (iii) of this paragraph (e) shall
not at any time constitute an Event of Default unless, at such time, one or
more defaults, events or conditions of the type described in clauses (i), (ii) and
(iii) of this paragraph (e) shall have occurred and be continuing
with respect to Indebtedness the outstanding principal amount of which exceeds
in the aggregate $15,000,000; or

(f) (i) any Group Member shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial part
of its assets, or any Group Member shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against any
Group Member any case, proceeding or other action of a nature referred to in
clause (i) above that (A) results in the entry of an order for relief
or any such adjudication or appointment or (B) remains undismissed or
undischarged for a period of 60 days; or (iii) there shall be commenced
against any Group Member any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets that results in the entry of an order for
any such relief that shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) any
Group Member shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) 

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above; or (v) any
Group Member shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or

(g) (i) the occurrence of any non-exempt “prohibited
transaction” (as defined in Section 406 and 408of ERISA or Section 4975
of the Code) involving any Plan, (ii) any “accumulated funding deficiency”
(as defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise
on the assets of any Group Member or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Required Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) any Group Member or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required Lenders
is likely to, incur any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other
event or condition shall occur or exist with respect to a Plan; and in each
case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could, in the
reasonable judgment of the Required Lenders, reasonably be expected to have a
Material Adverse Effect; or

(h) one or
more judgments or decrees shall be entered against any Group Member involving
in the aggregate a liability (not paid or fully covered by insurance as to
which the relevant insurance company has acknowledged coverage) of $15,000,000
or more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 30 days from the entry
thereof;

(i) the
guarantee of any Subsidiary Guarantor contained in the Guarantee shall cease,
for any reason, to be in full force and effect or any Loan Party or any Affiliate
of any Loan Party shall so assert; or

(j) (i) any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
excluding the Permitted Investors, shall become, or obtain rights (whether by
means or warrants, options or otherwise) to become, the “beneficial owner” (as
defined in Rules 13(d) 3 and 13(d) 5 under the Exchange Act),
directly or indirectly, of more than 25% of the outstanding stock of the
Borrower entitled to vote in the election of directors or (ii) the board
of directors of the Borrower shall cease to consist of a majority of Continuing
Directors;

then, and in
any such event, (A) if such event is an Event of Default specified in
clause (i) or (ii) of paragraph (f) above with respect to the
Borrower, automatically the Commitments shall immediately terminate and the
Loans (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters
of Credit shall have presented the documents required thereunder) shall
immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken:  (i) with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required
Lenders, the Administrative Agent shall, by notice to the Borrower declare the
Revolving Commitments to be terminated forthwith, whereupon the Revolving
Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans (with accrued interest thereon) and all other amounts owing
under this Agreement and the other Loan Documents (including all amounts 

 46
 

 

of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters
of Credit shall have presented the documents required thereunder) to be due and
payable forthwith, whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which presentment for
honor shall not have occurred at the time of an acceleration pursuant to this
paragraph, the Borrower shall at such time deposit in a cash collateral account
opened by the Administrative Agent an amount equal to the aggregate then
undrawn and unexpired amount of such Letters of Credit. Amounts held in such
cash collateral account shall be applied by the Administrative Agent to the
payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon, if any, shall be applied to repay other obligations of the Borrower
hereunder and under the other Loan Documents. After all such Letters of Credit
shall have expired or been fully drawn upon, all Reimbursement Obligations
shall have been satisfied and all other obligations of the Borrower hereunder
and under the other Loan Documents shall have been paid in full, the balance,
if any, in such cash collateral account shall be returned to the Borrower (or
such other Person as may be lawfully entitled thereto). Except as expressly
provided above in this Section, presentment, demand, protest and all other
notices of any kind are hereby expressly waived by the Borrower.

Section 10.
THE AGENTS

10.1         Appointment. Each Lender hereby
irrevocably designates and appoints the Administrative Agent as the agent of
such Lender under this Agreement and the other Loan Documents, and each such
Lender irrevocably authorizes the Administrative Agent, in such capacity, to
take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Administrative Agent by the terms of this Agreement
and the other Loan Documents, together with such other powers as are reasonably
incidental thereto.  Notwithstanding any
provision to the contrary elsewhere in this Agreement, the Administrative Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent.

