Document:

FINANCING AGREEMENT DATED JULY 16, 2003

 Exhibit 10.5 
  
 EXECUTION VERSION 
  
 FINANCING AGREEMENT  
  
 HILCO CAPITAL LP 
  
 and 
  
 CYBEX INTERNATIONAL, INC. 
  
 Dated: July 16, 2003 

 TABLE OF CONTENTS 
  

	 	  	 	  	Page

			
	 Section 1.
	  	 Definitions
	  	1
			
	 Section 2.
	  	 Conditions Precedent
	  	14
			
	 Section 3.
	  	 The Loan
	  	19
			
	 Section 4.
	  	 Accounts
	  	20
			
	 Section 5.
	  	 Collateral
	  	22
			
	 Section 6.
	  	 Representations, Warranties and Covenants
	  	26
			
	 Section 7.
	  	 Fees and Expenses
	  	42
			
	 Section 8.
	  	 Powers
	  	44
			
	 Section 9.
	  	 Events of Default and Remedies
	  	45
			
	 Section 10.
	  	 Expenses; Taxes; Attorneys' Fees
	  	48
			
	 Section 11.
	  	 Issuance Of Equity Interests To HILCO
	  	49
			
	 Section 12.
	  	 Miscellaneous
	  	51
		
	EXHIBIT	  	 
		
	 Exhibit A - Form of Promissory Note
	  	 
		
	 Exhibit B – Form of Warrant
	  	 
		
	SCHEDULES	  	 
		
	 Schedule 1 - Collateral Information
	  	 
	 Schedule 2 - Litigation
	  	 
	 Schedule 3 - ERISA
	  	 
	 Schedule 4 - EBITDA Projections (2003)
	  	 
	 Schedule 5 – Permitted Affiliate Payments
	  	 

 This Financing Agreement, dated July 16, 2003 (“Agreement” or “Financing
Agreement”) is made between HILCO CAPITAL LP, a Delaware limited partnership with offices located at 5 Revere Drive, Suite 510, Northbrook, Illinois 60062 (hereinafter “HILCO”), and CYBEX INTERNATIONAL, INC.,
a New York corporation with a principal place of business at 10 Trotter Drive, Medway, Massachusetts 02053 (herein the “Company”). 
  
 In consideration of the premises and the covenants and agreements contained herein, the parties hereto agree as follows: 
  
 Section 1. Definitions. Unless otherwise expressly provided herein,
each accounting term used in this Agreement shall have the meaning given it under GAAP applied on a basis consistent with those used in the preparation of financial statements. All terms used in this Agreement which are defined in Article 8 or
Article 9 of the UCC and which are not otherwise defined herein shall have the same meanings herein as set forth therein. The term “including” shall mean “including without limiting the generality of the foregoing,” and unless
otherwise specified, the terms “hereof,” “herein” and similar terms shall be references to this Agreement. 
  
 “Accounts” shall mean all of the Company’s now existing and future: (a) accounts (as defined in the UCC), and any and all other
receivables (whether or not specifically listed on schedules furnished to HILCO), including, without limitation, all accounts created by, or arising from, all of the Company’s sales, leases, rentals of goods or renditions of services to its
customers or lessees, including but not limited to, those accounts arising under any of the Company’s trade names or styles, or through any of the Company’s divisions; (b) any and all instruments, documents, chattel paper (including
electronic chattel paper) (all as defined in the UCC); (c) unpaid seller’s or lessor’s rights (including rescission, replevin, reclamation, repossession and stoppage in transit) relating to any of the foregoing or arising therefrom or in
connection therewith; (d) rights to any goods represented by any of the foregoing, including rights to returned, reclaimed or repossessed goods; (e) reserves and credit balances arising in connection with or pursuant hereto; (f) guarantees,
supporting obligations, payment intangibles and letter of credit rights (all as defined in the UCC); (g) insurance policies, awards thereunder and/or rights relating to any of the foregoing; (h) general intangibles pertaining to any and all of the
foregoing (including all rights to payment, including those arising in connection with bank and non-bank credit cards), and including books and records and any electronic media and software thereto; (i) notes, deposits or property of account debtors
securing the obligations of any such account debtors to the Company; and (j) cash and non-cash proceeds (as defined in the UCC) of any and all of the foregoing. 
  

“Affiliate” shall mean any Person that, directly or indirectly, Controls, is Controlled by, or is under common Control with, a
specified Person. For the purposes of this Agreement, “Control” means having the power to direct the management and policies of a Person, whether through the ownership of voting securities or beneficial interests, by contract, or
otherwise. 
  
 “Availability” shall have the
meaning specified therefor in the CIT Loan Agreement as in effect on the date hereof. 

 “Benefit Plan” shall mean a defined benefit plan as defined in Section 3(35) of
ERISA (other than a “multiemployer plan,” as such term is defined in ERISA) in respect of which the Company or any ERISA Affiliate is, or within the immediately preceding six (6) years was, an “employer” as defined in Section
3(5) of ERISA. 
  
 “Board of Directors” means
the board of directors (or comparable managers) of the Company or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers). 
  
 “Business Day” shall mean any day on which HILCO and LaSalle National Bank are open for business.

  
 “Capital Expenditures” shall mean for any
period the aggregate of all expenditures of the Company during such period that, in conformity with GAAP, are required to be included in or reflected by the property, plant or equipment or similar fixed asset account reflected in the balance sheet
of the Company. 
  
 “Capital Lease” shall mean
any lease of property (whether real, personal or mixed) which, in conformity with GAAP, is accounted for as a capital lease or a Capital Expenditure in the balance sheet of the Company. 
  
 “Change of Control” shall mean that (a) any “person” or “group” (within the meaning of
Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of a percentage of the stock of the Company having the right to vote for the election of members of
the Board of Directors which is in excess of the percentage of such stock beneficially owned by UM Holdings, Ltd. and its Affiliates, or (b) a majority of the members of the Board of Directors do not constitute Continuing Directors, or (c) the
Company ceases to own, directly or indirectly, and control 100% of the outstanding stock of each of its subsidiaries (other than the Inactive Subsidiaries) existing on the Closing Date, or (d) John Aglialoro ceases for any reason whatsoever (other
than as a result of death or disability) to be actively engaged in the management of the Company, or (e) UM Holdings, Ltd. and its Affiliates shall at any time own, in the aggregate, less than 40% of the issued and outstanding voting stock of the
Company. 
  
 “CIT” shall mean The CIT
Group/Business Credit, Inc., a New York corporation, its successors and permitted assigns and any replacement lender under the CIT Loan Agreement. 
  
 “CIT Borrowing Base” shall mean the “Borrowing Base”, as such term, and the terms “Domestic Borrowing Base” and
“Foreign Borrowing Base”, are defined in the CIT Loan Agreement as in effect on the date hereof. 
  
 “CIT Debt” shall mean the Indebtedness of the Company owing to CIT pursuant to the CIT Loan Documents (including, without limitation, all
Letters of Credit). 
  
 “CIT Loan” shall mean the
loans to be made to the Company pursuant to the CIT Loan Agreement. 
  

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 “CIT Loan Agreement” shall mean the Financing Agreement, dated the date hereof, between
CIT and the Company, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or refinanced from time to time in accordance with Section 6.10(e) of this Agreement. 
  
 “CIT Loan Documents” shall mean the CIT Loan Agreement and
all other documents, instruments, and agreements executed from time to time in connection with the CIT Loan Agreement, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or refinanced
from time to time in accordance with Section 6.10(e) of this Agreement. 
  
 “Closing Date” shall mean the date that this Financing Agreement has been duly executed by the parties hereto and delivered to HILCO, and all of the conditions precedent set forth in Section 2 are
satisfied or waived. 
  
 “Collateral” shall mean
all assets of the Company, including, without limitation, all present and future Accounts, Equipment, Inventory, Documents of Title, General Intangibles, Real Estate (including Mortgaged Property), pledged stock of the Company’s subsidiaries
and Other Collateral. 
  
 “Collateral Management
Fee” shall have the meaning given in Section 7.2. 
  
 “Commitment Fee” shall have the meaning given to such term in Section 7.1. 
  
 “Commitment Letter” shall mean the Commitment Letter, dated June 10, 2003, issued by HILCO to, and accepted by, the Company. 

 
 “Consolidated Balance Sheet” shall mean a consolidated or
compiled, as applicable, balance sheet for the Company and its consolidated subsidiaries, eliminating all inter-company transactions and prepared in accordance with GAAP. 
  
 “Consolidating Balance Sheet” shall mean a Consolidated Balance Sheet plus individual balance sheets for
the Company and its consolidated subsidiaries, showing all eliminations of inter-company transactions and prepared in accordance with GAAP, and including a balance sheet for the Company exclusively. 
  
 “Continuing Director” means (a) any member of the Board of
Directors who was a director (or comparable manager) of the Company on the Closing Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was appointed or nominated for election to the
Board of Directors by a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office at the Closing Date in an actual or threatened election contest
relating to the election of the directors (or comparable managers) of the Company and whose initial assumption of office resulted from such contest or the settlement thereof. 
  
 “Copyrights” shall mean all present and hereafter acquired copyrights, copyright registrations, recordings,
applications, designs, styles, licenses, marks, prints and labels bearing 

  

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any of the foregoing, goodwill, any and all general intangibles, intellectual property and rights pertaining thereto, and all cash and non-cash proceeds
thereof. 
  
 “Current Assets” shall mean those
assets of the Company which, in accordance with GAAP, are classified as current. 
  
 “Current Liabilities” shall mean those liabilities of the Company which, in accordance with GAAP, are classified as “current”, provided however, that, notwithstanding GAAP, the Revolving
Loans (as defined in the CIT Loan Agreement) and the current portion of Permitted Indebtedness shall be considered “current liabilities”. 
  
 “Default” shall mean the occurrence of any event which, but for the giving of notice, the lapse of time, or both, would constitute an
“Event of Default.” 
  
 “Default Rate of
Interest” shall mean a rate of interest per annum equal to 2% above the Interest Rate in effect from time to time pursuant to the terms of this Agreement. 
  
 “Depository Accounts” shall have the meaning specified therefor in the CIT Loan Agreement as in effect on
the date hereof. 
  
 “Documents of Title” shall
mean all present and future documents (as defined in the UCC), and any and all warehouse receipts, bills of lading, shipping documents, chattel paper, instruments and similar documents, all whether negotiable or not and all goods and Inventory
relating thereto and all cash and non-cash proceeds of the foregoing. 
  
 “EBIT” shall mean, in any period, all earnings of the Company for said period before all interest and tax obligations of the Company for said period, determined in accordance with GAAP applied on a consistent basis with the
latest audited financial statements of the Company, but excluding the effect of extraordinary or non-reoccurring gains or losses for such period. 
  
 “EBITDA” shall mean, in any period, all earnings of the Company for said period before all interest and tax obligations of the Company
for said period and all depreciation and amortization expense for said period, determined in accordance with GAAP applied on a consistent basis with the latest audited financial statements of the Company, but excluding the effect of extraordinary or
non-reoccurring gains or losses for such period. 
  
 “Employee Plan” means an employee benefit plan (other than a Multiemployer Plan) covered by Title IV of ERISA and maintained (or that was maintained at any time during the six (6) calendar years preceding the date of any
borrowing hereunder) for employees of the Company or any of its ERISA Affiliates. 
  
 “Environmental Actions” means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter or other
communication from any Person or Governmental Authority involving violations of Environmental Laws or Releases of Hazardous Materials (i) from any assets, properties or businesses owned or operated by the Company or any of its subsidiaries or any
predecessor in interest; (ii) from adjoining properties or businesses; or (iii) onto any facilities which received 

  

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Hazardous Materials generated by the Company or any of its subsidiaries or any predecessor in interest. 
  
 “Environmental Laws” means the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. § 9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901,
et seq.), the Federal Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.) and
the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as such laws may be amended or otherwise modified from time to time, and any other present or future federal, state, local or foreign statute, ordinance, rule,
regulation, order, judgment, decree, permit, license or other binding determination of any Governmental Authority imposing liability or establishing standards of conduct for protection of the environment or other government restrictions relating to
the protection of the environment or the Release, deposit or migration of any Hazardous Materials into the environment. 
  
 “Environmental Liabilities and Costs” means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages,
consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts and consultants and costs of investigations and feasibility studies), fines, penalties, sanctions and interest
incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any environmental condition or a Release of Hazardous Materials from or onto (i) any property presently or formerly owned by the
Company or any of its subsidiaries or (ii) any facility which received Hazardous Materials generated by the Company or any of its subsidiaries. 
  
 “Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs. 
  
 “Equipment” shall mean all present and hereafter acquired
equipment (as defined in the UCC) including, without limitation, all machinery, equipment, furnishings and fixtures, and all additions, substitutions and replacements thereof, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto and all proceeds thereof of whatever sort. 
  
 “ERISA” shall mean the Employee Retirement Income Security Act or 1974, as amended from time to time and the rules and regulations
promulgated thereunder from time to time. 
  
 “ERISA
Affiliate” shall mean any (i) corporation which is or was at any time a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as the Company; (ii) partnership or other
trade or business (whether or not incorporated) at any time under common control (within the meaning of Section 414(c) of the Internal Revenue Code) with the Company; and (iii) member of the same affiliated service group (within the meaning
of Section 414(m) of the Internal Revenue Code) as the Company, any corporation described in clause (i) above, or any partnership or trade or business described in clause (ii) above. 
  

 - 5 - 

 “Event(s) of Default” shall have the meaning provided for in Section 9.1. 
  
 “Executive Officers” shall mean the Chairman, President,
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Executive Vice President(s), Senior Vice President(s), Treasurer, Controller and Secretary of the Company. 
  
 “Ex-Im Bank” shall mean the Export-Import Bank of the United States. 
  
 “Ex-Im Bank Agreement” shall mean the Borrower Agreement
between the Company and Ex-Im Bank. 
  
 “Ex-IM Bank
Documents” shall mean the Ex-IM Bank Guarantee, the Loan Authorization Agreement between CIT and Ex-Im Bank and the Ex-Im Bank Agreement. 
  
 “Ex-IM Guarantee” shall mean the guarantee executed by Ex-IM Bank in favor of CIT, together with all amendments, modifications and
supplements thereto. 
  
 “Existing Lender” shall
mean Wachovia Bank, National Association. 
  
 “Expense
Deposit” shall have the meaning given to such term in Section 6.9. 
  
 “Extraordinary Receipts” means any cash received by the Company or any of its subsidiaries not in the ordinary course of business, including, without limitation, (i) foreign, United States, state or
local tax refunds in excess of $150,000 in the aggregate during any Fiscal Year, (ii) pension plan reversions, (iii) proceeds of insurance other than any proceeds of insurance subject to the provisions of Section 6.5(b), (iv) judgments, proceeds of
settlements or other consideration of any kind in connection with any cause of action, (v) condemnation awards (and payments in lieu thereof), and (vi) any purchase price adjustment received in connection with any purchase agreement. 
  
 “Fair Market Value” shall mean, with respect to Real Estate,
the appraised value thereof as determined by an MAI appraisal satisfactory in form and substance to HILCO, and performed by a real estate appraiser licensed in the jurisdiction where the relevant Real Estate is located, and acceptable to HILCO.

  
 “Fiscal Quarter” shall mean, with respect to
the Company, each three (3) month period ending on the last Saturday in March, June, and September, and December 31 of each Fiscal Year. 
  
 “Fiscal Year” shall mean each twelve (12) month period commencing on January 1 of each year and ending on the following December 31.

  
 “Fixed Charge Coverage Ratio” shall mean, for
any applicable period of computation, the ratio of the following for the Company and its subsidiaries on a consolidated basis determined in accordance with GAAP: (a) EBITDA less non-financed Capital Expenditures for such period, less,
without duplication, losses incurred in respect of Lease Support Obligations during such period to (b) Fixed Charges for such period. 
  

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 “Fixed Charges” shall mean, for any applicable period of computation, the sum of (a)
interest expense paid or accrued in respect of any Indebtedness during such period, plus (b) taxes to the extent paid or accrued during or with respect to such period plus (c) regularly scheduled payments of principal paid on
Indebtedness (excluding the Revolving Loans (as defined in the CIT Loan Agreement)) during such period. 
  
 “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time and for the
period as to which such accounting principles are to apply, provided that in the event the Company modifies its accounting principles and procedures as applied as of the Closing Date, the Company shall provide such statements of reconciliation as
shall be in form and substance acceptable to HILCO. 
  
 “General Intangibles” shall mean all present and hereafter acquired general intangibles (as defined in the UCC), and shall include, without limitation, all present and future right, title and interest in and to: (a) all
Trademarks, tradenames, corporate names, business names, logos and any other designs or sources of business identities, (b) Patents, together with any improvements on said Patents, utility models, industrial models, and designs, (c) Copyrights, (d)
trade secrets, (e) licenses, (f) all applications with respect to the foregoing, (g) all right, title and interest in and to any and all extensions and renewals, (h) goodwill with respect to any of the foregoing, (i) any other forms of similar
intellectual property, (j) all customer lists, distribution agreements, supply agreements, blueprints, indemnification rights and tax refunds, together with all monies and claims for monies now or hereafter due and payable in connection with any of
the foregoing or otherwise, and all cash and non-cash proceeds thereof, including, without limitation, the proceeds or royalties of any licensing agreements between the Company and any licensee of any of the Company’s General Intangibles.

  
 “Governmental Authority” shall mean any
nation or government, any foreign, Federal, state, city, town, municipality, county, local or other political subdivision thereof or thereto and any department, commission, board, bureau, instrumentality, agency or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. 
  
 “Guaranties” shall mean the guaranty documents executed and delivered by the Guarantors guaranteeing the Obligations. 
  
 “Guarantors” shall mean Cybex Capital Corporation, Tectrix
Fitness Equipment, Inc. and Cybex International UK Limited. 
  
 “Hazardous Material” means (a) any element, compound or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, special waste, or solid waste under Environmental Laws or that is likely to cause immediately, or at some future time, harm to or have an adverse effect on, the environment or risk to human health or safety, including,
without limitation, any pollutant, contaminant, waste, hazardous waste, toxic substance or dangerous good which is defined or identified in any Environmental Law and which is present in the environment in such quantity or state that it contravenes
any Environmental Law; (b) petroleum and its refined products; (c) polychlorinated biphenyls; (d) any substance 

  

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exhibiting a hazardous waste characteristic, including, without limitation, corrosivity, ignitability, toxicity or reactivity as well as any radioactive or
explosive materials; and (e) any raw materials, building components (including, without limitation, asbestos-containing materials) and manufactured products containing hazardous substances listed or classified as such under Environmental Laws.

  
 “Inactive Subsidiary” shall mean Cybex
Fitness Gerate Vertriebes GmbH. 
  
 “Indebtedness” shall mean, without duplication, all liabilities, contingent or otherwise, which are any of the following: (a) obligations in respect of borrowed money or for the deferred purchase price of property, services
or assets, other than Inventory, or (b) lease obligations which, in accordance with GAAP, have been, or which should be capitalized. 
  
 “Insurance Proceeds” shall mean proceeds or payments from an insurance carrier with respect to any loss, casualty or damage to
Collateral. 
  
 “Intercreditor Agreement” shall
mean the Intercreditor Agreement, dated the date hereof, between HILCO and CIT. 
  
 “Interest Rate” shall mean the per annum rate of interest equal to the greater of (a) 15.5%, and (b) the Prime Rate plus 11.5%. 
  
 “Inventory” shall mean all of the Company’s present and hereafter acquired inventory (as defined in
the UCC) and including, without limitation, all merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods and materials used or usable in manufacturing, processing,
packaging or shipping same in all stages of production from raw materials through work-in-process to finished goods and all proceeds thereof of whatever kind or nature. 
  
 “Investment Property” means the Company’s now owned or hereafter acquired right, title and interest
with respect to “investment property” as that term is defined in the UCC, and any and all supporting obligations in respect thereof. 
  
 “IRB” shall mean the Massachusetts Industrial Finance Agency Industrial Revenue Bonds – United Medical Corporation Issue - Series
1992 in the original principal amount of $3,779,069. 
  
 “IRB Letter of Credit” shall mean the letter of credit issued by Wachovia Bank, National Association on the application of the Company providing credit support for the IRB. 
  
 “Lease Support Guarantees” shall have the meaning given to
such term in the definition of Permitted Indebtedness. 
  
 “Letters of Credit” shall have the meaning given to such term in the CIT Loan Agreement as in effect on the date hereof. 
  
 “Lien” means any mortgage, deed of trust, deed to secure debt, lien (statutory or other), pledge, easement, restrictive covenant,
hypothecation, assignment, preference, priority, 

  

 - 8 - 

 
security interest, or any other encumbrance or charge, or any interest in any of the foregoing, including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement or similar instrument under the UCC or comparable law of any other jurisdiction, domestic or
foreign and mechanic’s, materialmen’s and other similar liens and encumbrances. 
  
 “Loan” shall mean the term loan to be made by HILCO to the Company in accordance with the terms and conditions of this Agreement. 
  
 “Loan Account” shall mean the account on HILCO’s books, in the Company’s name, in which the
Company will be charged with all Obligations under this Financing Agreement. 
  
 “Loan Documents” shall mean this Financing Agreement, the Promissory Note, the Mortgages, the Guaranties, the Officer’s Certificate, the Intercreditor Agreement, the Pledge Agreement, the
Warrants, the Registration Rights Agreement, the Commitment Letter, and any other documents, instruments and agreements executed from time to time in connection with this Financing Agreement, all as may be renewed, amended, extended, restated,
increased or supplemented from time to time. 
  
 “Loan
Facility Fee” shall have the meaning given to such term in Section 7.1. 
  
 “Material Adverse Effect” means a material adverse effect on any of (i) the operations, business, assets, properties, condition (financial or otherwise) or prospects of the Company or the Company and
its subsidiaries taken as a whole, (ii) the ability of the Company to perform any of its obligations under any Loan Document to which it is a party, (iii) the legality, validity or enforceability of this Agreement or any other Loan Document, (iv)
the rights and remedies of HILCO under any Loan Document, or (v) the validity, perfection or priority of a Lien in favor of HILCO on any of the Collateral. 
  
 “Maturity Date” shall mean July 16, 2006, or such earlier date on which the Loan shall become due and payable in full, whether by
acceleration or otherwise. 
  
 “Maximum HILCO
Amount” shall mean, at any time, an amount equal to the outstanding principal amount of the Loan minus Reserves. 
  
 “Mortgages” means each Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing with respect to the Mortgaged
Properties to be delivered to HILCO on or before the Closing Date, in form and substance satisfactory to HILCO. 
  
 “Mortgaged Property” shall mean the Real Estate located in Owatonna, Minnesota and Medway, Massachusetts, more particularly described in
the Mortgages. 
  
 “Multiemployer Plan” means a
“multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which the Company or any of its ERISA Affiliates has contributed to, or has been obligated to contribute, at any time during the preceding six (6) years. 
  

 - 9 - 

 “Net Income” shall mean with respect to any person and for any period, the aggregate net
income (or loss) after taxes of such person for such period, determined in accordance with GAAP consistently applied. 
  
 “Obligations” shall mean all loans, advances and extensions of credit made or to be made by HILCO to the Company or to others for the
Company’s account, including the Loan; any and all indebtedness, obligations and liabilities which may at any time be owing by the Company to HILCO howsoever arising, whether now in existence or incurred by the Company from time to time
hereafter; regardless of whether secured by pledge, lien upon or security interest in any of the Company’s Collateral, assets or property or the assets or property of any other person, firm, entity or corporation; regardless of whether such
indebtedness is absolute or contingent, joint and several or individual, matured or unmatured, direct or indirect, or of whether the Company is liable to HILCO for such indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations
shall also include indebtedness owing to HILCO by the Company under any Loan Document or under any other agreement or arrangement now or hereafter entered into between the Company and HILCO; indebtedness or obligations incurred by, or imposed on,
HILCO as a result of environmental claims arising out of the Company’s operations, premises or waste disposal practices or sites in accordance with paragraph 7.7 hereof; the Company’s liability to HILCO as maker or endorser of any
promissory note or other instrument for the payment of money; the Company’s liability to HILCO under any instrument of guaranty or indemnity, or arising under any guaranty, endorsement or undertaking which HILCO may make or issue to others for
the Company’s account, including HILCO’s acceptance of drafts or HILCO’s endorsement of notes or other instruments for the Company’s account and benefit. 
  
 “Other Collateral” shall mean all now owned and hereafter acquired lockbox, blocked account and any other
deposit accounts maintained with any bank or financial institutions into which the proceeds of Collateral (including the Mortgaged Properties) are or may be deposited; all cash and other monies and property in the possession or control of HILCO; all
books, records, ledger cards, disks and related data processing software at any time evidencing or containing information relating to any of the Collateral described herein or otherwise necessary or helpful in the collection thereof or realization
thereon; and all cash and non-cash proceeds of the foregoing. 
  
 “Patents” shall mean all of the Company’s present and hereafter acquired patents, patent applications, registrations, any reissues or renewals thereof, licenses, any inventions and improvements claimed thereunder, and
all general intangible, intellectual property and patent rights with respect thereto of the Company and all income, royalties, cash and non-cash proceeds thereof. 
  
 “Permitted Encumbrances” shall mean: (a) with respect to the Mortgaged Properties, the liens and
encumbrances set forth in the Title Insurance Policy, and such other liens and encumberances as HILCO may approve in writing in its sole discretion, (b) with respect to all Collateral other than the Mortgaged Properties, (i) liens existing on the
date hereof on specific items of Equipment and other liens expressly permitted, or consented to in writing by HILCO; (ii) Purchase Money Liens; (iii) liens of local or state authorities for franchise or other like Taxes, provided that the aggregate
amounts of such liens shall not exceed $100,000.00 in the aggregate at any one time; (iv) statutory liens of landlords and liens of carriers, warehousemen, 

  

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mechanics, materialmen and other like liens imposed by law, created in the ordinary course of business and for amounts not yet due (or which are being
contested in good faith, by appropriate proceedings or other appropriate actions which are sufficient to prevent imminent foreclosure of such liens) and with respect to which adequate reserves or other appropriate provisions are being maintained by
the Company in accordance with GAAP; (v) deposits made (and the liens thereon) in the ordinary course of business of the Company (including, without limitation, security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in
connection with workers’ compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money
obligations), statutory obligations and other similar obligations arising as a result of progress payments under government contracts; (c) with respect to all Real Estate other than the Mortgaged Properties, easements (including, without limitation,
reciprocal easement agreements and utility agreements), encroachments, minor defects or irregularities in title, variation and other restrictions, charges or encumbrances (whether or not recorded) affecting the Real Estate, if applicable, and which
in the aggregate (A) do not materially interfere with the occupation, use or enjoyment by the Company in its business of the property so encumbered (B) do not secure obligations for the payment of money, and (C) in the reasonable business judgment
of HILCO do not materially and adversely affect the value of such Real Estate; and (d) liens granted to HILCO by the Company; (e) liens of judgment creditors provided such liens do not exceed, in the aggregate, at any time, $50,000.00 (other than
liens bonded or insured to the reasonable satisfaction of HILCO); (f) tax liens which are not yet due and payable or which are being diligently contested in good faith by the Company by appropriate proceeding and, in the case of the Mortgaged
Properties, in accordance with the provisions of the applicable Mortgage, and which liens are not (x) filed on any public records, (y) with respect to the Mortgage Properties, senior to the liens of HILCO, or (z) for Taxes due the United States of
America or any state thereof having similar priority statutes, as further set forth in paragraph 7.6 hereof; and (g) subject to the terms of the Intercreditor Agreement, liens granted in favor of CIT to secure the CIT Debt. 
  
 “Permitted Indebtedness” shall mean: (a) subject to the
terms of the Intercreditor Agreement, the CIT Debt in an aggregate principal amount not to exceed at any time outstanding, the sum of (i) the lower of (A) $14,000,000 and (B) the aggregate amount of Availability of the Company less $1,500,000,
plus $1,250,000 and (ii) $5,000,000 less all principal payments received by CIT with respect to the term loans under the CIT Loan Agreement as in effect on the date hereof, in each case plus interest, fees and expenses payable thereunder; (b)
Indebtedness under the IRB, provided that such Indebtedness is not secured by any assets of the Company; (c) current Indebtedness (other than Indebtedness for borrowed money) maturing in less than one year and incurred in the ordinary course of
business for raw materials, supplies, equipment, services, Taxes or labor; (d) the Indebtedness secured by Purchase Money Liens; (e) Indebtedness arising under this Agreement; (f) deferred Taxes and other expenses incurred in the ordinary course of
business; (g) to the extent constituting Indebtedness, guarantees of third-party leases and other third party financing arrangements pertaining to the Company’s products and related matters (the “Lease Support Guarantees”),
provided that the maximum liability under all Lease Support Guarantees shall not at any time exceed $6,000,000 in the aggregate; and (h) other Indebtedness existing on the date of execution of this Financing Agreement and listed in the most recent
financial statement delivered to HILCO or otherwise disclosed to HILCO in writing prior to the Closing Date. 
  

 - 11 - 

 “Person” shall mean any individual, corporation, Governmental Authority, partnership,
limited liability company, unincorporated business association, trust or other entity. 
  
 “Pledge Agreement” shall have the meaning given to such term in Section 2.1(m). 
  
 “Prime Rate” shall mean the rate of interest per annum announced by LaSalle National Bank from time to time as its prime rate in effect
at its principal office in Chicago, Illinois. (The prime rate is not intended to be the lowest rate of interest charged by LaSalle National Bank to its borrowers). 
  
 “Promissory Note” shall mean the Promissory Note attached hereto as Exhibit A and made a part
hereof. 
  
 “Purchase Money Liens” shall mean
liens on any item of Equipment acquired after the date of this Financing Agreement provided that (a) each such lien shall attach only to the property to be acquired, (b) a description of the Equipment so acquired is furnished to HILCO, and (c) the
debt incurred in connection with such acquisitions shall not exceed, in the aggregate, $50,000.00 in any Fiscal Year. 
  
 “Real Estate” shall mean the Company’s fee and/or leasehold interests in real property, including any such real property which has
been, or will be, encumbered, mortgaged, pledged or assigned to HILCO or its designee. 
  
 “Registration Rights Agreement” means the Registration Rights Agreement, in form and substance satisfactory to HILCO, by and between the Company and HILCO, with respect to the demand and piggy-back
registration rights of HILCO with respect to shares of Warrant Stock that HILCO may acquire and the anti-dilution and tag-along provisions applicable thereto. 
  

“Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, seeping,
migrating, dumping or disposing of any Hazardous Material (including the abandonment or discarding of barrels, containers and other closed receptacles containing any Hazardous Material) into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through or in the ambient air, soil, surface or ground water, or property. 
  
 “Remedial Action” means all actions taken to (i) clean up, remove, remediate, contain, treat, monitor, assess, evaluate or in any other
way address Hazardous Materials in the indoor or outdoor environment; (ii) prevent or minimize a Release or threatened Release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor
or outdoor environment; (iii) perform pre-remedial studies and investigations and post-remedial operation and maintenance activities; or (iv) perform any other actions authorized by 42 U.S.C. § 9601. 
  
 “Reserves” shall mean such reserves with respect to the Loan
as HILCO determines from time to time in its reasonable discretion based upon the lending practices of HILCO, which reserves may relate to the assets of the Company (other than a reserve established as a result of a decrease in the Fair Market Value
of any Mortgaged Property) or any other matter 

  

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or circumstance deemed appropriate by HILCO in its reasonable discretion based upon the lending practices of HILCO. 
  
 “Supplemental Facility Fee” shall have the meaning given to
such term in Section 7.1. 
  
 “Taxes” shall mean
all federal, state, municipal and other governmental taxes, levies, charges, claims and assessments which are or may be due by the Company with respect to its business, operations, Collateral or otherwise. 
  
 “Termination Event” means (i) a Reportable Event with
respect to any Employee Plan, (ii) any event that causes the Company or any of its ERISA Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the
Internal Revenue Code, (iii) the filing of a notice of intent to terminate an Employee Plan or the treatment of an Employee Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings by the PBGC to terminate an
Employee Plan, or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Employee Plan. 
  
 “Title Insurance Policy” means a mortgagee’s loan
policy, in form and substance reasonably satisfactory to HILCO, together with all endorsements made from time to time thereto, issued by or on behalf of a title insurance company satisfactory to HILCO, insuring the Lien created by a Mortgage on
terms reasonably satisfactory to HILCO, delivered to HILCO. 
  
 “Total Assets” shall mean total assets determined in accordance with GAAP, on a basis consistent with the latest audited financial statements of the Company. 
  
 “Total Liabilities” shall mean total liabilities determined
in accordance with GAAP, on a basis consistent with the latest audited financial statements of the Company. 
  
 “Trade Accounts Receivable” shall mean that portion of the Company’s Accounts which arises from the sale of Inventory or the
rendition of services in the ordinary course of the Company’s business. 
  
 “Trademarks” shall mean all present and hereafter acquired trademarks, trademark registrations, recordings, applications, tradenames, trade styles, service marks, prints and labels (on which any of
the foregoing may appear), licenses, reissues, renewals, and any other intellectual property and trademark rights pertaining to any of the foregoing, together with the goodwill associated therewith, and all cash and non-cash proceeds thereof.

  
 “Transfer” shall mean any conveyance,
transfer, pledge, assignment, hypothecation, refinancing, mortgage, encumbrance, gift, sale, lease (including any amendment, extension, modification, waiver or renewal thereof), Lien, or other disposition, whether direct or indirect, legal or
beneficial, by law or otherwise. 
  
 “UCC” shall
mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that for purposes of the fixture filings contemplated by the Mortgages, the definition of “UCC” contained in each Mortgage shall
govern the applicable Mortgaged Property. 
  

 - 13 - 

 “UM Holdings Letter of Credit” shall mean the letter of credit issued by Wachovia Bank,
National Association in favor of CIT on the application of UM Holdings Ltd. in the face amount of $1,500,000.00. 
  
 “Warrants” shall have the meaning given to such term in Section 11. 
  
 “Warrant Stock” shall have the meaning given to such term in the Warrants. 
  
 “Working Capital” shall mean Current Assets in excess of
Current Liabilities. 
  
 “Working Day” shall mean
any Business Day on which dealings in foreign currencies and exchanges between banks may be transacted. 
  
 Section 2. Conditions Precedent 
  
 2.1. The obligation of HILCO to make the Loan hereunder is subject to the satisfaction of, extension of or waiver of, on or prior to, the Closing Date,
the following conditions precedent: 
  
 (a) Lien
Searches. HILCO shall have received tax, judgment and Uniform Commercial Code searches satisfactory to HILCO for all locations presently occupied or used by the Company. 
  
 (b) Casualty Insurance. The Company shall have delivered to HILCO evidence satisfactory to HILCO that casualty
insurance policies listing HILCO as loss payee or mortgagee, as the case may be, are in full force and effect, all as set forth in Section 6.5 of this Financing Agreement. 
  
 (c) UCC Filings. Any financing statements required to be filed in order to create, in favor of HILCO, a first
perfected lien and security interest in and to the Collateral, subject, with respect to Collateral other than the Mortgaged Property, only to the security interests granted to CIT under the CIT Loan Documents, and subject to the Permitted
Encumbrances, shall have been properly filed in each office in each jurisdiction required in order to create in favor of HILCO a perfected lien on the Collateral. HILCO shall have received acknowledgment copies of all such filings (or, in lieu
thereof, HILCO shall have received other evidence satisfactory to HILCO that all such filings have been made) and HILCO shall have received evidence that all necessary filing fees and all taxes or other expenses related to such filings have been
paid in full. 
  
 (d) Board Resolution. HILCO shall have
received a copy of the resolutions of the Board of Directors of the Company and each Guarantor authorizing the execution, delivery and performance of (i) this Financing Agreement, (ii) the Guaranties, and (iii) any related agreements, in each case
certified by the Secretary, Assistant Secretary or other senior authorized officer of the Company and the Guarantors (as the case may be) as of the date hereof, together with a certificate of the Secretary, Assistant Secretary or other senior
authorized 

  

 - 14 - 

 
officer of the Company and the Guarantors (as the case may be) as to the incumbency and signature of the officers of the Company and/or the Guarantors
executing such Loan Documents and any certificate or other documents to be delivered by them pursuant hereto, together with evidence of the incumbency of such Secretary, Assistant Secretary or other senior authorized officer. 
  
 (e) Corporate Organization. HILCO shall have received (i) a copy of
the Certificate of Incorporation of the Company and the Guarantors certified by the Secretary of State of the state of its incorporation, and (ii) a copy of the By-Laws of the Company certified by the Secretary, Assistant Secretary or other senior
authorized officer thereof, all as amended through the date hereof. 
  
 (f) Officer’s Certificate. HILCO shall have received an executed Officer’s Certificate of the Company, satisfactory in form and substance to HILCO, certifying that (i) the representations and warranties contained herein are
true and correct in all material respects on and as of the Closing Date; (ii) the Company is in compliance with all of the terms and provisions set forth herein; and (iii) no Default or Event of Default has occurred. 
  
 (g) Opinions. Counsel for the Company and the Guarantors shall have
delivered to HILCO opinions satisfactory to HILCO. 
  
 (h)
Legal Restraints/Litigation. As of the Closing Date, there shall be no (x) litigation, investigation or proceeding (judicial or administrative) pending or threatened against the Company or the Guarantors or their assets, by any Governmental
Authority arising out of this Financing Agreement, (y) injunction, writ or restraining order restraining or prohibiting the financing arrangements contemplated under this Financing Agreement or (z) suit, action, investigation or proceeding (judicial
or administrative) pending against the Company or the Guarantors or their assets, which, in the judgment of HILCO, if adversely determined, could have a Material Adverse Effect. 
  
 (i) Guaranties. The Guarantors shall have executed and delivered to HILCO guaranties, in form acceptable to HILCO,
guaranteeing all present and future Obligations of the Company. 
  