10.2         Delegation of Duties. The Administrative
Agent may execute any of its duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys in-fact selected by it with
reasonable care.

10.3         Exculpatory Provisions. Neither
any Agent nor any of their respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Loan Document (except to the extent
that any of the foregoing are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted from its or such Person’s own
gross negligence or willful misconduct) or (ii) responsible in any manner
to any of the Lenders for any recitals, statements, representations or warranties
made by any Loan Party or any officer thereof contained in this Agreement or
any other Loan Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agents under or in
connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of any Loan Party a
party thereto to perform its obligations hereunder or thereunder. The Agents
shall not be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of any Loan Party.

 

 47

 

10.4.        Reliance by Administrative Agent.
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any instrument, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including counsel to
Holdings or the Borrower), independent accountants and other experts selected
by the Administrative Agent. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes unless a written notice
of assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Required Lenders (or, if so specified by this Agreement, all Lenders) as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense that may be incurred by it by
reason of taking or continuing to take any such action. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the other Loan Documents in accordance with a
request of the Required Lenders (or, if so specified by this Agreement, all
Lenders), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Loans.

10.5.        Notice of Default. The
Administrative Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default unless the Administrative Agent
has received notice from a Lender or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a “notice
of default”. In the event that the Administrative Agent receives such a notice,
the Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders (or,
if so specified by this Agreement, all Lenders); provided that unless
and until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.

10.6.        Non-Reliance on Agents and Other
Lenders. Each Lender expressly acknowledges that neither the Agents nor any
of their respective officers, directors, employees, agents, attorneys-in-fact
or affiliates have made any representations or warranties to it and that no act
by any Agent hereafter taken, including any review of the affairs of a Loan
Party or any affiliate of a Loan Party, shall be deemed to constitute any
representation or warranty by any Agent to any Lender. Each Lender represents
to the Agents that it has, independently and without reliance upon any Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon any Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Loan Parties and their affiliates. Except for notices,
reports and other documents expressly required to be furnished to the Lenders
by the Administrative Agent hereunder, the Administrative Agent shall not have
any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of any Loan Party or any affiliate
of a Loan Party that may come into the possession of the Administrative Agent
or any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates.

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10.7.        Indemnification. The Lenders
agree to indemnify each Agent in its capacity as such (to the extent not
reimbursed by the Borrower and without limiting the obligation of the Borrower
to do so), ratably according to their respective Aggregate Exposure Percentages
in effect on the date on which indemnification is sought under this Section (or,
if indemnification is sought after the date upon which the Commitments shall
have terminated and the Loans shall have been paid in full, ratably in
accordance with such Aggregate Exposure Percentages immediately prior to such
date), from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever that may at any time (whether before or after the payment of the
Loans) be imposed on, incurred by or asserted against such Agent in any way
relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by such Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements that are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from such Agent’s gross negligence or willful misconduct. The agreements in
this Section shall survive the payment of the Loans and all other amounts
payable hereunder.

10.8.        Agent in Its Individual Capacity.
Each Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with any Loan Party as though such
Agent were not an Agent. With respect to its Loans made or renewed by it and
with respect to any Letter of Credit issued or participated in by it, each
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not an
Agent, and the terms “Lender” and “Lenders” shall include each Agent in its
individual capacity.

10.9.        Successor Administrative Agent. The
Administrative Agent may resign as Administrative Agent upon 10 days’ notice to
the Lenders and the Borrower. If the Administrative Agent shall resign as
Administrative Agent under this Agreement and the other Loan Documents, then
the Required Lenders shall appoint from among the Lenders a successor agent for
the Lenders, which successor agent shall (unless an Event of Default under Section 9(a) or
Section 9(f) with respect to the Borrower shall have occurred and be
continuing) be subject to approval by the Borrower (which approval shall not be
unreasonably withheld or delayed), whereupon such successor agent shall succeed
to the rights, powers and duties of the Administrative Agent, and the term “Administrative
Agent” shall mean such successor agent effective upon such appointment and
approval, and the former Administrative Agent’s rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Loans. If no successor agent has accepted
appointment as Administrative Agent by the date that is 10 days following a
retiring Administrative Agent’s notice of resignation, the retiring
Administrative Agent’s resignation shall nevertheless thereupon become
effective, and the Lenders shall assume and perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above. After any retiring
Administrative Agent’s resignation as Administrative Agent, the provisions of
this Section 10 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under this
Agreement and the other Loan Documents.