 (j) [intentionally omitted] 
  
 (k)
Intercreditor Agreement. CIT and HILCO shall have entered into the Intercreditor Agreement. 
  
 (l) Cash Budget Projections. HILCO shall have received, reviewed and been satisfied with a twelve (12) month cash budget projection prepared by
the Company on the form provided by HILCO. 
  
 (m) Pledge
Agreement. The Company shall (i) execute and deliver to HILCO a pledge and security agreement (a “Pledge Agreement”) pledging to HILCO as additional collateral for the Obligations of the Company 100% of the stock of each
Guarantor and, (ii) deliver to HILCO copies of the original stock certificates evidencing such stock, together with copies of the duly executed stock powers (undated and in-blank) with respect 

  

 - 15 - 

 
thereto, provided that the originals of such stock certificates and stock powers shall have been delivered to CIT in accordance with the terms and provisions
of the CIT Loan Documents, all in form and substance satisfactory to HILCO. 
  
 (n) Additional Documents. The Company shall have executed and delivered to HILCO all Loan Documents necessary to consummate the lending arrangement contemplated between the Company and HILCO. 
  
 (o) Disbursement Authorization. The Company shall have delivered to
HILCO all information necessary for HILCO to issue wire transfer instructions on behalf of the Company for the Loan, including disbursement authorizations in form acceptable to HILCO. 
  
 (p) Examination & Verification. HILCO shall have completed, to its satisfaction, an examination and verification
of the Accounts, Inventory, books and records of the Company which examination shall indicate that, after giving effect to the Loan, the CIT Loan and the payment of all financing fees and expenses related to this Agreement and the transactions
contemplated herein, in each case, to be made on the Closing Date, (i) Availability shall not be less than $4,500,000.00, as evidenced by the Borrowing Base certificate delivered by the Company to HILCO on the Closing Date, which shall be in the
same form as delivered to CIT on the Closing Date and (ii) all debts and obligations of the Company shall be current, and all payables shall, at such time, be handled in the normal course of the Company’s business and consistent with their past
practice. The Company shall deliver to HILCO a certificate of the chief financial officer of the Company certifying as to the matters set forth in clauses (i) and (ii) above and containing the calculation of Availability. 
  
 (q) Depository Accounts. The Company shall have established a system
of lockbox and bank accounts with respect to the collection of Accounts and the deposit of proceeds of Collateral as shall be acceptable to CIT in all respects. Such accounts shall be subject to three party agreements (between the Company, CIT and
the depository bank), which shall be in form and substance satisfactory to CIT. 
  
 (r) Existing Revolving Credit Agreement. (i) The Company’s existing credit agreement with the Existing Lender shall be terminated, (ii) all loans and obligations of the Company and/or the Guarantors
thereunder (other than the Company’s reimbursement obligations with respect to the IRB Letter of Credit) shall be paid or satisfied in full, including through utilization of the proceeds of the Loans to be made under this Financing Agreement,
(iii) all liens or security interests in favor of the Existing Lender on the Collateral and otherwise in connection therewith shall be terminated and/or released upon such payment, and (iv) the Company shall have delivered to HILCO a copy of the
Termination Agreement, dated the date hereof, duly executed by the Company, the Existing Lender and CIT. 
  
 (s) Mortgages/Deeds of Trust. The Company shall have executed and delivered the Mortgages to HILCO. 
  
 (t) Title Insurance Policies. HILCO shall have received, in respect
of each Mortgaged Property, a commitment for the Title Insurance Policy. HILCO shall also have 

  

 - 16 - 

 
received evidence that all premiums in respect of such Title Insurance Policies have been paid and that all charges for mortgage recording taxes, if any,
shall have been paid. 
  
 (u) Surveys. HILCO and the title
insurance company issuing each Title Insurance Policy referred to in the immediately preceding paragraph shall have received maps or plats of a perimeter or boundary of the site of each of the properties covered by the mortgages or deeds of trust,
dated a date satisfactory to HILCO and the relevant title insurance company prepared by an independent professional licensed land surveyor satisfactory to HILCO and the relevant title insurance company, which maps or plats and the surveys on which
they are based shall be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping; and, without
limiting the generality of the foregoing, there shall be surveyed and shown on the maps or plats or surveys the following: (i) the locations on such sites of all the buildings, structures and other improvements and the established building setback
lines insofar as the foregoing affect the perimeter or boundary of such property; (ii) the lines of streets abutting the sites and width thereof; (iii) all access and other easements appurtenant to the sites or necessary or desirable to use the
sites; (iv) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the sites, if recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (v) any
encroachments on any adjoining property by the building, structures and improvements on the sites; and (vi) if the site is designated as being on a filed map, a legend relating the survey to said map. Further, the survey shall (x) be certified to
HILCO, the Company and the relevant title insurance company and (y) contain a legend reciting as to whether or not the site is located in a flood zone. 
  
 (v) Environmental Report. HILCO shall have received environmental audit reports on (i) all of the Company’s leasehold and fee interests, and
(ii) the Company’s waste disposal practices. The reports must (x) be satisfactory to HILCO and (y) not disclose or indicate any material liability (real or potential) stemming from the Company’s premises, its operations, its waste disposal
practices or waste disposal sites used by Company. 
  
 (w) UM
Holdings Letter of Credit. The UM Holdings Letter of Credit shall have been delivered to CIT, subject to the terms of the Intercreditor Agreement, and shall be in form and substance reasonably satisfactory to HILCO. 
  
 (x) CIT Loan. HILCO shall be satisfied that the Company shall have
satisfied all of the conditions to effectiveness of the CIT Loan Agreement, including without limitation, with respect to establishing lockboxes and Depository Accounts. 
  
 (y) Opening Balance Sheet. HILCO shall have received an opening balance sheet of the Company as of the Closing Date
which shall be in form and substance satisfactory to HILCO. 
  
 (z) Warrants. HILCO shall have received the Warrants and the Registration Rights Agreement, all in form and substance satisfactory to HILCO. 
  

 - 17 - 

 (aa) Additional Collateral for IRB Letter of Credit. UM Holdings, Ltd. shall have provided
additional collateral for the IRB Letter of Credit and HILCO shall be satisfied with the terms and provisions relating to such additional collateral. 
  
 (bb) Ex-Im Bank Guarantee. CIT shall have received the Ex-Im Bank Guarantee duly executed by Ex-Im Bank on terms acceptable to CIT, HILCO and the
Company shall have entered into the Ex-Im Bank Agreement with Ex-Im Bank in accordance with the Ex-Im Bank Guarantee. 
  
 (cc) Schedules. The Company or its counsel shall provide HILCO with schedules of: (a) any of the Company’s and its subsidiaries (i)
Trademarks, (ii) Patents, and (iii) Copyrights, as applicable and all in such detail as to provide appropriate recording information with respect thereto, (b) any tradenames, (c) monthly rental payments for any leased premises or any other premises
where any Collateral may be stored or processed, and (d) Permitted Liens, all of the foregoing in form and substance satisfactory to HILCO. 
  
 (dd) Commitment Letter. The Company shall have fully complied, to the reasonable satisfaction of HILCO, with all of the terms and conditions of
the Commitment Letter. 
  
 (ee) Good Standing
Certificates. The Company shall have delivered a certificate of the appropriate official(s) of (i) the state of organization of the Company and (ii) Massachusetts and Minnesota, in each case as to the subsistence in good standing of, and, if
available, the payment of taxes by, the Company in such states. 
  
 (ff) Approvals. All consents, authorizations and approvals of, and filings and registrations with, and all other actions in respect of, any Governmental Authority or other Person required in connection with the making of the Loan or
the conduct of the Company’s business shall have been obtained and shall be in full force and effect. 
  
 (gg) Payment of Fees, Etc.. The Company shall have paid on or before the Closing Date all fees, costs, expenses and taxes then payable pursuant to
Section 7. 
  
 (hh) Representations and Warranties; Absence of
Default. The following statements shall be true and correct: (i) the representations and warranties contained herein and in each other Loan Document, certificate or other writing delivered to HILCO pursuant hereto or thereto on or prior to the
Closing Date are true and correct on and as of the Closing Date as though made on and as of such date and (ii) no Default or Event of Default shall have occurred and be continuing or result from this Agreement or the other Loan Documents becoming
effective in accordance with its or their respective terms and no material adverse change shall have occurred in the financial condition, business, prospects, profits, operations or assets of the Company or the Company’s subsidiaries.

  
 Upon the execution of this Financing Agreement and the
disbursement of the Loan hereunder, all of the above Conditions Precedent shall have been deemed satisfied except as otherwise set forth hereinabove or as the Company and HILCO shall otherwise agree in writing. 
  

 - 18 - 

 Section 3. The Loan 
  
 3.1. The Company hereby agrees to execute and deliver to HILCO the Promissory Note to evidence the Loan. 
  
 3.2. Upon receipt of the Promissory Note, HILCO hereby agrees to extend to
the Company the Loan in the principal amount of $11,000,000. 
  
 3.3. The Loan shall bear interest and shall be repayable as follows: 
  
 (a) as long as no Event of Default has occurred and is continuing, interest on the unpaid principal amount of the Loan shall accrue at the Interest Rate, and shall be payable monthly in arrears on the first Business
Day of each month; 
  
 (b) to the extent permitted by law, upon
the occurrence and during the continuance of an Event of Default, (i) the principal of the Loan (including all capitalized interest added to the principal balance thereof) and (ii) the amount of all other monetary Obligations of the Company under
this Agreement and the other Loan Documents shall bear interest, from the date such Event of Default occurred until the date such Event of Default is cured or waived in writing in accordance herewith, at a rate per annum equal at all times to the
Default Rate of Interest. 
  
 (c) commencing on the date which is
one year after the Closing Date, and continuing through but not including the Maturity Date, principal payments of the Loan shall become due and payable in equal monthly installments in the amount of $45,833.33, which payments shall be made monthly
on the date provided for the payment of interest hereunder; and 
  
 (d) all unpaid principal, interest and other sums due under this Agreement and the other Loan Documents shall be due and payable in full on the Maturity Date. 
  
 3.4. Interest shall be calculated based on a 360-day year for the number of days elapsed. HILCO shall be entitled to charge
the Company’s Loan Account at the rate provided for herein when due until all Obligations have been paid in full. HILCO’s determination of amounts due hereunder shall be conclusive, absent manifest error. 
  
 3.5. Notwithstanding the provisions of Section 3.3 to the contrary, the Loan
and all other monetary Obligations under the Agreement shall become immediately due and payable in its entirety upon (a) the occurrence of a Change of Control, and (b) the Transfer of any Mortgaged Property. 
  
 3.6. The Company may prepay the Loan at any time, at its option, in whole or
in part, provided that together with each such prepayment, the Company shall pay accrued interest on the principal so prepaid to the date of such prepayment, together with all other sums then due and payable on the Loan. Each partial prepayment
shall be in multiples of $100,000. 
  
 3.7. Upon the receipt by
the Company or any of its subsidiaries of any Extraordinary Receipts, the Company shall prepay (i) the CIT Loans constituting term loans and (ii) if the CIT Loans constituting the term loans have been paid in full, the outstanding principal 

  

 - 19 - 

 
of the Loan in an amount equal to 100% of such Extraordinary Receipts, net of any reasonable expenses incurred in collecting such Extraordinary Receipts.

  
 3.8. If at any time (x) the outstanding principal amount of
the Loan under this Agreement exceeds (y) the Maximum HILCO Amount (the amount by which the amount of clause (x) above exceeds the amount of clause (y) above is hereafter referred to as the “Deficiency”), the Company shall,
immediately upon the occurrence of such Deficiency, prepay the principal of the Loan in an amount equal to the Deficiency. 
  
 3.9. Each prepayment of the principal balance of the Loan (whether voluntary or mandatory) shall be applied to the installments of principal of the Loan
in the inverse order of their maturity. 
  
 3.10. The Company will
make each payment to HILCO under this Agreement not later than 3:00 p.m. (New York City time) on the day when due, in lawful money of the United States of America and in immediately available funds. All payments received by HILCO after 3:00 p.m.
(New York City time) on any Business Day will be credited to the Loan Account on the next succeeding Business Day. 
  
 Section 4. Accounts. 
  
 4.1. In furtherance of the continuing assignment and security interest in the Company’s Accounts and Inventory, upon the reasonable request of HILCO,
the Company will, upon the creation of Accounts and purchase or acquisition of Inventory, execute and deliver to HILCO in such form and manner as HILCO may reasonably require, solely for HILCO’s convenience in maintaining records of Collateral,
such confirmatory schedules of Accounts and Inventory as HILCO may reasonably request, including, without limitation, weekly schedules of Accounts and monthly schedules of Inventory, all in form and substance satisfactory to HILCO, and such other
appropriate reports designating, identifying and describing the Accounts and Inventory as HILCO may reasonably request, and provided further that HILCO may request any such information more frequently, from time to time, upon its reasonable prior
request. In addition, upon HILCO’s request, the Company shall provide HILCO with copies of agreements with, or purchase orders from, the Company’s customers, and copies of invoices to customers, proof of shipment or delivery, access to its
computers, electronic media and software programs associated therewith (including any electronic records, contracts and signatures) and such other documentation and information relating to said Accounts and other Collateral as HILCO may reasonably
require. Failure to provide HILCO with any of the foregoing shall in no way affect, diminish, modify or otherwise limit the security interests granted herein. Subject to the terms of the Intercreditor Agreement, the Company hereby authorizes HILCO
to regard the Company’s printed name or rubber stamp signature on assignment schedules or invoices as the equivalent of a manual signature by one of the Company’s authorized officers or agents. 
  
 4.2. The Company hereby represents and warrants that: each Trade Account
Receivable is based on an actual and bona fide sale and delivery of Inventory or rendition of services to customers, made by the Company in the ordinary course of its business; the Inventory being sold, and the Trade Accounts Receivable created, are
the exclusive property of the Company and are not and shall not be subject to any lien, consignment arrangement, 

  

 - 20 - 

 
encumbrance, security interest or financing statement whatsoever, other than the Permitted Encumbrances; the invoices evidencing such Trade Accounts
Receivable are in the name of the Company; and the customers of the Company have accepted the Inventory or services, owe and are obligated to pay the full amounts stated in the invoices according to their terms, without dispute, offset, defense,
counterclaim or contra, except for disputes and other matters arising in the ordinary course of business with respect to which the Company has complied with the notification requirements of Section 4.4. The Company confirms to HILCO that any and all
Taxes or fees relating to its business, its sales, the Accounts or Inventory relating thereto, are its sole responsibility and that same will be paid by the Company when due, subject to Section 6.6, and that none of said Taxes or fees represent a
lien on or claim against the Accounts. The Company hereby further represents and warrants that it shall not acquire any Inventory on a consignment basis, nor co-mingle its Inventory with any of its customers or any other person, including pursuant
to any bill and hold sale or otherwise, and that its Inventory is marketable to its customers in the ordinary course of business of the Company, except as it may otherwise report in writing to HILCO pursuant to Section 4.5 hereof from time to time.
The Company also represents and warrants that it is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its organization and is qualified in all states where the failure to so qualify would have
an adverse effect on the business of the Company or the ability of the Company to enforce collection of Accounts due from customers residing in that state. The Company agrees to maintain such books and records regarding Accounts and Inventory as
HILCO may reasonably require and agrees that the books and records of the Company will reflect HILCO’s interest in the Accounts and Inventory. All of the books and records of the Company will be available to HILCO at normal business hours,
including any records handled or maintained for the Company by any other company or entity. 
  
 4.3. The Company shall comply with all terms and provisions with respect to cash management contained in the CIT Loan Agreement (or any successor or replacement agreement acceptable to HILCO), provided that, if the
CIT Loan Agreement shall have been terminated and the Company shall not have entered into a successor or replacement agreement acceptable to HILCO, then the Company shall enter into control agreements, lockbox agreements depository agreements and
other similar agreements in form and substance satisfactory to HILCO. 
  
 4.4. The Company agrees to notify HILCO: (a) of any matters affecting the value, enforceability or collectibility of any Account and of all customer disputes, offsets, defenses, counterclaims, returns, rejections and all reclaimed or
repossessed merchandise or goods, and of any adverse effect in the value of its Inventory, in its weekly and monthly collateral reports (as applicable) provided to HILCO hereunder, in such detail and format as HILCO may reasonably require from time
to time and (b) promptly of any such matters which are material, as a whole, to the Accounts and/or the Inventory. The Company agrees to issue credit memoranda promptly (with duplicates to HILCO upon request after the occurrence of an Event of
Default) upon accepting returns or granting allowances. Subject to the terms of the Intercreditor Agreement, upon the occurrence of an Event of Default (which is not waived in writing by HILCO) and on notice from HILCO, the Company agrees that all
returned, reclaimed or repossessed merchandise or goods shall be set aside by the Company, marked with HILCO’s name (as secured party) and held by the Company for HILCO’s account. 
  

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 4.5. HILCO shall maintain a Loan Account on its books in which the Company will be charged with all loans
and advances made by HILCO to it or for its account, and with any other Obligations, including any and all costs, expenses and reasonable attorney’s fees which HILCO may incur in connection with the exercise by or for HILCO of any of the rights
or powers herein conferred upon HILCO, or in the prosecution or defense of any action or proceeding to enforce or protect any rights of HILCO in connection with this Financing Agreement, the other Loan Documents or the Collateral, or any Obligations
owing by the Company. The Company will be credited with all amounts received by HILCO from the Company or from others for the Company’s account, and such amounts will be applied to payment of the Obligations as set forth herein. In no event
shall prior recourse to any security granted to or by the Company be a prerequisite to HILCO’s right to demand payment of any Obligation. Further, it is understood that HILCO shall have no obligation whatsoever to perform in any respect any of
the Company’s contracts or obligations. 
  
 4.6. After the
end of each month, HILCO shall promptly send the Company a statement showing the accounting for the charges, loans, advances and other transactions occurring between HILCO and the Company during that month. The monthly statements shall be deemed
correct and binding upon the Company and shall constitute an account stated between the Company and HILCO unless HILCO receives a written statement of the exceptions within thirty (30) days of the date of the monthly statement. 
  
 Section 5. Collateral 
  
 5.1. As security for the prompt payment in full of all Obligations, the
Company hereby pledges and grants to HILCO a continuing general lien upon, and security interest in, all of its assets, including without limitation, all of its: 
  
 (a) Accounts; 
  
 (b) Inventory; 
  
 (c) General Intangibles; 
  
 (d) Documents of Title; 
  
 (e) Other Collateral; 
  
 (f) Investment Property; 
  
 (g) Equipment; and 
  
 (h) Real Estate. 
  