10.10.     Securitizations. Each party hereto
authorizes the Administrative Agent to enter into customary intercreditor
agreements not inconsistent with the provisions hereof, in connection with
Securitizations permitted under this Agreement.

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10.11.       Co-Documentation Agents and Syndication
Agent. Neither the Co-Documentation Agents nor the Syndication Agent shall
have any duties or responsibilities hereunder in its capacity as such.

Section 11. MISCELLANEOUS

11.1.        Amendments and Waivers. (a)  Neither
this Agreement, any other Loan Document, nor any terms hereof or thereof may be
amended, supplemented or modified except in accordance with the provisions of
this Section 11.1. The Required Lenders and each Loan Party party to the
relevant Loan Document may, or, with the written consent of the Required
Lenders, the Administrative Agent and each Loan Party party to the relevant
Loan Document may, from time to time, (a) enter into written amendments,
supplements or modifications hereto and to the other Loan Documents for the
purpose of adding any provisions to this Agreement or the other Loan Documents
or changing in any manner the rights of the Lenders or of the Loan Parties
hereunder or thereunder or (b) waive, on such terms and conditions as the
Required Lenders or the Administrative Agent, as the case may be, may specify
in such instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, that no such waiver and no such amendment, supplement or modification
shall (i) forgive the principal amount or extend the final scheduled date
of maturity of any Loan or Reimbursement Obligations, extend the scheduled date
of any amortization payment in respect of any Term Loan, reduce the stated rate
of any interest or fee payable hereunder (except (x) in connection with
the waiver of applicability of any post-default increase in interest rates
(which waiver shall be effective with the consent of the Majority Facility
Lenders of each adversely affected Facility) and (y) that any amendment or
modification of defined terms used in the financial covenants in this Agreement
shall not constitute a reduction in the rate of interest or fees for purposes
of this clause (i)) or extend the scheduled date of any payment thereof, or
increase the amount or extend the expiration date of any Lender’s Revolving
Commitment, in each case without the written consent of each Lender directly
affected thereby; (ii) eliminate or reduce the voting rights of any Lender
under this Section 11.1 without the written consent of such Lender; (iii) reduce
any percentage specified in the definition of Required Lenders, consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents, release all or substantially
all of the Subsidiary Guarantors from their obligations under the Guarantee, in
each case without the written consent of all Lenders; (iv) amend, modify
or waive any provision of Section 4.7 without the written consent of the
Majority Facility Lenders in respect of each Facility adversely affected
thereby; (v) reduce the percentage specified in the definition of Majority
Facility Lenders with respect to any Facility without the written consent of
all Lenders under such Facility; (vi) amend, modify or waive any provision
of Section 10 without the written consent of the Administrative Agent; (vii) amend,
modify or waive any provision of Section 3.3 or 3.4 without the written
consent of the Swingline Lender; or (viii) amend, modify or waive any
provision of Section 3 without the written consent of the Issuing Lender. Any
such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Loan Parties, the
Lenders, the Administrative Agent and all future holders of the Loans. In the
case of any waiver, the Loan Parties, the Lenders and the Administrative Agent
shall be restored to their former position and rights hereunder and under the
other Loan Documents, and any Default or Event of Default waived shall be
deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.

(b)           If, in connection
with any proposed change, waiver, discharge or termination of or to any of the
provisions of this Agreement as contemplated by clauses (i) through (v),
inclusive, of the proviso to Section 11.1(a), the consent of Lenders
having Revolving Extensions of Credit, Term Loans and unused Commitments
representing more than 50% of the sum of the Total Revolving Extensions of
Credit, outstanding Term Loans and unused Commitments at such time is obtained
but the consent of one

 50
 

 