 5.2. The security interests granted hereunder shall extend and attach to: 
  
 (a) All Collateral which is presently in existence and which is owned by the Company or in which the Company has any
interest, whether held by the Company or 

  

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others for its account, and, if any Collateral is Equipment, whether the Company’s interest in such Equipment is as owner, finance lessee or conditional
vendee; 
  
 (b) All Equipment, whether the same constitutes
personal property or fixtures, including, but without limiting the generality of the foregoing, all dies, jigs, tools, benches, molds, tables, accretions, component parts thereof and additions thereto, as well as all accessories, motors, engines and
auxiliary parts used in connection with, or attached to, the Equipment; and 
  
 (c) All Inventory and any portion thereof which may be returned, rejected, reclaimed or repossessed by either HILCO or the Company from the Company’s customers, as well as to all supplies, goods, incidentals,
packaging materials, labels and any other items which contribute to the finished goods or products manufactured or processed by the Company, or to the sale, promotion or shipment thereof. 
  
 5.3. The Company agrees to safeguard, protect and hold all Inventory for HILCO’s account and make no disposition
thereof except in the ordinary course of its business of the Company, as herein provided. The Company represents and warrants that Inventory will be sold and shipped by the Company to its customers only in the ordinary course of the Company’s
business, and then only on open account and on terms currently being extended by the Company to its customers, provided that, absent the prior written consent of HILCO, the Company shall not sell Inventory on a consignment basis nor retain any lien
or security interest in any sold Inventory. Upon the sale, exchange, or other disposition of Inventory, as herein provided, the security interest in the Inventory provided for herein shall, without break in continuity and without further formality
or act, continue in, and attach to, all proceeds, including any instruments for the payment of money, Trade Accounts Receivable, documents of title, shipping documents, chattel paper and all other cash and non-cash proceeds of such sale, exchange or
disposition. As to any such sale, exchange or other disposition, HILCO shall have all of the rights of an unpaid seller, including stoppage in transit, replevin, rescission and reclamation. The Company hereby agrees, subject to the terms of the
Intercreditor Agreement, to immediately forward any and all proceeds of Collateral to the Deposit Account, and to hold any such proceeds (including any notes and instruments), in trust for HILCO pending delivery to HILCO. Irrespective of
HILCO’s perfection status in any and all of the General Intangibles, including, without limitations, any Trademarks, Copyrights or licenses with respect thereto, the Company hereby irrevocably grants HILCO a royalty free license to sell, or
otherwise dispose or transfer, in accordance with Section 9.3 of this Financing Agreement, and the applicable terms hereof, of any of the Inventory upon the occurrence of an Event of Default which has not been waived in writing by HILCO. 

 
 5.4. The Company agrees at its own cost and expense to keep the Equipment
in as good and substantial repair and condition as the same is now or at the time the lien and security interest granted herein shall attach thereto, reasonable wear and tear excepted, making any and all repairs and replacements when and where
necessary. The Company also agrees to safeguard, protect and hold all Equipment in accordance with the terms hereof and subject to HILCO’s security interest. Absent HILCO’s prior written consent, any sale, exchange or other disposition of
any Equipment shall be made by the Company in the ordinary course of business and as set forth herein. The Company may, in the ordinary course of its business, sell, exchange 

  

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or otherwise dispose of obsolete or surplus Equipment provided, however, that (a) the then value of the Equipment so disposed of in any Fiscal Year does not
exceed $250,000 in the aggregate and (b) the proceeds of any such sales or dispositions shall be held in trust by the Company for HILCO and shall be immediately delivered to HILCO by deposit to the Depository Account, except that the Company may
retain and use such proceeds to purchase forthwith replacement Equipment which the Company determines in its reasonable business judgment to have a collateral value at least equal to the Equipment so disposed of or sold, provided, however, that the
aforesaid right shall automatically cease upon the occurrence of a Default or an Event of Default which is not waived in writing by HILCO. Upon the sale, exchange, or other disposition of the Equipment, as herein provided, the security interest
provided for herein shall, without break in continuity and without further formality or act, continue in, and attach to, all proceeds, including any instruments for the payment of money, Accounts, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sales, exchange or disposition. As to any such sale, exchange or other disposition, HILCO shall have all of the rights of an unpaid seller, including stoppage in transit, replevin, rescission
and reclamation. 
  
 5.5. The rights and security interests
granted to HILCO hereunder are to continue in full force and effect, notwithstanding the termination of this Financing Agreement until the final payment in full to HILCO of all Obligations and the termination of this Financing Agreement. Any delay,
or omission by HILCO to exercise any right hereunder shall not be deemed a waiver thereof, or be deemed a waiver of any other right, unless such waiver shall be in writing and signed by HILCO. A waiver on any one occasion shall not be construed as a
bar to, or waiver of, any right or remedy on any future occasion. 
  
 5.6. Notwithstanding HILCO’s security interest in the Collateral and to the extent that the Obligations are now or hereafter secured by any assets or property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, HILCO shall have the right in its sole discretion to determine which rights, liens, security interests or remedies HILCO shall at any time pursue, foreclose upon, relinquish, subordinate, modify or take any other action
with respect to, without in any way modifying or affecting any of them, or any of HILCO’s rights hereunder. 
  
 5.7. Any balances to the credit of the Company and any other property or assets of the Company in the possession or control of HILCO may be held by HILCO
as security for any Obligations and applied in whole or partial satisfaction of such Obligations when due. The liens and security interests granted herein, and any other lien or security interest HILCO may have in any other assets of the Company,
shall secure payment and performance of all now existing and future Obligations. HILCO may in its discretion charge any or all of the Obligations to the Loan Account when due. 
  
 5.8. The Company possess all General Intangibles and rights thereto necessary to conduct its business as conducted as of the
Closing Date and the Company shall maintain its rights in, and the value of, the foregoing in the ordinary course of its business, including, without limitation, by making timely payment with respect to any applicable licensed rights. The Company
shall deliver to HILCO, and/or shall cause the appropriate party to deliver to HILCO, from time to time such pledge or security agreements with respect to General Intangibles (now or hereafter acquired) of the Company and its subsidiaries as HILCO
shall require to obtain valid 

  

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first liens thereon. In furtherance of the foregoing, the Company shall provide timely notice to HILCO of any additional Patents, Trademarks, tradenames,
service marks, Copyrights, brand names, trade names, logos and other trade designations acquired or applied for subsequent to the Closing Date and the Company shall execute such documentation as HILCO may reasonably require to obtain and perfect its
lien thereon. Subject to the terms of the Intercreditor Agreement, the Company hereby confirms that it shall deliver, or cause to be delivered, any pledged stock issued subsequent to the Closing Date to HILCO in accordance with the applicable terms
of the Pledge Agreement and prior to such delivery, shall hold any such stock in trust for HILCO. Subject to the terms of the Intercreditor Agreement, the Company hereby irrevocably grants to HILCO a royalty-free, non-exclusive license in the
General Intangibles, including tradenames, Trademarks, Copyrights, Patents, licenses, and any other proprietary and intellectual property rights and any and all right, title and interest in any of the foregoing, for the sole purpose, upon the
occurrence of an Event of Default, of the right to: (i) advertise for sale and sell or transfer any Inventory bearing any of the General Intangibles, and (ii) make, assemble, prepare for sale or complete, or cause others to do so, any applicable raw
materials or Inventory bearing any of the General Intangibles, including use of the Equipment and Real Estate for the purpose of completing the manufacture of unfinished goods, raw materials or work-in-process comprising Inventory, and apply the
proceeds thereof to the Obligations hereunder, all as further set forth in this Financing Agreement and irrespective of HILCO’s lien and perfection in any General Intangibles. 
  
 5.9. This Financing Agreement and the obligation of the Company to perform all of its covenants and obligations hereunder
are further secured by mortgage(s), deed(s) of trust or assignment(s) on the Real Estate. 
  
 5.10. The Company shall give to HILCO from time to time such mortgage(s), deed(s) of trust or assignment(s) on the Real Estate or real estate acquired after the date hereof as HILCO shall require to obtain a valid
first Lien thereon subject only to those exceptions of title as set forth in future title insurance policies that are satisfactory to HILCO. 
  
 5.11. As additional credit support for the CIT Debt, the Company agrees to provide the UM Holdings Letter of Credit to CIT, subject to the terms of the
Intercreditor Agreement, on the Closing Date. If the CIT Debt is paid in full, subject to the terms of the Intercreditor Agreement, such Letter of Credit will be assigned to HILCO as additional support for the Obligations. HILCO understands that CIT
will release the UM Holdings Letter of Credit within thirty (30) days of CIT’s receipt of the Company’s annual audited financial statements for the fiscal year ending December 31, 2003 provided the following conditions are satisfied to the
reasonable satisfaction of CIT: 
  
 (i) no Default or Event of
Default has occurred prior to the receipt by CIT of such audited financial statements or is indicated on such financial statements; 
  
 (ii) the Company has met or has exceeded its forecasted projections for EBITDA for the fiscal quarters ending June 30, 2003, September 30, 2003 and
December 31, 2003 (as such projections are set forth on Schedule 4 attached hereto); 
  

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 (iii) the Company has maintained a liquidity position satisfactory to CIT at all times prior to the
receipt by CIT of such audited financial statements; and 
  
 (iv)
CIT is otherwise reasonably satisfied with the financial condition and prospects of the Company. 
  
 Section 6. Representations, Warranties and Covenants 
  
 6.1. The Company hereby warrants, represents and covenants that: (a) the fair value of the Total Assets exceeds the book value of the Total Liabilities;
(b) the Company is generally able to pay its debts as they become due and payable; and (c) the Company does not have unreasonably small capital to carry on its business as it is currently conducted absent extraordinary and unforeseen circumstances.
The Company further warrants and represents that: (i) Schedule 1 hereto correctly and completely sets forth the Company’s (A) chief executive office, (B) Collateral locations, (C) tradenames , and (D) all the other information listed on said
Schedule; (ii) except for the Permitted Encumbrances, after filing of financing statements in the applicable filing clerks office at the locations set forth in Schedule 1, this Financing Agreement creates a valid, perfected and first priority
security interest in the Collateral and the security interests granted herein constitute and shall at all times constitute the first and only liens on the Collateral; (iii), except for the Permitted Encumbrances, the Company is, or will be, at the
time additional Collateral is acquired by it, the absolute owner of the Collateral with full right to pledge, sell, consign, transfer and create a security interest therein, free and clear of any and all claims or liens in favor of others; (iv) the
Company will, at its expense, forever warrant and, at HILCO’s request, defend the same from any and all claims and demands of any other person other than a holder of a Permitted Encumbrance; (v) the Company will not grant, create or permit to
exist, any lien upon, or security interest in, the Collateral, or any proceeds thereof, in favor of any other person other than the holders of the Permitted Encumbrances; and that the Equipment does not comprise a part of the Inventory of the
Company, and (vi) the Equipment is and will only be used by the Company in its business and will not be held for sale or lease, or removed from its premises, or otherwise disposed of by the Company except as otherwise permitted in this Financing
Agreement. 
  
 6.2. The Company agrees to maintain books and
records pertaining to the Collateral in accordance with GAAP and in such additional detail, form and scope as HILCO shall reasonably require. The Company agrees that HILCO or its agents may enter upon the Company’s premises at any time during
normal business hours, and from time to time in its reasonable business judgement, to examine and make copies of and abstracts from its records and books of account, to visit and inspect its properties, to verify materials, leases, notes, accounts
receivable, deposit accounts and its other assets, to conduct audits, physical counts, valuations, appraisals, or examinations and to discuss its affairs, finances and accounts with any of its directors, officers, managerial employees, independent
accountants or any of its other representatives. In furtherance of the foregoing, the Company hereby authorizes its independent accountants, and the independent accountants of each of its subsidiaries, to discuss the affairs, finances and accounts
of such Person (independently or together with representatives of such Person) with the agents and representatives of HILCO in accordance with this Section 6.2. The Company agrees to afford HILCO thirty (30) days prior written notice of any change
in the 

  

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location of any Collateral, other than to locations, that as of the Closing Date, are known to HILCO and at which HILCO has filed financing statements and
otherwise fully perfected its liens thereon. The Company is also to advise HILCO promptly, in sufficient detail, of any material adverse change relating to the type, quantity or quality of the Collateral or on the security interests granted to HILCO
therein. 
  
 6.3. The Company agrees to: (a) execute and deliver
to HILCO, from time to time, solely for HILCO’s convenience in maintaining a record of the Collateral, such written statements, and schedules as HILCO may reasonably require, designating, identifying or describing the Collateral; and (b)
provide HILCO, on request, with an appraisal of the Inventory which appraisal shall be at the Company’s expense and otherwise acceptable to HILCO. The Company’s failure, however, to promptly give HILCO such statements, or schedules shall
not affect, diminish, modify or otherwise limit HILCO’s security interests in the Collateral. 
  
 6.4. The Company agrees to comply with the requirements of all state and federal laws in order to grant to HILCO valid and perfected first security
interests in the Collateral, subject only to the Permitted Encumbrances. HILCO is hereby authorized by the Company to file (including pursuant to the applicable terms of the UCC) from time to time any financing statements, continuations or
amendments covering the Collateral whether or not the Company’s signature appears thereon. The Company hereby consents to and ratifies any and all execution and/or filing of financing statements on or prior to the Closing Date by HILCO. The
Company agrees to do whatever HILCO may reasonably request, from time to time, by way of: filing notices of liens, financing statements, amendments, renewals and continuations thereof; cooperating with HILCO’s agents and employees; keeping
Collateral records; transferring proceeds of Collateral to HILCO’s possession; and performing such further acts as HILCO may reasonably require in order to effect the purposes of this Financing Agreement. 
  
 6.5. (a) (i) The Company agrees to maintain, until the termination of this
Financing Agreement, insurance on the Real Estate, Equipment and Inventory under such policies of insurance, with such insurance companies, in such reasonable amounts and covering such insurable risks as are at all times reasonably satisfactory to
HILCO. All policies covering the Real Estate, Equipment and Inventory are, subject to the rights of any holders of Permitted Encumbrances holding claims with respect to the Equipment and Inventory that are senior to HILCO, to be made payable to
HILCO, and its successors and assigns, in case of loss, under a standard non-contributory “mortgagee”, “lender” or “secured party” clause and are to contain such other provisions, be in such form, and with such insurers
as HILCO may require to fully protect HILCO’s interest in the Real Estate, Inventory and Equipment and to any payments to be made under such policies. 
  
 (ii) Without limiting the generality of the foregoing, until the termination of this Financing Agreement, the Company shall maintain or cause to be
maintained the following policies of insurance with respect to the Mortgaged Property: 
  
 (A) Casualty (property) insurance against loss or damage by fire, lightning and such other perils as are included in a standard
“special form” policy (formerly known as an “all-risk” endorsement policy), and against loss or damage by all other risks and hazards covered by a standard extended coverage insurance 

  

 - 27 - 

 
policy, including, without limitation, riot and civil commotion, terrorist actions, vandalism, malicious mischief, burglary and theft, in an amount equal to
the greater of (1) the then full replacement cost of the improvements, without deduction for physical depreciation and (2) such amount that the insurer would not deem the Company a co-insurer under said policies. The policies of insurance required
under this Section shall contain a “Replacement Cost” endorsement with a waiver of depreciation and an “Agreed Amount” or “No Coinsurance” endorsement and shall have a deductible no greater than $10,000.00. 

 
 (B) Commercial General Liability insurance and coverages
for broad form property damage, contractual damages and personal injuries (including death resulting therefrom) and containing minimum limits per occurrence of $1,000,000 and $2,000,000 in the aggregate for any policy year and having no deductible.

  
 (C) Insurance against loss or damage from
(1) leakage of sprinkler systems and (2) explosion of steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed on the improvements (without exclusion
for explosions). 
  
 (D) Flood insurance if any
part of the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards as may be agreed to by HILCO in writing. 
  
 (E) If the Mortgaged Property is or ever becomes
non-conforming with respect to zoning, ordinance or law coverage to compensate for loss of value or property resulting from operation of law and the cost of demolition and the increased cost of construction in such amounts as may be requested by
HILCO. 
  
 (F) Insurance covering the major
components of the central heating, air conditioning and ventilating systems, boilers, other pressure vessels, high pressure piping and machinery, elevators and escalators, if any, and other similar equipment installed in the improvements, in an
amount equal to one hundred percent (100%) of the full replacement cost of the improvements, which policies shall insure against physical damage to and loss of occupancy and use of the Improvements arising out of an accident or breakdown covered
thereunder; and 
  
 (G) During the period of any
construction on the Mortgaged Property or renovation or alteration of the Improvements, a so-called “Builder’s All-Risk Completed Value” or “Course of Construction” insurance policy in non-reporting form for any improvements
under construction, renovation or alteration in an amount approved by HILCO and worker’s compensation insurance covering all persons engaged in such construction, renovation or alteration. 
  
 All original policies or true copies thereof are to be delivered to HILCO,
premium prepaid, with the aforementioned clauses and provisions in HILCO’s favor, and shall provide for not less than thirty (30) days prior written notice to HILCO of the exercise of any right of cancellation. 
  

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 (iii) At the Company’s request, or if the Company fails to maintain such insurance, HILCO may
arrange for such insurance, but at the Company’s expense and without any responsibility on HILCO’s part for: obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims. Upon
the occurrence of an Event of Default which is not waived in writing by HILCO, HILCO shall, subject to the rights of any holders of Permitted Encumbrances holding claims senior to HILCO, have the sole right, in the name of HILCO or the Company, to
file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may
be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies. 
  
 (b) (i) In the event of any loss or damage by fire or other casualty, insurance proceeds relating to Inventory and Equipment (other than fixtures secured
by the Mortgages, as to which the provisions of this Agreement relating to the Mortgaged Properties shall apply) shall first reduce the CIT Loan (provided that in the case of insurance proceeds relating to Equipment, such proceeds must first reduce
the CIT Loan consisting of term loans), and then the Loan, subject to the provisions of the Intercreditor Agreement. 
  
 (ii) In the event any part of the Mortgaged Property is damaged by fire or other casualty and the Insurance Proceeds for such damage or other casualty
are (x) less than or equal to $250,000, then as long as no Default exists (other than a Default which was caused by the damage due to such fire or other casualty) the Company shall be entitled to apply such proceeds to restore such damage, subject
to HILCO’s approval and required for the disbursement of such proceeds and subject to any requirement for a deficiency deposit as set forth in Section 6.5(b)(iv), or (y) more than $250,000, HILCO may, in its discretion, apply such proceeds to
repay all or a portion of the Obligations in such manner and such order as HILCO may elect. 
  
 (iii) As long as no Event of Default exists, the Company has sufficient business interruption insurance to replace the lost profits of any of the Company’s facilities, and the Insurance Proceeds are in excess of
$100,000, the Company may elect (by delivering written notice to HILCO) to replace, repair or restore Real Estate other than any Mortgaged Property (as to which Section 6.5(b)(ii) shall govern) to substantially the equivalent condition prior to such
fire or other casualty as set forth herein. If the Company does not, or cannot, elect to use the Insurance Proceeds as set forth above, HILCO may, subject to the rights of CIT under the Intercreditor Agreement, apply the Insurance Proceeds to the
payment of the Obligations in such manner and in such order as HILCO may elect. 
  