 

or more of
such other Lenders whose consent is required is not obtained, then the Borrower
shall have the right, so long as all non-consenting Lenders whose individual
consent is required are treated as described in either clause (i) or (ii) below,
to either (i) replace each such non-consenting Lender or Lenders (or, at
the option of the Borrower if any such Lender’s consent is required with
respect to less than all classes of Loans (or related Commitments), to replace
only the Commitments and/or Loans of any such non-consenting Lender that gave
rise to the need to obtain such Lender’s individual consent) with one or more
assignees pursuant to, and with the effect of an assignment under, Section 4.12
so long as at the time of such replacement, each such assignee consents to the
proposed change, waiver, discharge or termination or (ii) terminate such
non-consenting Lender’s Commitment (if such Lender’s consent is required as a
result of its Commitment) and/or repay each class of outstanding Loans of such
Lender that gave rise to the need to obtain such Lender’s consent; provided
(A) that, unless the Commitments that are terminated and Loans that are
repaid pursuant to the preceding clause (ii) are immediately replaced in
full at such time through the addition of new Lenders or the increase of the
Commitments and/or outstanding Loans of existing Lenders (who in each case must
specifically consent thereto), then in the case of any action pursuant to the
preceding clause (ii), Lenders having Revolving Extensions of Credit, Term
Loans and unused Commitments representing more than 50% of the sum of the Total
Revolving Extensions of Credit, outstanding Term Loans and unused Commitments
at such time (determined after giving effect to the proposed action) shall
specifically consent thereto and (B) any such replacement or termination
transaction described above shall be effective on the date notice is given of
the relevant transaction and shall have a settlement date no earlier than five
Business Days and no later than 90 days after the relevant transaction; provided
further that the Borrower shall not have the right to replace a Lender,
terminate its Commitment or repay its Loans solely as a result of the exercise
of such Lender’s rights (and the withholding of any required consent by such
Lender) pursuant to clauses (vi) through (viii) of the proviso to Section 11.1(a).

(c)           Notwithstanding the
foregoing, this Agreement may be amended (or amended and restated) with the
written consent of the Required Lenders, the Administrative Agent and the
Borrower (a) to add one or more additional credit facilities to this
Agreement and to permit the extensions of credit from time to time outstanding
thereunder and the accrued interest and fees in respect thereof to share
ratably in the benefits of this Agreement and the other Loan Documents with the
Term Loans and Revolving Extensions of Credit and the accrued interest and fees
in respect thereof and (b) to include appropriately the Lenders holding
such credit facilities in any determination of the Required Lenders and
Majority Facility Lenders.

11.2.        Notices. All notices, requests
and demands to or upon the respective parties hereto to be effective shall be
in writing (including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered, or
three Business Days after being deposited in the mail, postage prepaid, or, in
the case of telecopy notice, when received, addressed as follows in the case of
the Borrower and the Administrative Agent, and as set forth in an administrative
questionnaire delivered to the Administrative Agent in the case of the Lenders,
or to such other address as may be hereafter notified by the respective parties
hereto:

	
  Borrower:

  	
   

  	
  MSC Industrial Direct Co., Inc.

  75 Maxess Road

  Melville, New York 11747

  
	
   

  	
   

  	
  Attention:

  
	
   

  	
   

  	
  Telecopy:

  
	
   

  	
   

  	
  Telephone:

  

 

 51
 

 

 

 

	
  Administrative Agent:

  	
   

  	
  J.P. Morgan Securities, Inc.

  Long Island Corporate

  Banking Group

  395 North Service Road,

  Suite 302

  Melville NY 11747

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: John K. Budzynski

  
	
   

  	
   

  	
  Telecopy: (631) 755-5184

  
	
   

  	
   

  	
  Telephone: (631) 755-5179

  
	
   

  	
   

  	
   

  

 

provided
that any notice, request or demand to or upon the Administrative Agent or the
Lenders shall not be effective until received.

Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall
not apply to notices pursuant to Section 2, Section 3 and Section 4
unless otherwise agreed by the Administrative Agent and the applicable Lender. The
Administrative Agent or the Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such
procedures may be limited to particular notices or communications.

11.3.         No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.

11.4         Survival of Representations and
Warranties. All representations and warranties made hereunder, in the other
Loan Documents and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the making of the Loans and other extensions of credit
hereunder.

11.5         Payment of Expenses and Taxes. The
Borrower agrees (a) to pay or reimburse the Administrative Agent for all
its out-of-pocket costs and expenses incurred in connection with
the development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the other Loan Documents and any other
documents prepared in connection herewith or therewith, and the consummation
and administration of the transactions contemplated hereby and thereby,
including the reasonable fees and disbursements of counsel to the
Administrative Agent and filing and recording fees and expenses, with
statements with respect to the foregoing to be submitted to the Borrower prior
to the Closing Date (in the case of amounts to be paid on the Closing Date) and
from time to time thereafter on a quarterly basis or such other periodic basis
as the Administrative Agent shall deem appropriate, (b) to pay or
reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents, including the fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) to each Lender and of counsel
to the Administrative Agent, (c) to pay, indemnify, and hold each Lender
and the Administrative Agent harmless from, any and all recording and filing
fees that may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the

 52
 

 

 

transactions contemplated
by, or any amendment, supplement or modification of, or any waiver or consent
under or in respect of, this Agreement, the other Loan Documents and any such
other documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent and their respective officers, directors, employees,
affiliates, agents and controlling persons (each, an “Indemnitee”) harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, excluding taxes (as to which the provisions of Section 4.9
shall control) with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including any of the foregoing relating to the use of
proceeds of the Loans or the violation of, noncompliance with or liability
under, any Environmental Law applicable to the operations of any Group Member
or any of the Properties and the reasonable fees and expenses of legal counsel
in connection with claims, actions or proceedings by any Indemnitee against any
Loan Party under any Loan Document (all the foregoing in this clause (d),
collectively, the “Indemnified Liabilities”), provided, that the
Borrower shall have no obligation hereunder to any Indemnitee with respect to
Indemnified Liabilities to the extent such Indemnified Liabilities are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Indemnitee. Without
limiting the foregoing, and to the extent permitted by applicable law, the
Borrower agrees not to assert and to cause its Subsidiaries not to assert, and
hereby waives and agrees to cause its Subsidiaries to waive, all rights for
contribution or any other rights of recovery with respect to all claims,
demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any Indemnitee. All
amounts due under this Section 11.5 shall be payable not later than 10
days after written demand therefor. Statements payable by the Borrower pursuant
to this Section 11.5 shall be submitted to Charles Boehlke, Executive
Vice President and Chief Financial Officer (Telecopy No. 516-812-1703), at the address of the Borrower set
forth in Section 11.2, or to such other Person or address as may be
hereafter designated by the Borrower in a written notice to the Administrative
Agent. The agreements in this Section 11.5 shall survive repayment of the
Loans and all other amounts payable hereunder.

11.6.         Successors and Assigns;
Participations and Assignments. (a)  The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby (including any
affiliate of the Issuing Lender that issues any Letter of Credit), except that (i) the
Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and
void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section.

(b)           (i)  Subject
to the conditions set forth in paragraph (b)(ii) below, any Lender may
assign to one or more assignees (each, an “Assignee”) all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitments and the Loans at the time owing to it) with the prior
written consent of:

(A)                              the Borrower (such consent not to be
unreasonably withheld), provided that no consent of the Borrower shall
be required for an assignment to a Lender, an affiliate of a Lender, an
Approved Fund (as defined below) or, if an Event of Default under Section 9(a) or (f) has occurred and is continuing,
any other Person; and

(B)                                the Administrative Agent, provided
that no consent of the Administrative Agent shall be required for an assignment
of all or any portion of a Term Loan  to
a Lender, an affiliate of a Lender or an Approved Fund.

 53
 

 

 

(ii)   Assignments shall be subject to the following
additional conditions:

(A)                              except in the case of an assignment to a
Lender, an affiliate of a Lender or an Approved Fund or an assignment of the
entire remaining amount of the assigning Lender’s Commitments or Loans under
any Facility, the amount of the Commitments or Loans of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 unless each of the Borrower and the
Administrative Agent otherwise consent, provided that (1) no such
consent of the Borrower shall be required if an Event of Default under Section 9(a) or (f) has occurred and is continuing
and (2) such amounts shall be aggregated in respect of each Lender and its
affiliates or Approved Funds, if any;

(B)                                the parties to each assignment shall execute
and deliver to the Administrative Agent an Assignment and Assumption, together
with a processing and recordation fee of $3,500; and

(C)                                the Assignee, if it shall not be a Lender,
shall deliver to the Administrative Agent an administrative questionnaire in
which the Assignee designates one or more credit contacts to whom all
syndicate-level information (which may contain material non-public information
about the Borrower and its Affiliates and their related parties or their
respective securities) will be made available and who may receive such
information in accordance with the assignee’s compliance procedures and
applicable laws, including Federal and state securities law.