 (iv) Prior to the commencement of any material restoration, repair or replacement of Real Estate (including repair of any damage caused by fire or casualty), the Company shall provide HILCO with a restoration plan and
a total budget certified by an independent third party experienced in construction costing, such third party to be acceptable to HILCO. If there are insufficient Insurance Proceeds to cover the cost of repair, replacement of restoration as so
determined, the Company shall be responsible for the amount of any such insufficiency, and prior to the commencement of restoration shall deposit with HILCO the amount of such insufficiency, as determined by HILCO. Completion of repair, replacement
or 

  

 - 29 - 

 
restoration shall be evidenced by a final, unqualified certification of the design architect employed, if any; final waivers of all mechanics’ liens; an
unconditional Certificate of Occupancy, if applicable; such other certification as may be required by law; or if none of the above is applicable, a written good faith determination of completion by the Company (herein collectively the
“Completion”). Upon Completion, HILCO will release any remaining deposit established hereunder. HILCO shall have the right to disburse the Insurance Proceeds and any deficiency deposit through the relevant title insurance company
against monthly lien waivers, title date downs and other standard disbursement procedures for construction loans. 
  
 (c) In the event the Company fails to provide HILCO with timely evidence, acceptable to HILCO, of its maintenance of insurance coverage required pursuant
to Section 6.5(a) above, HILCO may purchase, at the Company’s expense, insurance to protect HILCO’s interests in the Collateral. The insurance acquired by HILCO may, but need not, protect the Company’s interest in the Collateral, and
therefore such insurance may not pay claims which the Company may have with respect to the Collateral or pay any claim which may be made against the Company in connection with the Collateral. In the event HILCO purchases, obtains or acquires
insurance covering all or any portion of the Collateral, the Company shall be responsible for all of the applicable costs of such insurance, including premiums, interest (at the Interest Rate) fees and any other charges with respect thereto, until
the effective date of the cancellation or the expiration of such insurance. HILCO may charge all of such premiums, fees, costs, interest and other charges to the Company’s Loan Account. The Company hereby acknowledges that the costs of the
premiums of any insurance acquired by HILCO may exceed the costs of insurance which the Company may be able to purchase on its own. In the event that HILCO purchases such insurance, HILCO will notify the Company of said purchase within thirty (30)
days of the date of such purchase. If, within thirty (30) days of the date of such notice, the Company provides HILCO with proof that the Company had the insurance coverage required pursuant to Section 6.5(a) above (in form and substance
satisfactory to HILCO) as of the date on which HILCO purchased insurance and the Company continued at all times to have such insurance, then HILCO agrees to cancel the insurance purchased by HILCO and credit the Company’s Loan Account with the
amount of all costs, interest and other charges associated with any insurance purchased by HILCO, including with any amounts previously charged to the Loan Account. 
  
 6.6. The Company agrees to pay, when due, all Taxes, including sales taxes, assessments, claims and other charges lawfully
levied or assessed upon the Company or the Collateral unless such Taxes are being diligently contested in good faith by the Company by appropriate proceedings and adequate reserves are established in accordance with GAAP. Notwithstanding the
foregoing, if any lien shall be filed or claimed thereunder (x) for Taxes due the United States of America or (y) which in HILCO’s opinion might create a valid obligation having priority over the rights granted to HILCO herein (exclusive of
Real Estate), such lien shall not be deemed to be a Permitted Encumbrance hereunder and the Company shall immediately pay such tax and remove the lien of record. If the Company fails to do so promptly, then at HILCO’s election, HILCO may (i)
create a reserve in such amount as it may deem appropriate in its business judgement, or (ii) upon the occurrence of a Default or Event of Default, imminent risk of seizure, filing of any priority lien, forfeiture, or sale of the Collateral, pay
Taxes on the Company’s behalf, and the amount thereof shall be an Obligation secured hereby and due on demand. 
  

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 6.7. The Company: (a) agrees to comply with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official, which the failure to comply with would have a material and adverse impact on the Collateral, or any material part thereof, or on the business or operations of the Company, provided that the Company may
contest any acts, rules, regulations, orders and directions of such bodies or officials in any reasonable manner which will not, in HILCO’s reasonable opinion, materially and adversely effect HILCO’s rights or priority in the Collateral;
(b) agrees to comply with all environmental statutes, acts, rules, regulations or orders as presently existing or as adopted or amended in the future, applicable to the Collateral, the ownership and/or use of its real property and operation of its
business, which the failure to comply with would have a material and adverse impact on the Collateral, or any material part thereof, or on the operation of the business of the Company; and (c) shall not be deemed to have breached any provision of
this Section 6.7 if (i) the failure to comply with the requirements of this Section 6.7 resulted from good faith error or innocent omission, (ii) the Company promptly commences and diligently pursues a cure of such breach, and (iii) such failure is
cured within (30) days following the Company’s receipt of notice of such failure, or if such cannot in good faith be cured within thirty (30) days, then such breach is cured within a reasonable time frame based upon the extent and nature of the
breach and the necessary remediation, and in conformity with any applicable consent order, consensual agreement and applicable law. 
  
 6.8. Until termination of this Financing Agreement and payment and satisfaction of all Obligations due hereunder, the Company agrees that, unless HILCO
shall have otherwise consented in writing, the Company will furnish to HILCO: (a) within one hundred five (105) days after the end of each Fiscal Year of the Company, an audited Consolidated Balance Sheet, with an unaudited Consolidating Balance
Sheet attached thereto, as at the close of such year, and statements of profit and loss, cash flow and reconciliation of surplus of the Company and its consolidated subsidiaries for such year, audited (with respect to consolidated financial
statements only) by independent public accountants selected by the Company and satisfactory to HILCO; (b) within sixty (60) days after the end of each Fiscal Quarter (i) a Consolidated Balance Sheet and Consolidating Balance Sheet as at the end of
such period and statements of profit and loss, cash flow and reconciliation of surplus of the Company and its consolidated subsidiaries, certified by an authorized financial or accounting officer of the Company, and (ii) a detailed report setting
forth the amount of all Lease Support Guarantees, the amount of all Lease Support Guarantees entered into during such Fiscal Quarter and the amount of all payments made under Lease Support Guarantees during such Fiscal Quarter; (c) within thirty
(30) days after the end of each month a Consolidated Balance Sheet as at the end of such period and statements of profit and loss and statements of cash flow of the Company and all subsidiaries for such period, certified by an authorized financial
or accounting officer of the Company; (d) weekly, a copy of the Borrowing Base certificate, in the same form and at the same time as delivered to CIT under the CIT Loan Agreement, provided that any representation and warranty made in favor of CIT in
such certificate shall also be made in favor of HILCO, and (e) from time to time, such further information regarding the business affairs and financial condition of the Company and its consolidated subsidiaries as HILCO may reasonably request,
including, without limitation (i) the accountant’s management practice letter and (ii) annual cash flow projections in form satisfactory to HILCO. Each financial statement which the Company is required to submit hereunder must be accompanied by
an officer’s certificate, signed by the President, Vice President, Controller, or Treasurer, pursuant to which any one such officer must 

  

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certify that: (x) the financial statement(s) fairly and accurately represent(s) the Company’s financial condition at the end of the particular
accounting period, as well as the Company’s operating results during such accounting period, subject to year-end audit adjustments; and (y) during the particular accounting period: (A) there has been no Default or Event of Default under this
Financing Agreement, provided, however, that if any such officer has knowledge that any such Default or Event of Default, has occurred during such period, the existence of and a detailed description of same shall be set forth in such
officer’s certificate; (B) the Company has not received any notice of cancellation with respect to its property insurance policies; (C) the Company has not received any notice that could result in a material adverse effect on the value of the
Collateral taken as a whole; and (D) the exhibits attached to such financial statement(s) constitute detailed calculations showing compliance with all financial covenants contained in this Financing Agreement. 
  
 6.9. The Company agrees that upon the occurrence of a Default or Event of
Default, upon the request of HILCO, the Company shall pay to HILCO in immediately available funds an expense deposit in the amount of $25,000 (an “Expense Deposit”), which Expense Deposit shall be held by HILCO and may be applied by
HILCO to the fees and expenses incurred by HILCO in connection with the exercise of any of its rights under this Financing Agreement, including, without limitation, monitoring the Company’s compliance with the terms of this Financing Agreement
and the other Loan Documents and any appraisals, audits, collateral reviews and field examinations conducted by HILCO during the term of this Financing Agreement. In no event shall prior recourse to the Expense Deposit be a prerequisite to
HILCO’s right to demand reimbursement for any such fees and expenses. The Expense Deposit will not be segregated and may be commingled with other funds of HILCO and the Company will not be entitled to receive any interest on the Expense
Deposit. The unused portion of the Expense Deposit shall be returned to the Company upon the earlier of the Maturity Date or the payment in full in cash of all of the Obligations. 
  
 6.10. Until termination of the Financing Agreement and payment and satisfaction of all Obligations due hereunder, the
Company agrees that, without the prior written consent of HILCO, except as otherwise herein provided, the Company will not: 
  
 (a) Mortgage, assign, pledge, transfer or otherwise permit any lien, charge, security interest, encumbrance or judgment, (whether as a result of a
purchase money or title retention transaction, or other security interest, or otherwise) to exist on any of the Company’s Collateral or any other assets, whether now owned or hereafter acquired, except for the Permitted Encumbrances;

  
 (b) Incur or create any Indebtedness other than the Permitted
Indebtedness; 
  
 (c) Wind-up, liquidate or dissolve, or merge,
consolidate or amalgamate with any Person, or convey, sell, lease or sublease, transfer or otherwise dispose of, whether in one transaction or a series of related transactions, all or any part of its business, property or assets, whether now owned
or hereafter acquired (or agree to do any of the foregoing), or purchase or otherwise acquire, whether in one transaction or a series of related transactions, all or substantially all of the assets of any Person (or any division thereof) (or agree

  

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to do any of the foregoing), or permit any of its subsidiaries to do any of the foregoing; provided, however, that; 
  
 (i) any wholly-owned subsidiary of the Company may be merged into the
Company or another wholly-owned subsidiary of the Company, or may consolidate with another wholly-owned subsidiary of the Company, so long as (A) no other provision of this Agreement would be violated thereby, (B) the Company gives HILCO at least 60
days’ prior written notice of such merger or consolidation, (C) no Default or Event of Default shall have occurred and be continuing either before or after giving effect to such transaction, (D) HILCO’s rights in any Collateral, including,
without limitation, the existence, perfection and priority of any Lien thereon, are not adversely affected by such merger or consolidation and (E) the surviving subsidiary, if any, is joined as a party to a Guaranty and the stock of which subsidiary
is the subject of a Pledge Agreement, in each case, which is in full force and effect on the date of and immediately after giving effect to such merger or consolidation; and 
  
 (ii) the Company and its subsidiaries may (A) sell Inventory in the ordinary course of business, (B) dispose of obsolete or
worn-out equipment in the ordinary course of business, and (C) sell or otherwise dispose of other property or assets (other than the Mortgaged Properties) for cash in an aggregate amount not less than the fair market value of such property or
assets, provided that the net cash proceeds of such dispositions in the case of clauses (B) and (C) above, do not exceed $200,000 in the aggregate in any Fiscal Year. 
  
 (d) Modify its corporate name, principal place of business, structure, or existence, re-incorporate or re-organize, or
enter into or engage in any operation or activity materially different from that presently being conducted by the Company, or purchase or acquire all or substantially all of the capital stock or assets of any corporation or entity, except that the
Company may change its corporate name or address, provided that (i) the Company shall give HILCO 30 days prior written notice thereof and (ii) the Company shall execute and deliver, prior to or simultaneously with any such action, any and all
documents and agreements requested by HILCO to confirm the continuation and preservation of all security interests and liens granted to HILCO hereunder; 
  
 (e) (i) Amend, modify or otherwise change (or permit the amendment, modification or other change in any manner of) any of the provisions of any of its or
its subsidiaries’ Indebtedness or of any instrument or agreement (including, without limitation, any purchase agreement, indenture, loan agreement or security agreement) relating to any such Indebtedness if such amendment, modification or
change would shorten the final maturity or average life to maturity of, or require any payment to be made earlier than the date originally scheduled on, such Indebtedness, would increase the interest rate applicable to such Indebtedness, would
change the subordination provision, if any, of such Indebtedness, or would otherwise be adverse to HILCO or the issuer of such Indebtedness in any respect, or, in the case of the Term Loans (as defined in the CIT Loan Agreement), amend the due dates
or decrease the amounts of any principal payments in respect of the Term Loans (as defined in the CIT Loan Agreement), or (ii) except for the Obligations and the CIT Debt, make any voluntary or optional payment, prepayment, redemption, defeasance,
sinking fund payment or other acquisition for value of any of its or its subsidiaries’ Indebtedness (including, without limitation, by way of depositing money or securities with the trustee therefor before the date required for the purpose

  

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of paying any portion of such Indebtedness when due), or refund, refinance, replace or exchange any other Indebtedness for any such Indebtedness (except to
the extent such Indebtedness is otherwise expressly permitted by the definition of “Permitted Indebtedness”) (provided that prepayments of the Term Loans (as defined in the CIT Loan Agreement) shall not be permitted to be made unless both
immediately before and after such prepayment Availability is not less than $2,500,000), or make any payment, prepayment, redemption, defeasance, sinking fund payment or repurchase of any outstanding Indebtedness as a result of any asset sale, change
of control, issuance and sale of debt or equity securities or similar event, or give any notice with respect to any of the foregoing; 
  
 (f) Assume, guarantee, endorse, or otherwise become liable upon the obligations of any person, firm, entity or corporation, except (i) for Lease Support
Guarantees to the extent permitted in clause (h) of the definition of Permitted Indebtedness and (ii) by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; 
  
 (g) Declare or pay any dividend or distributions of any kind on, or
purchase, acquire, redeem or retire, any of the capital stock or equity interest, of any class whatsoever, whether now or hereafter outstanding; 
  
 (h) Make any advance or loan to, or any investment in, any firm, entity, person or corporation or purchase or acquire all or substantially all of the
stock or assets of any entity, person or corporation; 
  
 (i) Pay
any management, consulting or other similar fees to any person, corporation or other entity affiliated with the Company (other than payments to any Affiliate described on Schedule 5 hereto); 
  
 (j) engage in any business, enter into any transaction, use any securities
or take any other action or permit any of its subsidiaries to do any of the foregoing, that would cause it or any of its subsidiaries to become subject to the registration requirements of the Investment Company Act of 1940, as amended, by virtue of
being an “investment company” or a company “controlled” by an “investment company” not entitled to an exemption within the meaning of such Act; 
  
 (k) permit the Inactive Subsidiary to (i) have any material operations or conduct any material business, (ii) incur
liabilities in an aggregate amount in excess of $50,000, or (iii) own assets with an aggregate fair market value in excess of $50,000; 
  
 (l) engage in any sale-lease-back transactions; or 
  
 (m) engage, or permit any ERISA Affiliate to engage, in any transaction described in Section 4069 of ERISA; (ii) engage, or permit any ERISA Affiliate to
engage, in any prohibited transaction described in Section 406 of ERISA or 4975 of the Internal Revenue Code for which a statutory or class exemption is not available or a private exemption has not previously been obtained from the U.S. Department
of Labor; (iii) adopt or permit any ERISA Affiliate to adopt any employee welfare benefit plan within the meaning of Section 3(1) of ERISA which provides benefits to employees after termination of employment other than as 
  

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required by Section 601 of ERISA or applicable law; (iv) fail to make any contribution or payment to any Multiemployer Plan which it or any ERISA Affiliate
may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; or (v) fail, or permit any ERISA Affiliate to fail, to pay any required installment or any other payment required under Section 412 of
the Internal Revenue Code on or before the due date for such installment or other payment. 
  
 6.11. Until termination of the Financing Agreement and payment and satisfaction in full of all Obligations hereunder, the Company shall: 
  
 (a) maintain in full force and effect the CIT Loan Documents, and comply with all of the terms and provisions thereof;

  
 (b) have for each Fiscal Quarter set forth below the Fixed
Charge Coverage Ratio corresponding to such Fiscal Quarter; provided that (v) for the Fiscal Quarter ending September 27, 2003, the Fixed Charge Coverage Ratio shall be calculated for the Fiscal Quarter ending September 27, 2003, (w) for the
Fiscal Quarter ending December 31, 2003, the Fixed Charge Coverage Ratio shall be calculated for the two consecutive Fiscal Quarters ending December 31, 2003, (x) for the Fiscal Quarter ending March 27, 2004, the Fixed Charge Coverage Ratio shall be
calculated for the three consecutive Fiscal Quarters ending March 27, 2004, (y) for the Fiscal Quarter ending June 26, 2004, the Fixed Charge Coverage Ratio shall be calculated for the four consecutive Fiscal Quarters ending June 26, 2004, and (z)
for each Fiscal Quarter thereafter, the Fixed Charge Coverage Ratio shall be calculated for the four consecutive Fiscal Quarters ending at the end of such Fiscal Quarter. 
  

	 Period

	  	 Ratio

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

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

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

  
 (c) not contract for,
purchase, make expenditures for, lease pursuant to a Capital Lease or otherwise incur obligations with respect to Capital Expenditures (whether subject to a security interest or otherwise) in excess of (i) $2,500,000 during the Fiscal Year ended
December 31, 2003, (ii) $3,000,000 during the Fiscal Year ended December 31, 2004, and (iii) $3,500,000 during each Fiscal Year thereafter (computed on a non-cumulative basis). 
  

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 6.12. The Company agrees to (a) advise HILCO in writing of all expenditures (actual or anticipated) in
excess of $150,000.00 from the budgeted amount therefor in any Fiscal Year for (i) environmental clean-up, (ii) environmental compliance or (iii) environmental testing and the impact of said expenses on the Company’s Working Capital, (b) keep
any property either owned or operated by it or any of its subsidiaries free of any Environmental Liens; (ii) comply, and cause each of its subsidiaries to comply, in all material respects with Environmental Laws and provide to HILCO any
documentation of such compliance which HILCO may reasonably request; (c) provide HILCO written notice within five (5) days of any Release of a Hazardous Material in excess of any reportable quantity from or onto property at any time owned or
operated by it or any of its subsidiaries and take any Remedial Actions required to abate said Release; (d) provide HILCO with written notice within ten (10) days of the receipt of any of the following: (i) notice that an Environmental Lien has been
filed against any property of the Company or any of its subsidiaries; (ii) commencement of any Environmental Action or notice that an Environmental Action will be filed against the Company or any of its subsidiaries; and (iii) notice of a violation,
citation or other administrative order which could have a Material Adverse Effect and (e) defend, indemnify and hold harmless HILCO and its respective employees, agents, officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses (including, without limitation, attorney and consultant fees, investigation and laboratory fees, court costs and litigation expenses) arising out of (i) the generation, presence, disposal, Release
or threatened Release of any Hazardous Materials on, under, in, originating or emanating from any property at any time owned or operated by the Company or any of its subsidiaries (or its predecessors in interest or title), (ii) any personal injury
(including wrongful death) or property damage (real or personal) arising out of or related to the presence or Release of such Hazardous Materials, (iii) any request for information, investigation, lawsuit brought or threatened, settlement reached or
order by a Governmental Authority relating to the presence or Release of such Hazardous Materials, (iv) any violation of any Environmental Law and/or (v) any Environmental Action filed against HILCO. 
  