For the purposes of this Section 11.6,
“Approved Fund” means any Person (other than a natural person) that is
engaged in making, purchasing, holding or investing in bank loans and similar
extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an affiliate of a Lender
or (c) an entity or an affiliate of an entity that administers or manages
a Lender.

(iii)  Subject to acceptance and recording thereof
pursuant to paragraph (b)(iv) below, from and after the effective
date specified in each Assignment and Assumption the Assignee thereunder shall
be a party hereto and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under
this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obliga­tions under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 4.8, 4.9, 4.10 and 11.5). Any
assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this Section 11.6 shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such
rights and obligations in accordance with paragraph (c) of this Section.

 54
 

 

 

(iv)  The Administrative Agent, acting for this
purpose as an agent of the Borrower, shall maintain at one of its offices a
copy of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amount of the Loans and L/C Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The
entries in the Register shall be conclusive, and the Borrower, the
Administrative Agent, the Issuing Lender and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower, the
Issuing Lender and any Lender, at any reasonable time and from time to time
upon reasonable prior notice.

(v)   Upon its receipt of a duly completed
Assignment and Assumption executed by an assigning Lender and an Assignee, the
Assignee’s completed administrative questionnaire (unless the Assignee shall already
be a Lender hereunder), the processing and recordation fee referred to in
paragraph (b) of this Section and any written consent to such
assignment required by paragraph (b) of this Section, the Administrative
Agent shall accept such Assignment and Assumption and record the information
contained therein in the Register. No assignment shall be effective for
purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph.

(c)           (i)  Any
Lender may, without the consent of the Borrower or the Administrative Agent,
sell participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this
Agreement (including all or a portion of its Commitments and the Loans owing to
it); provided that (A) such Lender’s obligations under this
Agreement shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (C) the Borrower, the Administrative Agent, the Issuing Lender and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement. Any
agreement pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce this Agreement and to
approve any amendment, modification or waiver of any provision of this
Agreement; provided that such agreement may provide that such Lender
will not, without the consent of the Participant, agree to any amendment,
modification or waiver that (1) requires the consent of each Lender
directly affected thereby pursuant to the proviso to the second sentence of Section 11.1
and (2) directly affects such Participant. Subject to paragraph (c)(ii) of
this Section, the Borrower agrees that each Participant shall be entitled to
the benefits of Sections 4.8, 4.9 and 4.10 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 11.7(b) as though it were a
Lender, provided such Participant shall be subject to Section 11.7(a) as
though it were a Lender.

(ii)   A Participant shall not be entitled to
receive any greater payment under Section 4.8 or 4.9 than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower’s prior written consent. Any Participant
that is a Non-U.S. Lender shall not be entitled to the benefits of Section 4.9
unless such Participant complies with Section 4.9(d).

(d)           Any Lender may at
any time pledge or assign a security interest in all or any portion of its
rights under this Agreement to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall
not apply to any such pledge or assignment of a security interest; provided
that no such pledge or assignment of a security interest shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or
Assignee for such Lender as a party hereto.

 55
 

 

 

(e)           The Borrower, upon
receipt of written notice from the relevant Lender, agrees to issue Notes to
any Lender requiring Notes to facilitate transactions of the type described in
paragraph (d) above.

(f)            Notwithstanding the
foregoing, any Conduit Lender may assign any or all of the Loans it may have
funded hereunder to its designating Lender without the consent of the Borrower
or the Administrative Agent and without regard to the limitations set forth in Section 11.6(b).
The Borrower, each Lender and the Administrative Agent hereby confirms that it
will not institute against a Conduit Lender or join any other Person in
instituting against a Conduit Lender any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding under any state bankruptcy or
similar law, for one year and one day after the payment in full of the latest
maturing commercial paper note issued by such Conduit Lender; provided,
however, that each Lender designating any Conduit Lender hereby agrees to
indemnify, save and hold harmless each other party hereto for any loss, cost,
damage or expense arising out of its inability to institute such a proceeding
against such Conduit Lender during such period of forbearance.