 6.13. In addition to the Company’s other Obligations under this
Agreement, the Company agrees to defend, protect, indemnify and hold harmless HILCO, and all of its respective officers, directors, employees, attorneys, consultants and agents (each an “Indemnified Party”) from and against any and
all losses, damages, liabilities, obligations, penalties, fees, reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees, costs and expenses) incurred by such Indemnified Party, whether prior to or from and after
the Closing Date, whether direct, indirect or consequential, as a result of or arising from or relating to or in connection with any of the following: (a) the negotiation, preparation, execution or performance or enforcement of this Agreement, any
other Loan Document or of any other document executed in connection with the transactions contemplated by this Agreement, (b) any matter relating to the financing transactions contemplated by this Agreement or the other Loan Documents or by any
document executed in connection with the transactions contemplated by this Agreement or the other Loan Documents, or (c) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnified Party is a
party thereto (collectively, the ”Indemnified Matters”); provided, however, that the Company shall not have any obligation to any Indemnified Party under this Section for any Indemnified Matter caused by the gross
negligence or willful misconduct of such Indemnified Party, as determined by a final judgment of a court of competent jurisdiction. The indemnification for all of the foregoing losses, 

  

 - 36 - 

 
damages, fees, costs and expenses of the Indemnified Parties are chargeable against the Loan Account. To the extent that the undertaking to indemnify, pay
and hold harmless set forth in this Section may be unenforceable because it is violative of any law or public policy, the Company shall contribute the maximum portion which it is permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnified Parties. The indemnities set forth in this Section and in Section 6.12 shall survive the repayment of the Obligations and discharge of any Liens granted under the Loan Documents.

  
 6.14. Without the prior written consent of HILCO, the Company
agrees that it will not enter into any transaction, including, without limitation, any Transfer of property to or exchange of property with any of its Affiliates (other than transactions between the Company and a Guarantor, provided that the
aggregate amount of all loans, advances or other Transfers of assets by the Company to such Guarantor shall not exceed $500,000 in the aggregate), provided that, except as otherwise set forth in this Financing Agreement (including, without
limitation in Schedule 5 attached hereto), the Company may enter into sale and service transactions in the ordinary course of its business and pursuant to the reasonable requirements of the Company, and upon standard terms and conditions and fair
and reasonable terms, no less favorable to the Company than the Company could obtain in a comparable arms length transaction with an unrelated third party, provided further that no Default or Event of Default exists or will occur hereunder prior to
and after giving effect to any such transaction. 
  
 6.15. The
Company agrees to maintain and preserve, and cause each of its subsidiaries to maintain and preserve, all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and
tear excepted, and comply, and cause each of its subsidiaries to comply, at all times with the material provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or
thereunder. 
  
 6.16. The Company agrees to obtain, maintain and
preserve, and cause each of its subsidiaries to obtain, maintain and preserve, and take all necessary action to timely renew, all material permits, licenses, authorizations, approvals, entitlements and accreditations which are necessary or useful in
the proper conduct of its business. 
  
 6.17. The Company agrees
to take such action and execute, acknowledge and deliver, and cause each of its subsidiaries to take such action and execute, acknowledge and deliver, at its sole cost and expense, such agreements, instruments or other documents as HILCO may require
from time to time in order (a) to carry out more effectively the purposes of this Agreement and the other Loan Documents, (b) to subject to valid and perfected Liens any of the Collateral or any other property of the Company, (c) to establish and
maintain the validity and effectiveness of any of the Loan Documents and, subject to the terms of the Intercreditor Agreement, the validity, perfection and priority of the Liens intended to be created thereby, and (d) to better assure, convey,
grant, assign, transfer and confirm unto HILCO the rights now or hereafter intended to be granted to it under this Agreement or any other Loan Document. In furtherance of the foregoing, to the maximum extent permitted by applicable law, the Company
(i) authorizes HILCO to execute any such agreements, instruments or other documents in the Company’s name and to file such agreements, instruments or other documents in any appropriate filing office, (ii) authorizes HILCO to file any financing
statement required hereunder or under 

  

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any other Loan Document, and any continuation statement or amendment with respect thereto, in any appropriate filing office without the signature of the
Company, and (iii) ratifies the filing of any financing statement, and any continuation statement or amendment with respect thereto, filed without the signature of the Company prior to the date hereof. 
  
 6.18. The Company agrees to cause all Indebtedness (other than Indebtedness
and obligations described on Schedule 5 attached hereto) and other obligations now or hereafter owed by it to any of its affiliates, to be subordinated in right of payment and security to the Indebtedness and other Obligations owing to HILCO in
accordance with a subordination agreement in form and substance satisfactory to HILCO. 
  
 6.19. In order to induce HILCO to enter into this Agreement and to make the Loan, the Company represents and warrants to HILCO that: 
  
 (a) Organization and Qualification. The Company (i) is duly organized validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, (ii) has the corporate or limited liability company (as the case may be) power to own its property and to carry on its business as now conducted and (iii) is duly qualified to do
business and is in good standing, in each case in each jurisdiction in which the failure to be so qualified or in good standing would reasonably be expected to have a Material Adverse Effect. 
  
 (b) Authorization and Validity. The Company has the corporate or
limited liability company (as the case may be) power and authority to execute, deliver and perform its obligations hereunder and under the other Loan Documents to which the Company is a party and all such action has been duly authorized by all
necessary corporate proceedings on its part. The Loan Documents to which it is a party have been duly and validly executed and delivered by the Company and constitute valid and legally binding agreements of the Company enforceable in accordance with
the respective terms thereof, except, in each case, as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to or affecting the enforcement of creditors’
rights generally and general principles of equity. 
  
 (c)
Consents. No authorization, consent, approval, license or exemption (other than such exemptions that exist under applicable law, that are permitted, or that have been obtained) of any person or filing or registration with any court or
governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is necessary for the valid, delivery or performance by the Company of any Loan Document to which it is a party or for the grant of a security
interest in or mortgage on the collateral covered by the Loan Documents, except such matters relating to performance as would ordinarily be done in the ordinary course of business after the date hereof. 
  
 (d) Conflicting or Adverse Agreements or Ratifications. Neither the
delivery of the Loan Documents nor compliance with the terms and provisions hereof or thereof will be contrary to the provisions of, or constitute a default under (i) the charter or bylaws or operating agreement (as the case may be) of the Company
or (ii) any applicable law or any applicable regulation, order, writ, injunction or decree of any court or governmental 

  

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instrumentality or (iii) any material agreement to which the Company is a party or by which it is bound or to which it is subject. 
  
 (e) Title to Assets; Licenses and Permits. The Company has good title
to all personal property and good and indefeasible title to or a subsisting leasehold interest in, all realty as reflected as of the date hereof on its books and records as being owned or leased by it after giving effect to the transaction
contemplated herein, subject to no liens except Permitted Encumbrances. All of such assets are being maintained by the appropriate person in good working condition in accordance with industry standards. 
  
 (f) Litigation. Except as set forth in Schedule 2, no proceedings
before any court or Governmental Authority or department are pending against the Company and, to the knowledge of the Company, none have been threatened which, if adversely determined, could reasonably be expected to have a Material Adverse Effect.

  
 (g) No Defaults. The Company is not in default (i)
under any material provisions of any instrument evidencing any Indebtedness or of any agreement relating thereto in such manner as to cause a Material Adverse Effect or (ii) in any respect under or in violation of any order, writ, injunction or
decree of any court or governmental instrumentality, in such manner as to cause a Material Adverse Effect or (iii) under any provision of any material contract to which the Company is a party, which default would reasonably be expected to have a
Material Adverse Effect. The Company will give HILCO prompt written notice of any event or circumstance that may constitute such a default and, in any event, will provide it upon receipt with copies of all material notices from landlords or other
property owners with respect to any business location or operation of the Company. 
  
 (h) Investment Company Act. The Company is not an “investment company,” as such term is defined in, or subject to registration under, the Investment Company Act of 1940, as amended. 
  
 (i) ERISA. The Company does not maintain or contribute to any Benefit
Plan other than those listed on Schedule 3. Each Benefit Plan has been and is being maintained and funded in accordance with its terms and in compliance in all material respects with all provisions of ERISA and the Internal Revenue Code applicable
thereto. The Company and each ERISA Affiliate have fulfilled all obligations related to the minimum funding standards of ERISA and the Internal Revenue Code for each Benefit Plan and no “accumulated funding deficiency,” as such term is
defined in Section 302 of ERISA and Section 412 of the Internal Revenue Code, has occurred or is reasonably likely to occur, nor do the conditions for imposition of a lien under Section 302(f) of ERISA exist or are reasonably likely to exist, with
respect to any Benefit Plan, and neither the Company nor any ERISA Affiliate has incurred any liability (other than routine liability for premiums) under Title IV of ERISA with respect to any Benefit Plan. No event or events have occurred with
respect to any Benefit Plan in connection with which the Company, any ERISA Affiliate, or, to the knowledge of the Company, any fiduciary of a Benefit Plan, directly or indirectly, would be subject to any material liability (other than routine
liability for premiums, contributions (if required) and, with respect to a Benefit Plan, routine liabilities for benefits), individually or in the aggregate, under ERISA or the Internal Revenue Code. 
  

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 (j) Environmental Matters. To the best of the Company’s knowledge, the Company (a) possesses
all environmental, health and safety licenses, permits, authorizations, registrations, approvals and similar rights necessary under Environmental Laws for the Company to conduct its operations as now being conducted, except where failure to have
such licenses, permits, authorizations, registrations, approvals, and similar rights would not reasonably be expected to have a Material Adverse Effect, and (b) each of such licenses, permits, authorizations, registrations, approvals and similar
rights is valid and subsisting, in full force and effect and enforceable by the Company, and the Company is in compliance with all terms, conditions or other provisions of such permits, authorizations, regulations, approvals and similar rights
except for such failure or noncompliance that, individually or in the aggregate for the Company, would not reasonably be expected to have a Material Adverse Effect. The Company has not received any written notices of any violation or noncompliance
with, or remedial obligation under, any Environmental Laws (which violation, non-compliance, or remedial obligation has not been cured or would not reasonably be expected to have a Material Adverse Effect) and there are no writs, injunctions,
decrees, orders or judgments outstanding under the Environmental Laws, or lawsuits, claims, proceedings, or, to the knowledge of the Company, investigations or inquiries pending or threatened under Environmental Laws, relating to the ownership, use,
condition, maintenance or operation of, or conduct of business related to, any property owned, leased or operated by the Company or other assets of the Company other than those violations, instances of noncompliance, obligations, writs, injunctions,
decrees, orders, judgments, lawsuits, claims, proceedings, investigations or inquiries that individually or in the aggregate for the Company, would not reasonably be expected to have a Material Adverse Effect. There are no obligations, undertakings
or liabilities arising out of or relating to Environmental Laws which the Company has agreed to, assumed or retained, or to the best of the Company’s knowledge by which the Company are adversely affected, by contract or otherwise, except such
obligations, undertakings or liabilities as would not reasonably be expected to have a Material Adverse Effect. The Company has not received a written notice or claim to the effect that any of them are or may be liable to any other person as the
result of a release or threatened release of a Hazardous Material except such notice or claim that would not reasonably be expected to have a Material Adverse Effect. The Company has complied with all Environmental Laws and the requirements of any
permits, licenses or other authorizations issued under any Environmental Laws, except any noncompliance that would not reasonably be expected to have a Material Adverse Effect. 
  
 (k) Purpose of Loans. The proceeds of the Loan will be used by the Company to refinance existing Indebtedness and
for working capital purposes. None of the proceeds of the Loan will be used directly or indirectly for the purpose of purchasing or carrying any “margin stock” within the meaning of Regulation U (herein called “margin stock”) or
for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry margin stock, or for any other purpose which might constitute this transaction as a “purpose credit” within the meaning of
Regulation U. Neither the Company nor any agent acting on its behalf has taken or will take any action which might cause this Agreement or any other Loan Document to violate Regulation U, Regulation X or any other regulation of the Board of
Governors or to violate the Securities Exchange Act of 1934. 
  
 (l) Insurance. The Company maintains insurance of such types as is usually carried by corporations of established reputation engaged in the same or similar 

  

 - 40 - 

 
businesses and similarly situated with financially sound, responsible and reputable insurance companies or associations (or, as to workers’ compensation
or similar insurance, with an insurance fund or by self-insurance authorized by the jurisdiction in which its operations are carried on) and in such amounts (and with co-insurance and deductibles) as such insurance is usually carried by corporations
of established reputation and engaged in the same or similar businesses and similarly situated, but in any event, with respect to improvements to real property and tangible personal property (assuming the subject improvements are in fact replaced or
restored), in amounts acceptable to HILCO. The Company does not maintain any formalized self-insurance program with respect to its assets or operations or material risks with respect thereto. 
  
 (m) Indebtedness and Contingent Liabilities. Except as disclosed in
writing to HILCO, the Company does not have any outstanding Indebtedness (excluding the loans and advances hereunder) or material contractually assumed contingent liabilities other than Permitted Indebtedness. 
  
 (n) Security Interests in Favor of HILCO. This Agreement and the
other Loan Documents create valid security interest and liens in all of the Collateral described therein in favor of HILCO securing the Obligations and constitute (subject to (i) the filing of financing statements on the date hereof and thereafter
from time to time on HILCO’s request therefor and (ii) subject to the terms of the Intercreditor Agreement, delivery of any collateral after the date hereof as provided herein or any other Loan Document) and, except for Permitted Encumbrances,
perfected first priority liens and security interests in substantially all of such collateral described therein subject to no liens other than Permitted Encumbrances. 
  
 (o) USA Patriot Act. Neither the making of the Loan hereunder (or the extension of any other credit contemplated
hereunder) nor the Company’s use of the proceeds thereof will violate Sections 326 and 371 through 377 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No.
107-56 (also known as the USA Patriot Act) or any enabling legislation or rules, regulations or executive orders relating thereto. 
  
 (p) Subsidiaries. 
  
 (i) The Inactive Subsidiary does not (A) have any material operations or conduct any material business, or (B) have assets of $50,000 or greater;

  
 (ii) Tectrix Fitness Equipment, Inc. has no assets other than
intangible assets associated with its acquisition by the Company; and 
  
 (iii) Cybex Capital Corporation has no assets other than a depreciating asset of $350,000, comprised of leases which are in run-down. 
  
 (q) Ex-IM Bank. The Company hereby (i) acknowledges that certain letter agreement, dated as of July 16, 2003 (the
“Ex-IM Letter Agreement”), by and between CIT and Ex-Im Bank with respect to the subordination by Ex-Im Bank of Ex-Im Bank’s right to seek or receive any proceeds from a liquidation or other exercise of remedies with respect to
the Secondary Collateral (as such term is defined, together with all related definitions, in the Ex-IM 

  

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Bank Documents) until all obligations owing to HILCO under this Agreement have been paid in full in cash, and (ii) agrees not to take any action inconsistent
with the Ex-IM Letter Agreement. 
  
 Section 7. Fees and
Expenses 
  
 7.1. To induce HILCO to enter into this
Financing Agreement and to extend the Loan to the Company, the Company shall pay to HILCO (a) a “Loan Facility Fee” equal to 0.75% of the outstanding principal balance of the Loan, payable and calculated with respect to the
principal amount which is then outstanding on the date which is the first anniversary of the Closing Date, (b) a “Supplemental Facility Fee” equal to 2.25% of the outstanding principal balance of the Loan, payable and calculated
with respect to the principal amount which is outstanding on the date which is the first Business Day occurring 18 months after the Closing Date, and (c) on the Closing Date, the unpaid portion of the “Commitment Fee” in the amount
of $125,000 in accordance with the terms of the Commitment Letter (it being acknowledged and agreed that, prior to the date of this Agreement, HILCO has earned and received (x) an underwriting fee in the amount of $25,000 and (y) a portion of the
Commitment Fee in the amount of $100,000, in each case in accordance with the terms of the Commitment Letter). Each of the Loan Facility Fee, the Supplemental Facility Fee and the Commitment Fee shall be earned in full, non-refundable and constitute
part of the Obligations. 
  
 7.2. The Company shall pay to HILCO a
“Collateral Management Fee” in an amount equal to $5,000 per month, which fee shall constitute part of the Obligations and be earned in full on the Closing Date and on the first Business Day of each month after the Closing Date
until all principal, interest and other sums due under this Agreement and the other Loan Documents shall be paid in full. The Collateral Management Fee shall be payable on the first Business Day of each month following the Closing Date. 

 
 7.3. The Company shall pay HILCO’s standard charges and fees for
HILCO’s personnel used by HILCO for reviewing the books and records of the Company and for verifying, testing, protecting, safeguarding, preserving or disposing of all or any part of the Collateral (which fees shall be in addition to the Loan
Facility Fee, the Supplemental Facility Fee and the Collateral Management Fee), all of which charges and fees shall be part of the Obligations.. 
  
 7.4. The Company hereby authorizes HILCO to charge the Loan Account with the amount of all payments due hereunder as such payments become due. The Company
confirms that any charges which HILCO may so make to the Loan Account as herein provided will be made as an accommodation to the Company and solely at HILCO’s discretion. 
  
 7.5. In the event that HILCO or any participant hereunder (or any financial institution which may from time to time become a
participant or lender hereunder) shall have determined in the exercise of its reasonable business judgement that subsequent to the Closing Date any change in applicable law, rule, regulation or guideline regarding capital adequacy, or any change in
the interpretation or administration thereof, or compliance by HILCO or such participant or lender with any new request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return on HILCO’s or such participant’s or lender’s 

  

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capital as a consequence of its obligations with respect to the Loan to a level below that which HILCO or such lender or participant could have achieved but
for such adoption, change or compliance (taking into consideration HILCO or such lender or participant’s policies with respect to capital adequacy) by an amount reasonably deemed by HILCO or such lender or participant to be material, then, from
time to time, the Company shall pay no later than five (5) days following demand to HILCO or such lender or participant such additional amount or amounts as will compensate HILCO’s or such lender or participant for such reduction. In
determining such amount or amounts, HILCO or such lender or participant may use any reasonable averaging or attribution methods. The protection of this Section 7.5 shall be available to HILCO and such lender or participant regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law, regulation or condition. A certificate of HILCO or such lender or participant setting forth such amount or amounts as shall be necessary to compensate HILCO or such
lender or participant with respect to this Section 7.5 and the calculation thereof when delivered to the Company shall be conclusive on the Company absent manifest error. Notwithstanding anything in this paragraph to the contrary, in the event HILCO
or such lender or participant has exercised its rights pursuant to this paragraph, and subsequently determines that the additional amounts paid by the Company in whole or in part exceed the amount which HILCO or lender or such participant actually
required pursuant hereto, the excess, if any, shall be returned to the Company by HILCO or such lender or participant, as applicable. 
  
 7.6. In the event that any applicable law, treaty or governmental regulation, or any change therein or in the interpretation or application thereof, or
compliance by HILCO or any lender or participant with any request or directive (whether or not having the force of law) from any central bank or other financial, monetary or other authority, shall: 
  
 (a) subject HILCO or such lender or participant to any tax of any kind
whatsoever with respect to this Financing Agreement or change the basis of taxation of payments to HILCO or such lender or participant of principal, fees, interest or any other amount payable hereunder or under any other documents (except for
changes in the rate of tax on the overall net income of HILCO or such lender or participant by the federal government or the jurisdiction in which it maintains its principal office); 
  
 (b) impose, modify or hold applicable any reserve, special deposit, assessment or similar requirement against assets held
by, or deposits in or for the account of, advances or loans by, or other credit extended by HILCO or such lender or participant by reason of or in respect to this Financing Agreement and the Loan Documents, including pursuant to Regulation D of the
Board of Governors of the Federal Reserve System; or 
  
 (c)
impose on HILCO or such lender or participant any other condition with respect to this Financing Agreement or any other document; 
  
 and the result of any of the foregoing is to increase the cost to HILCO or such lender or participant of making, renewing or maintaining its loans hereunder by an amount
that HILCO or such lender or participant deems to be material in the exercise of its reasonable business judgment or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any of the loans by an amount that
HILCO or such lender or participant deems to be material in the exercise of its reasonable business judgement, then, in any case the Company shall pay HILCO and such lender or 

  

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participant (to the extent applicable), within five (5) days following its demand, such additional cost or such reduction, as the case may be. HILCO or such
lender or participant shall certify the amount of such additional cost or reduced amount to the Company and the calculation thereof and such certification shall be conclusive upon the Company absent manifest error. Notwithstanding anything in this
paragraph to the contrary, in the event HILCO or such lender or participant has exercised its rights pursuant to this paragraph, and subsequently determines that the additional amounts paid by the Company in whole or in part exceed the amount which
HILCO or such lender or participant actually required pursuant hereto, the excess, if any, shall be returned to the Company by HILCO or such lender or participant, as applicable. 
  
 7.7. For purposes of Section 7 of this Financing Agreement, any reference to
HILCO shall include any financial institution which may become a participant or co-lender on or after the Closing Date. 
  
 Section 8. Powers 
  
 Subject to the terms of the Intercreditor Agreement, the Company hereby constitutes HILCO, or any Person HILCO may designate or appoint, as its
attorney-in-fact, at the Company’s cost and expense, to exercise any or all of the following powers, which power being coupled with an interest, shall be irrevocable until all Obligations shall have been indefeasibly paid in full in cash:

  
 (a) To receive, take, endorse, sign, assign and deliver, all
in the name of HILCO or the Company, any and all checks, notes, drafts, and other documents or instruments relating to any of the Collateral, including in connection with Insurance Proceeds; 
  
 (b) To receive, open and dispose of all mail addressed to the Company and to
notify postal authorities to change the address for delivery thereof to such address as HILCO may designate; 
  
 (c) To request from Persons indebted on Accounts at any time, in the name of HILCO information concerning the amounts owing on the Accounts; 

 
 (d) To request from Persons indebted on Accounts at any time, in the name
of the Company, in the name of certified public accountants designated by HILCO or in the name of HILCO or its designee, information concerning the amounts owing on the Accounts; 
  
 (e) To transmit to Persons indebted on Accounts notice of HILCO’s interest therein and to notify Persons indebted on
Accounts to make payment directly to HILCO or its designee for the Company’s account; and 
  
 (f) To take or bring, in the name of HILCO, its designee or the Company, all steps, actions, suits or proceedings deemed by HILCO necessary or desirable
to enforce or effect collection of the Accounts. 
  
 Notwithstanding anything hereinabove contained to the contrary, the powers set forth in (b), (c), (e) and (f) above may only be exercised after the occurrence and during the continuation of an Event of Default. 
  

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 Section 9. Events of Default and Remedies 
  
 9.1. The occurrence of any one or more of the following shall constitute an
“Event of Default”: 
  
 (a) cessation of the
business of the Company or the calling of a meeting of the creditors of the Company for purposes of compromising the debts and obligations of the Company; 
  
 (b) the failure by the Company or any Guarantor, or the admission by the Company or any Guarantor in writing of its inability, to pay its debts generally
as and when they become due; 
  
 (c) (i) commencement of an
involuntary case or other proceeding against the Company or any Guarantor which seeks liquidation, reorganization or other relief with respect to it or its debts or other liabilities under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeks the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any of its property, and such involuntary case or other proceeding shall remain undismissed or unstayed for a period of
sixty days (60) days; or an order for relief against the Company or any Guarantor shall be entered in any such case under the Federal Bankruptcy Code; or (ii) commencement by the Company or any Guarantor of a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or its Debts or other liabilities under any bankruptcy, insolvency or other similar law or seeking the appointment or a trustee, receiver, liquidator, custodian or other
similar official for it or any of its property, or (iii) consent by the Company or any Guarantor to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it,
or (iv) the making by the Company or any Guarantor of a general assignment for the benefit of creditors, or (v) any action by the Company or any Guarantor to authorize or effect any of the foregoing; 
  
 (d) breach by the Company of any warranty, representation or covenant
contained herein (other than those referred to in sub-paragraph (e) below) or in any other written agreement between the Company and HILCO, provided that such Default by the Company of any of the warranties, representations or covenants referred in
this clause (d) shall not be deemed to be an Event of Default unless and until such Default shall remain unremedied to HILCO’s satisfaction for a period of ten (10) days from the date of such breach; 
  
 (e) breach by the Company of any warranty, representation or covenant of
Section 4.2 hereof (other than the fourth sentence of Section 4.2); Sections 5.3 and 5.4 hereof (other than the first sentence of Section 5.4); Sections 6.1, 6.5, 6.6, and 6.7 through 6.19 hereof; 
  
 (f) failure of the Company to make any payment of principal, interest or any
other monetary Obligation within two (2) Business Days of the due date thereof; 
  
 (g) the Company or any of its ERISA Affiliates shall have made a complete or partial withdrawal from a Multiemployer Plan, and, as a result of such complete or partial withdrawal, the Company or any of its ERISA
Affiliates incurs a withdrawal liability in 

  

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an annual amount exceeding $250,000; or a Multiemployer Plan enters reorganization status under Section 4241 of ERISA, and, as a result thereof the Company
or any of its ERISA Affiliates’ annual contribution requirements with respect to such Multiemployer Plan increases in an annual amount exceeding $250,000; 
  

(h) any Termination Event with respect to any Employee Plan shall have occurred, and, 30 days after notice thereof shall have been given to the
Company by HILCO, (i) such Termination Event (if correctable) shall not have been corrected, and (ii) the then current value of such Employee Plan’s vested benefits exceeds the then current value of assets allocable to such benefits in such
Employee Plan by more than $250,000 (or, in the case of a Termination Event involving liability under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the Internal Revenue Code, the
liability is in excess of such amount); 
  
 (i) the occurrence of
any default or event of default (after giving effect to any applicable grace or cure periods) under any instrument or agreement evidencing any Indebtedness of the Company having a principal amount in excess of $250,000 (including the CIT Debt); or

  
 (j) the receipt by HILCO of notice from the issuer of the UM
Holdings Letter of Credit that such issuer elects not to renew UM Holdings Letter of Credit for an additional one year period and the failure of UM Holdings, Ltd. or the Company, unless the UM Holdings Letter of Credit has been returned to UM
Holdings, Ltd. in accordance with the terms of the CIT Loan Agreement, to replace the UM Holdings Letter of Credit with a replacement letter of credit (in form and substance satisfactory to HILCO and issued by an issuer satisfactory to HILCO) no
less than 45 days prior to the expiration of the UM Holdings Letter of Credit. 
  
 (k) the attempt to Transfer a Mortgaged Property or any part thereof or interest therein without the prior written consent of HILCO; 
  
 (l) the payment by the Company of an amount in excess of $1,000,000 in the aggregate during any Fiscal Year under any Lease
Support Guaranty; or 
  
 (m) the occurrence of an “Event of
Default” under any other Loan Document. 
  
 9.2. Without
notice, upon the occurrence of an Event of Default other than those contained in Section 9.1(b) or (c), at the option of HILCO: (a) all Obligations shall become immediately due and payable in full; (b) HILCO shall be entitled to exercise all rights
and remedies available to it under this Agreement, the other Loan Documents, at law and in equity. Immediately upon the occurrence of an Event of Default contained in Section 9.1(b) or (c), the Obligations shall automatically become due and payable
in full and HILCO shall be entitled to exercise all rights and remedies available to it under this Agreement, the other Loan Documents, at law and in equity. 
  
 9.3. Immediately upon the occurrence of an Event of Default, in addition to the other rights and remedies available under this Agreement, the other Loan
Documents, at law and 

  

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in equity, but subject to the rights of CIT as provided in the Intercreditor Agreement, HILCO may, or may cause its designee to: (a) remove from any premises
where same may be located any and all books and records, computers, electronic media and software programs associated with any Collateral (including any electronic records, contracts and signatures pertaining thereto), documents, instruments, files
and records, and any receptacles or cabinets containing same, relating to the Accounts, or use, at the Company’s expense, such of the Company’s personnel, supplies or space at the Company’s places of business or otherwise, as may be
necessary to properly administer and control the Accounts or the handling of collections and realizations thereon; (b) bring suit, in the name of the Company or HILCO or its designee, and generally shall have all other rights respecting said
Accounts, including without limitation the right to: accelerate or extend the time of payment, settle, compromise, release in whole or in part any amounts owing on any Accounts and issue credits in the name of the Company or HILCO or its designee,
(c) sell, assign and deliver the Collateral and any returned, reclaimed or repossessed Inventory, with or without advertisement, at public or private sale, for cash, on credit or otherwise, at HILCO’s sole option and discretion, and bid or
become a purchaser at any such sale, free from any right of redemption, which right is hereby expressly waived by the Company; (d) foreclose the security interests and liens in the Collateral created herein or by the Loan Documents or take
possession of any or all of the Collateral, including any Inventory, Equipment and/or Other Collateral without judicial process, and to enter any premises where any Inventory and Equipment and/or Other Collateral may be located for the purpose of
taking possession of or removing the same. HILCO shall have the right, without notice or advertisement, to sell, lease, or otherwise dispose of all or any part of the Collateral, whether in its then condition or after further preparation or
processing, in the name of the Company or HILCO or its designee, either at public or private sale or at any broker’s board, in lots or in bulk, for cash or for credit, with or without warranties or representations, and upon such other terms and
conditions as HILCO in its sole discretion may deem advisable, and HILCO or its designee shall have the right to purchase at any such sale by credit bid or otherwise in its sole discretion. If any Inventory, Equipment or Mortgaged Property shall
require rebuilding, repairing, maintenance or preparation, HILCO shall have the right, at its option, to do such of the aforesaid as is necessary, for the purpose of putting the same in such saleable form as HILCO shall deem appropriate. The Company
agrees, at the request of HILCO, to assemble the Inventory and Equipment and to make it available to HILCO or its designee at premises of the Company or elsewhere and to make available to HILCO or its designee the premises and facilities of the
Company for the purpose of taking possession of, removing or putting the Inventory and Equipment in saleable form. If notice of intended disposition of any Collateral is required by law, it is agreed that ten (10) days notice shall constitute
reasonable notification and full compliance with the law. The net cash proceeds resulting from HILCO’s exercise of any of the foregoing rights, (after deducting all charges, costs and expenses, including attorneys’ fees and costs) shall be
applied by HILCO to the payment of the Obligations, whether due or to become due, in such order as HILCO may elect, and the Company shall remain liable to HILCO for any deficiency, and HILCO in turn agrees to remit to the Company or its successors
or assigns, any surplus resulting therefrom. The enumeration of the foregoing rights is not intended to be exhaustive and the exercise of any right shall not preclude the exercise of any other rights, all of which shall be cumulative. The Company
hereby agrees to indemnify, defend and hold harmless HILCO, its co-lenders, participants, agents, equity-holders, officers, directors and representatives (collectively, Indemnified Parties”) from and against any and all costs, expenses
(including attorneys’ fees and 

  

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costs and all cost of enforcement of its rights and remedies, whether in bankruptcy or otherwise), claims and liabilities arising in connection with the
exercise of any of such Indemnified Party’s rights, remedies and interests hereunder, including, from any sale or transfer of Collateral, preserving, maintaining or securing the Collateral, defending its interests in Collateral (including
pursuant to any claims brought by the Company, the Company as debtor-in-possession, any secured or unsecured creditors of the Company, any trustee or receiver in bankruptcy, or otherwise), provided, however, that the Company shall not
be responsible to pay for the costs or expenses of any Indemnified Party to the extent that such costs and expenses were caused by the gross negligence or willful misconduct of such Indemnified Party, as determined by the final, non-appealable
decision of a court of competent jurisdiction. The foregoing indemnification shall survive termination of this Financing Agreement until such time as all Obligations (including the foregoing) have been finally and indefeasibly paid in full. In
furtherance thereof HILCO may require the Company to establish such reserves for Obligations hereunder (including any contingent Obligations) as it may deem advisable in its reasonable business judgement. 
  
 Section 10. Expenses; Taxes; Attorneys’ Fees 
  
 The Company will pay on demand, all costs and expenses incurred by or on
behalf of HILCO regardless of whether the transactions contemplated hereby are consummated, including, without limitation, reasonable fees, costs, client charges and expenses of counsel for HILCO, accounting, due diligence, periodic field audits,
physical counts, valuations, investigations, searches and filings, monitoring of assets, appraisals of Collateral, title searches and reviewing environmental assessments, miscellaneous disbursements, examination, travel, lodging and meals, arising
from or relating to: (a) the negotiation, preparation, execution, delivery, performance and administration of this Agreement and any Loan Documents, (b) any requested amendments, waivers or consents to this Agreement or the other Loan Documents
whether or not such documents become effective or are given, (c) the preservation and protection of HILCO’s rights under this Agreement or the other Loan Documents, (d) the defense of any claim or action asserted or brought against HILCO by any
Person that arises from or relates to this Agreement, any other Loan Document, HILCO’s claims against the Company, or any and all matters in connection therewith, (e) the commencement or defense of, or intervention in, any court proceeding
arising from or related to this Agreement or any other Loan Document, (f) the filing of any petition, complaint, answer, motion or other pleading by HILCO, or the taking of any action in respect of the Collateral or other security, in connection
with this Agreement or any other Loan Document, (g) the protection, collection, lease, sale, taking possession of or liquidation of, any Collateral or other security in connection with this Agreement or any other Loan Document, (h) any attempt to
enforce any Lien or security interest in any Collateral or other security in connection with this Agreement or any other Loan Document, (i) any attempt to collect from the Company, (j) all liabilities and costs arising from or in connection with the
past, present or future operations of the Company involving any damage to real or personal property or natural resources or harm or injury alleged to have resulted from any Release of Hazardous Materials on, upon or into such property, (k) any
Environmental Liabilities and Costs incurred in connection with the investigation, removal, cleanup and/or remediation of any Hazardous Materials present or arising out of the operations of any facility of the Company, (l) any Environmental
Liabilities and Costs incurred in connection with any Environmental Lien; or (m) the receipt by HILCO of any advice from professionals with respect to any of the foregoing. 

  

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Without limitation of the foregoing or any other provision of any Loan Document: (x) the Company agrees to pay all stamp, document, transfer, recording or
filing taxes or fees and similar impositions now or hereafter determined by HILCO to be payable in connection with this Agreement or any other Loan Document, and the Company agrees to save HILCO harmless from and against any and all present or
future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such taxes, fees or impositions, (y) the Company agrees to pay all broker fees that may become due in connection with the transactions
contemplated by this Agreement and the other Loan Documents, and (z) if the Company fails to perform any covenant or agreement contained herein or in any other Loan Document, HILCO may itself perform or cause performance of such covenant or
agreement, and the expenses of HILCO incurred in connection therewith shall be reimbursed on demand by the Company. If at any time the Expense Deposit paid to HILCO in accordance with Section 6.9 is, in the discretion of HILCO, insufficient to fund
the fees and expenses incurred by HILCO in connection with the exercise of any of its rights under this Financing Agreement, the Company shall, within three (3) Business Days after HILCO’s request therefor, provide HILCO with an additional
Expense Deposit. 
  
 Section 11. Issuance Of Equity Interests
To HILCO 
  
 (a) Authorization and Issuance of
Warrants On the Closing Date, the Company shall issue to HILCO one or more warrant certificates covering the purchase of shares of common stock of the Company substantially in the form of Exhibit B hereto (such certificates, together with the
rights to purchase common stock of the Company provided thereby and all warrant certificates covering such stock issued upon transfer, division or combination of, or in substitution for, any thereof, being herein called the
“Warrants”) in an amount equal to 189,640 shares of common stock of the Company. It is understood and agreed that the Warrants contain provisions affecting the number of shares of common stock of the Company that may be acquired,
which provisions are set forth in the Warrants. Such Warrants will have an exercise price equal to an amount not greater than $.10 per share and will cease to be exercisable on a date that is the fifth anniversary of the Closing Date. 
  
 (b) HILCO represents and warrants to the Company that: 
  
 (i) HILCO is acquiring the Warrants hereunder for its own account, without
a view to the distribution thereof, all without prejudice, however, to the right of HILCO at any time, in accordance with this Agreement, lawfully to sell or otherwise to dispose of all or any part of the Warrants or Warrant Stock held by it.

  
 (ii) HILCO is an “accredited investor” within the
meaning of Regulation D under the Securities Act. 
  
 (c) The
Company represents and warrants to HILCO that: 
  
 (i) Assuming
the truth and accuracy of HILCO’S representations and warranties contained in the immediately preceding paragraphs, the issuance of the Warrants to HILCO hereunder and the issuance of shares of common stock to HILCO 
  

 - 49 - 

 
pursuant to the Warrants are exempt from the registration and prospectus delivery requirements of the Securities Act. 
  
 (ii) All stock and securities of the Company heretofore issued and sold by
the Company were, and all securities of the Company issued and sold by the Company on and after the date hereof are or will be issued and sold in accordance with, or are or will be exempt from, the registration and prospectus delivery requirements
of the Securities Act. 
  
 (d) The Company agrees that neither it
nor any Person acting on its behalf has offered or will offer the Warrants or Warrant Stock or any part thereof or any similar securities for issue or sale to, or has solicited or will solicit any offer to acquire any of the same from, any Person so
as to bring the issuance and sale of the Warrants or Warrant Stock hereunder within the provisions of the registration and prospectus delivery requirements of the Securities Act. 
  
 (e) The Company shall pay all taxes (other than Federal, state or local income taxes) which may be payable in connection
with the execution and delivery of this Agreement or the issuance of the Warrants or Warrant Stock hereunder or in connection with any modification of this Agreement or the Warrants and shall hold HILCO harmless without limitation as to time against
any and all liabilities with respect to all such taxes. The obligations of the Company under this Section shall survive any redemption, repurchase or acquisition of Warrants or Warrant Stock by the Company, any termination of this Agreement, and any
cancellation or termination of the Warrants. 
  