11.7.        Adjustments; Set-off.
(a)  Except to the extent that this Agreement expressly provides for
payments to be allocated to a particular Lender or to the Lenders under a
particular Facility, if any Lender (a “Benefitted Lender”) shall, at any
time after the Loans and other amounts payable hereunder shall immediately become
due and payable pursuant to Section 9, receive any payment of all or part
of the Obligations owing to it, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 9(f), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of the Obligations owing to such other Lender, such
Benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of the Obligations owing to each such
other Lender, or shall provide such other Lenders with the benefits of any such
collateral, as shall be necessary to cause such Benefitted Lender to share the
excess payment or benefits of such collateral ratably with each of the Lenders;
provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest.

(b)           In addition to any
rights and remedies of the Lenders provided by law, each Lender shall have the
right, without prior notice to the Borrower, any such notice being expressly
waived by the Borrower to the extent permitted by applicable law, upon any
amount becoming due and payable by the Borrower hereunder (whether at the
stated maturity, by acceleration or otherwise), to set off and appropriate and
apply against such amount, and Borrower grants each Lender a security interest
in any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender or any branch or
agency thereof to or for the credit or the account of the Borrower, as the case
may be. Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and application made by such Lender,
provided that the failure to give such notice shall not affect the
validity of such setoff and application.

11.8.        Counterparts. This Agreement may
be executed by one or more of the parties to this Agreement on any number of
separate counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. Delivery of an executed
signature page of this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof. A set of the
copies of this Agreement signed by all the parties shall be lodged with the
Borrower and the Administrative Agent.

 

 56

 

11.9.        Severability. Any provision of
this Agreement that is 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.

11.10.      Integration. This Agreement and the
other Loan Documents represent the entire agreement of the Borrower, the
Administrative Agent and the Lenders with respect to the subject matter hereof
and thereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent or any Lender relative to the subject
matter hereof not expressly set forth or referred to herein or in the other
Loan Documents.

11.11.       GOVERNING LAW. THIS AGREEMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

11.12.      Submission To Jurisdiction; Waivers.
The Borrower hereby irrevocably and unconditionally:

(a) submits for itself
and its property in any legal action or proceeding relating to this Agreement
and the other Loan Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the courts of the State of New York, the courts of the
United States for the Southern District of New York, and appellate courts
from any thereof;

(b) consents
that any such action or proceeding may be brought in such courts and waives any
objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in
an inconvenient court and agrees not to plead or claim the same;

(c) agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to the Borrower, at its address set
forth in Section 11.2 or at such other address of which the Administrative
Agent shall have been notified pursuant thereto;

(d) agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction; and

(e) waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any
special, exemplary, punitive or consequential damages.

11.13.      Acknowledgements. The Borrower
hereby acknowledges that:

(a) it has
been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents;

(b) neither
the Administrative Agent nor any Lender has any fiduciary relationship with or
duty to the Borrower arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between Administrative Agent
and Lenders, on one hand,

 57
 

 

 

and the Borrower,
on the other hand, in connection herewith or therewith is solely that of debtor
and creditor; and

(c)  no joint
venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Lenders or among the
Borrower and the Lenders.

11.14.      Releases of Guarantees. (a)  Notwithstanding
anything to the contrary contained herein or in any other Loan Document, the
Administrative Agent is hereby irrevocably authorized by each Lender (without
requirement of notice to or consent of any Lender except as expressly required
by Section 11.1) to take any action requested by the Borrower having the
effect of releasing any guarantee obligations (i) to the extent necessary
to permit consummation of any transaction not prohibited by any Loan Document
or that has been consented to in accordance with Section 11.1 or (ii) under
the circumstances described in paragraph (b) below.

(b)           At such time as the
Loans, the Reimbursement Obligations and the other obligations under the Loan
Documents (other than obligations under or in respect of Swap Agreements) shall
have been paid in full, the Commitments have been terminated and no Letters of
Credit shall be outstanding, the Guarantee and all obligations (other than
those expressly stated to survive such termination) of each Loan Party under
the Guarantee shall terminate subject to the provisions thereof, all without
delivery of any instrument or performance of any act by any Person.

11.15.       Confidentiality. Each of the
Administrative Agent and each Lender agrees to keep confidential all non-public
information provided to it by any Loan Party, the Administrative Agent or any
Lender pursuant to or in connection with this Agreement; provided that nothing
herein shall prevent the Administrative Agent or any Lender from disclosing any
such information (a) to the Administrative Agent, any other Lender or any
affiliate thereof, (b) subject to an agreement to comply with the
provisions of this Section, to any actual or prospective Transferee or any
direct or indirect counterparty to any Swap Agreement (or any professional
advisor to such counterparty), (c) to its employees, directors, agents,
attorneys, accountants and other professional advisors or those of any of its
affiliates, (d) upon the request or demand of any Governmental Authority, (e) in
response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Requirement of Law, (f) if requested
or required to do so in connection with any litigation or similar proceeding, (g) that
has been publicly disclosed, (h) to the National Association of Insurance
Commissioners or any similar organization or any nationally recognized rating
agency that requires access to information about a Lender’s investment
portfolio in connection with ratings issued with respect to such Lender, or (i) in
connection with the exercise of any remedy hereunder or under any other Loan
Document.

Each Lender acknowledges
that information furnished to it pursuant to this Agreement may include
material non-public information concerning the Borrower and its Affiliates and
their related parties or their respective securities, and confirms that it has developed
compliance procedures regarding the use of material non-public information and
that it will handle such material non-public information in accordance with
those procedures and applicable law, including Federal and state securities
laws.

All information, including
requests for waivers and amendments, furnished by the Borrower or the
Administrative Agent pursuant to, or in the course of administering, this
Agreement will be syndicate-level information, which may contain material
non-public information about the Borrower and its Affiliates and their related
parties or their respective securities. Accordingly, each Lender represents to
the Borrower and the Administrative Agent that it has identified in its
administrative questionnaire a credit contact who may receive information that
may contain material non-public

 58
 

 

 

information in accordance
with its compliance procedures and applicable law, including Federal and state
securities laws.

11.16.      WAIVERS
OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.

11.17.       USA PATRIOT Act. Each Lender hereby
notifies the Borrower that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56 (signed into law October 26, 2001))
(the “Act”), it is required to obtain, verify and record information that
identifies the Borrower, which information includes the name and address of the
Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the Act. The Borrower shall promptly provide such
information upon request by any Lender. In connection therewith, each Lender hereby
agrees that the confidentiality provisions set forth in Section 11.15
shall apply to any non-public information provided to it by the Borrower and
its Subsidiaries pursuant to this Section 11.17.

 59
 

 

 

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

	
  

  	
  MSC INDUSTRIAL
  DIRECT CO., INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Charles A.
  Boehlke Jr.

  
	
   

  	
  Name: Charles A.
  Boehlke Jr.

  
	
   

  	
  Title: EVP/CFO

  

 

 60
 

 

 

	
  

  	
  JPMORGAN CHASE
  BANK, N.A., as Administrative

  Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tara Lynne
  Moore

  
	
   

  	
  Name: Tara Lynne
  Moore

  
	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
  

  	
  CITIBANK, N.A.,
  as Syndication Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William A.
  Demilt, Jr.

  
	
   

  	
  Name: William A.
  Demilt, Jr.

  
	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
  

  	
  BANK OF AMERICA,
  N.A., as Co-Documentation Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven J. Melicharek

  
	
   

  	
  Name: Steven J.
  Melicharek

  
	
   

  	
  Title: SVP/CPO

  
	
   

  	
   

  
	
   

  	
   

  
	
  

  	
  HSBC BANK USA,
  NATIONAL ASSOCIATION, as 

  Co-Documentation Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher
  J. Mendelsohn

  
	
   

  	
  Name: Christopher
  J. Mendelsohn

  
	
   

  	
  Title: First
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
  

  	
  SOVEREIGN BANK,
  as Co-Documentation Agent and

  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christine
  Gerula

  
	
   

  	
  Name: Christine
  Gerula

  
	
   

  	
  Title: Senior
  Vice President

  

 

 61
 

 

 

	
  

  	
  North Fork Bank

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert J.
  Milas

  
	
   

  	
  Name: Robert J.
  Milas

  
	
   

  	
  Title: Vice
  President

  

 

 62

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}]]