 11.2. If HILCO
assigns or otherwise transfers all or any of its Loans (including by selling participations therein) to any Person, HILCO may request (upon 10 days’ prior notice to the Company) that (a) a number of Warrants held by HILCO be canceled on the
date of such assignment and transfer and (b) a like number of Warrants be issued by the Company to the Person to whom such Loans are being assigned or otherwise transferred. Upon the date specified in such request: 
  
 (i) the Company shall issue, and HILCO shall surrender (or cause to be
surrendered) for cancellation, such number of Warrants as aforesaid, provided that such issuance shall not violate the Securities Act or any applicable state securities laws; 
  
 (ii) the Company will deliver to each Person that receives a certificate for Warrants a favorable legal opinion from
counsel to the Company acceptable to such Person, covering the matters set forth in the opinion of counsel to the Company and its subsidiaries (to the extent relating to the Warrants); 
  
 (iii) each Person that receives Warrants will deliver a certificate to the Company affirming the representations and
warranties contained in this Section hereof as of such date; and 
  
 (b) the Company will deliver a certificate to each Person that receives Warrants affirming the representations and warranties contained in this Section hereof as of such date. 
  

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 Section 12. Miscellaneous 
  
 12.1. The Company, to the extent permitted by law, hereby waives diligence, notice of intent to accelerate, notice of
acceleration, demand, presentment and protest and any notices thereof as well as notice of nonpayment. No delay or omission of HILCO to exercise any right or remedy hereunder, whether before or after the happening of any Event of Default, shall
impair any such right or shall operate as a waiver thereof or as a waiver of any such Event of Default. No single or partial exercise by HILCO of any right or remedy precludes any other or further exercise thereof, or precludes any other right or
remedy. No waiver of any provision of this Agreement, and no consent to any departure by the Company therefrom, shall in any event be effective unless the same shall be in writing and signed by HILCO, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which given. 
  
 12.2. This Financing Agreement and the Loan Documents executed and delivered in connection herewith constitute the entire agreement between the Company and HILCO; supersede any prior agreements; can be amended only by
a writing signed by the Company and HILCO; and shall bind and benefit the Company and HILCO and their respective successors and assigns. The Company shall not Transfer any of its rights under this Agreement without the prior written consent of
HILCO. HILCO shall have the right at any time to (a) assign or transfer to any Person all or a portion of its rights and obligations under this Financing Agreement and the other Loan Documents (including, without limitation, the Loan) and (b) pledge
the Loan and all of its rights under this Financing Agreement and the other Loan Documents to its lenders in support of borrowings made by HILCO from such lenders, in each case without the consent of the Company. 
  
 12.3. In no event shall the Company, upon demand by HILCO for payment of any
indebtedness relating hereto, by acceleration of the maturity thereof, or otherwise, be obligated to pay interest and fees in excess of the amount permitted by law. Regardless of any provision herein or in any agreement made in connection herewith,
HILCO shall never be entitled to receive, charge or apply, as interest on any indebtedness relating hereto, any amount in excess of the maximum amount of interest permissible under applicable law. If HILCO ever receives, collects or applies any such
excess, it shall be deemed a partial repayment of principal and treated as such; and if principal is paid in full, any remaining excess shall be refunded to the Company. This paragraph shall control every other provision hereof, the Loan Documents
and of any other agreement made in connection herewith. As used herein, the term “applicable law” shall mean the law in effect as of the date hereof, provided, however, that in the event there is a change in the law which
results in a higher permissible rate of interest, then this Financing Agreement and the Loan Documents shall be governed by such new law insofar as it relates to the permissible rate of interest as of its effective date. 
  
 12.4. If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully severable, and the remaining provisions of the applicable agreement shall remain in full force and effect and shall not be affected by such provision’s severance.
Furthermore, in lieu of any such provision, there shall be added automatically as a part of the applicable agreement a legal and enforceable provision as similar in terms to the severed provision as may be possible. 
  

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 12.5. THE COMPANY AND HILCO EACH HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF THIS FINANCING AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREUNDER. THE COMPANY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED. IN NO EVENT WILL HILCO BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES. 
  
 12.6. Except as otherwise herein provided, any notice or other communication required hereunder shall be in writing (provided that, any electronic
communications from the Company with respect to any request, transmission, document, electronic signature, electronic mail or facsimile transmission shall be deemed binding on the Company for purposes of this Financing Agreement, provided further
that any such transmission shall not relieve the Company from any other obligation hereunder to communicate further in writing), and shall be deemed to have been validly served, given or delivered when hand delivered or sent by facsimile, or three
days after deposit in the United State mails, with proper first class postage prepaid and addressed to the party to be notified or to such other address as any party hereto may designate for itself by like notice, as follows: (A) if to HILCO, at the
address set forth in the preamble to this Agreement, to the Attention of: Portfolio Administrator, Fax No.: (847) 559-9330; 
  
 with a copy to : 
  
 Schulte Roth & Zabel LLP 
 919 Third Avenue 
 New York, New York 10022 
 Attn: Frederic L. Ragucci, Esq. 
 Fax No.: (212) 593-5955 
  
 (B) if
to the Company at: 
  
 Cybex International, Inc.

 10 Trotter Drive 
 Medway, Massachusetts 02053 
 Attn: Arthur Hicks 
 Fax No.: (508) 533-5799 
  
 With a courtesy copy of any material notice to the Company’s counsel at: 
  
 Archer & Greiner, PC 
 One Centennial Square 
 Haddenfield, New Jersey 08038 
 Attn: James H. Carll, Esq. 
 Fax No.: (856) 795-0574 
  

 - 52 - 

 
provided, however, that the failure of HILCO to provide the Company’s counsel with a copy of such notice shall not invalidate any notice
given to the Company and shall not give the Company any rights, claims or defenses due to the failure of HILCO to provide such additional notice. 
  
 12.7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK WITH RESPECT TO CONTRACTS MADE AND INTENDED TO BE PERFORMED IN SUCH STATE AND WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN EXPRESS ELECTION TO BE GOVERNED BY THE
LAWS OF ANOTHER JURISDICTION. 
  
 12.8. In any situation as to
which the consent or approval of HILCO is required hereunder or under any Loan Document, or as to which a determination or judgment is to be make by HILCO, HILCO may give or withhold such consent or approval, and may make such determination or
judgment in its sole discretion and without giving any reason or explanation therefor unless otherwise expressly provided in this Agreement or such Loan Document. 
  
 12.9. HILCO shall be entitled to advertise the closing of the transactions contemplated by this Agreement in such trade
publications, business journals, newspapers of general circulation and otherwise, as HILCO shall deem appropriate, including, without limitation, the publication of a tombstone announcing the closing of this transaction; provided, that HILCO
shall obtain the prior written consent of the Company prior to disseminating any advertisement described in this Section 12.9 which consent shall not be unreasonably withheld. 
  
 12.10. The ownership of an interest in the Promissory Note shall be registered on a record of ownership maintained by the
Company or its agent. Notwithstanding anything else in the Promissory Note to the contrary, the right to the principal of, and stated interest on, the Promissory Note may be transferred only if the transfer is registered on such record of ownership
and the transferee is identified as the owner of an interest in the obligation. The Company shall be entitled to treat the registered holder of the Promissory Note (as recorded on such record of ownership) as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or interest in the Promissory Note on the part of any other person or entity. 
  
 12.11. This Financing Agreement may be executed in any number of counterparts (including, without limitation, by facsimile), each of which shall be deemed
an original, but all of which taken together shall constitute one and the same instrument. 
  
 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 
  

 - 53 - 

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

	CYBEX INTERNATIONAL, INC.	  	HILCO CAPITAL LP
		
	 By: /s/ Arthur W. Hicks, Jr.

	  	 By: /s/ Eran Cohen

	 Title: Chief Financial Officer
	  	 Title: Vice-President

  

 - 54 - 

 SCHEDULE 1 – COLLATERAL INFORMATION 

 

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

		
	CYBEX CAPITAL CORPORATION	 	 
	 STATE OF INCORPORATION OR
FORMATION:
	 	New York
	 FEDERAL TAX I.D. NUMBER:
	 	11-3135906
	 CHIEF EXECUTIVE OFFICE:
	 	99 SW Wilshire, Suite 190, Portland OR 97225
	 COLLATERAL LOCATIONS:
	 	99 SW Wilshire, Suite 190, Portland OR 97225
		
	CYBEX INTERNATIONAL UK LIMITED	 	 
	 STATE OF INCORPORATION OR
FORMATION:
	 	England
	 FEDERAL TAX I.D. NUMBER:
	 	N/A
	 CHIEF EXECUTIVE OFFICE:
	 	 10 North Parkway Close, Round Spinney, Northampton
 NN38RQ UK

	 COLLATERAL LOCATIONS:
	 	 10 North Parkway Close, Round Spinney, Northampton
 NN38RQ UK

		
	TECTRIX FITNESS EQUIPMENT, INC.	 	 
	 STATE OF INCORPORATION OR
FORMATION:
	 	California
	 FEDERAL TAX I.D. NUMBER:
	 	33-0338901
	 CHIEF EXECUTIVE OFFICE:
	 	10 Trotter Drive, Medway MA 02053-2275
	 COLLATERAL LOCATIONS:
	 	N/A DORMANT
		
	CYBEX FITNESS GERATE VERTRIEBS GMBH	 	 
	 STATE OF INCORPORATION OR
FORMATION:
	 	Germany
	 FEDERAL TAX I.D. NUMBER:
	 	N/A
	 CHIEF EXECUTIVE OFFICE:
	 	N/A DORMANT
	 COLLATERAL LOCATIONS:
	 	N/A DORMANT

  

 - 55 - 

 Schedule 2 
  
 Litigation 
  
 Hot New Products, Inc. d/b/a Fitnesszone v. Trotter, Inc. and Cybex International, Inc., CV 98-JEO-1730-S, United States District Court for the Northern District of Alabama, Southern Division 
  
 Gary J. Colassi v. Cybex International, Inc., Civil Action 02-11909 RWZ, United States
District Court for the District of Massachusetts. 
  
 Free Motion Fitness, Inc.
f/k/a Ground Zero Design Corporation v. Cybex International, Inc., 1:01 CV00152 BSJ, United States District Court for the District of Utah. 
  
 Chris J. Creighton and Healthline, Inc. v. Cybex International, Inc., et. al., Case Number 788623, Superior Court of the State of California, Orange County.

  
 Gene Kirilla, II, et al v. Cybex International, Inc., et al, Civil
Division G.D. No. 1997 – 1725, Court of Common Pleas of Mercer County, Pennsylvania. 
  

 - 56 - 

 SCHEDULE #3 
 CYBEX INTERNATONAL, INC. 
  

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

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

	 	 	Long Term Disability
		
	Business Travel Accident Insurance	 	 
		
	Flexible Spending Accounts	 	 Healthcare Flexible Spending
 Dependent Care Spending

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

  
  

 - 57 - 

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

Liberty Mutual Company 
  

 - 58 - 

 SCHEDULE 4 
  
 2003 EBITDA PROJECTIONS 
  

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

	 CUMULATIVE 9 MONTHS
	  	$	5,422,000
	 	  	
	

  

 - 59 - 

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

 - 60 -COMMON STOCK PURCHASE WARRANT

 Exhibit 10.6 
  
 THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT AND IN THE FINANCE AGREEMENT, DATED
AS OF JULY 16, 2003, BETWEEN CYBEX INTERNATIONAL, INC., AND HILCO CAPITAL L.P. OR ITS AFFILIATE, COPIES OF WHICH WILL BE MADE AVAILABLE UPON REQUEST. 
  
 CYBEX INTERNATIONAL, INC. 
  
 COMMON STOCK PURCHASE WARRANT 
  
 July 16, 2003 
  
 Warrant to Purchase 189,640 
 Shares of Common Stock 
  
 CYBEX INTERNATIONAL, INC., a New York corporation (the “Company”),
for value received, hereby certifies that Hilco Capital L.P., or its registered assigns (the “Holder”), is entitled to purchase from the Company 189,640 (the “Warrant Quantity”) duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $0.10 per share, of the Company (the “Common Stock”), at a purchase price per share equal to $0.10 (the “Purchase Price”), at any time or from time to time but prior to 5:00 P.M.,
New York City time, on the fifth anniversary of the date hereof (the “Expiration Date”), all subject to the terms, conditions and adjustments set forth below in this warrant (this “Warrant”). 
  
 This Warrant (the “Warrant”, such term to include any warrant or
warrants issued in substitution therefor) is issued pursuant to the terms of a certain Financing Agreement, dated as of the date hereof (as amended or otherwise modified from time to time, the “Financing Agreement”), between the Company,
as Borrower, and the Lender named therein (the “Holder”). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned such terms in the Financing Agreement. 

 1. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms shall
have the meanings indicated: 
  
 “Additional Shares of
Common Stock” shall mean all shares (including treasury shares) of Common Stock issued or sold or, pursuant to Section 3.3 or 3.4, deemed to be issued by the Company after the date hereof, whether or not subsequently reacquired or retired
by the Company, other than: 
  
 (a) (i) shares issued upon the
exercise of this Warrant, (ii) such number of additional shares as may become issuable upon the exercise of this Warrant by reason of adjustments required pursuant to the anti-dilution provisions applicable to this Warrant as in effect on the date
hereof, (iii) the CIT Shares or (iv) the UM Holdings Shares, 
  
 (b) (i) shares issued upon the exercise of options granted or to be granted under the Company’s stock option or Non-employee Director Stock Retainer plans as in effect on the date hereof or under any other employee stock option or
purchase plan or plans adopted or assumed after such date by the Company’s Board of Directors and approved by its stockholders; provided in each such case that the exercise or purchase price for any such share shall not be less than 95%
of the fair market value (determined in good faith by the Company’s Board of Directors) of the Common Stock on the date of grant, and (ii) such additional number of shares as may become issuable pursuant to the terms of any such plans by reason
of adjustments required pursuant to anti-dilution provisions applicable to such securities in order to reflect any subdivision or combination of Common Stock, by reclassification or otherwise, or any dividend on Common Stock payable in Common Stock,
and 
  
 (c) (i) shares issued upon the exercise or conversion of
options or any other securities convertible into or exchangeable for shares of Common Stock outstanding as of the date hereof, including without limitation shares issuable upon exercise of those on or prior to the date hereof, (ii) such additional
number of shares as may become issuable upon the exercise of any such securities by reason of adjustments required pursuant to anti-dilution provisions applicable to such securities as in effect on the date hereof, but only if and to the extent that
such adjustments are required as the result of the original issuance of the Warrant, and (iii) such additional number of shares as may become issuable upon the exercise of any such securities by reason of adjustments required pursuant to
anti-dilution provisions applicable to such securities as in effect on the date hereof, in order to reflect any subdivision or combination of Common Stock, by reclassification or otherwise, or any dividend on Common Stock payable in Common Stock.

  
 “Business Day” shall mean any day other than
a Saturday or a Sunday or any day on which national banks are authorized or required by law to close. Any reference to “days” (unless Business Days are specified) shall mean calendar days. 
  
 “CIT” shall mean The CIT Business Group/Business Credit,
Inc. 
  
 “CIT Shares” shall mean the shares of
Common Stock issuable to CIT upon exercise of the warrants issued to CIT dated as of the date hereof. 
  

 2 

 “CIT Registration Rights Agreement” shall mean that certain warrantholders’ rights
agreement, dated as of the date hereof, among the Company, CIT and UM Holdings Ltd. 
  
 “Commission” shall mean the Securities and Exchange Commission or any successor agency having jurisdiction to enforce the Securities Act. 
  
 “Common Stock” shall have the meaning assigned to it in the introduction to this Warrant, such term to
include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have
the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference. 
  
 “Company” shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any corporation or other entity which shall succeed to or assume the obligations of the Company hereunder in compliance with Section 3. 
  
 “Convertible Securities” shall mean any evidences of indebtedness, shares of stock (other than Common
Stock) or other securities directly or indirectly convertible into or exchangeable for Additional Shares of Common Stock. 
  
 “Current Market Price” shall mean, on any date specified herein, the average of the daily Market Price during the 5 consecutive trading
days before such date, except that, if on any such date the shares of Common Stock are not listed or admitted for trading on any national securities exchange or quoted in the over-the-counter market, the Current Market Price shall be the Market
Price on such date. 
  
 “Exchange Act” shall mean
the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder, or any successor statute. 
  
 “Expiration Date” shall have the meaning assigned to it in the introduction to this Warrant. 
  
 “Fair Value” shall mean, on any date specified herein (i) in
the case of cash, the dollar amount thereof, (ii) in the case of a security, the Current Market Price, and (iii) in all other cases, the fair value thereof (as of a date which is within 20 days of the date as of which the determination is to be
made) determined jointly by the Company and the Holder; provided, however, that if such parties are unable to reach agreement within a reasonable period of time, the Fair Value shall be determined in good faith, by an independent
investment banking firm selected jointly by the Company and the Holders or, if that selection cannot be made within ten days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules,
and provided further, that the Company shall pay all of the fees and expenses of any third parties incurred in connection with determining the Fair Value. 
  
 “Financing Agreement” shall have the meaning assigned to in the introduction to this Warrant. 

 

 3 

 “Fully Diluted Basis” means all shares of Common Stock outstanding and any shares of
Common Stock issuable upon exercise or conversion of Options or Convertible Securities (including, without limitation, this Warrant), whether such right is exercisable or convertible immediately or only after the passage of time. 
  
 “Holder” shall have the meaning assigned to it in the
introduction to this Warrant. 
  
 “Market Price”
shall mean, on any date specified herein, the amount per share of the Common Stock, equal to (i) the last reported sale price of such Common Stock, regular way, on such date or, in case no such sale takes place on such date, the average of the
closing bid and asked prices thereof regular way on such date, in either case as officially reported on the principal national securities exchange on which such Common Stock is then listed or admitted for trading, (ii) if such Common Stock is not
then listed or admitted for trading on any national securities exchange but is designated as a national market system security by the NASD, the last reported trading price of the Common Stock on such date, (iii) if there shall have been no trading
on such date or if the Common Stock is not so designated, the average of the closing bid and asked prices of the Common Stock on such date as shown by the NASD automated quotation system, or (iv) if such Common Stock is not then listed or admitted
for trading on any national exchange or quoted in the over-the-counter market, the fair value thereof (as of a date which is within 20 days of the date as of which the determination is to be made) determined in good faith by an independent
investment banking firm selected jointly by the Company and the Holder or, if that selection cannot be made within five days, by an independent investment banking firm selected by the American Arbitration Association in accordance with its rules,
provided that the Company shall pay all of the fees and expenses of any third parties incurred in connection with determining the Market Price. 
  
 “NASD” shall mean the National Association of Securities Dealers, Inc. 
  
 “Obligations” shall have the meaning set forth in the Financing Agreement, in so far as such obligations
are for the payment of money. 
  
 “Options” shall
mean any rights, options or warrants to subscribe for, purchase or otherwise acquire either Additional Shares of Common Stock or Convertible Securities. 
  
 “Other Securities” shall mean any stock (other than Common Stock) and other securities of the Company or any other Person (corporate or
otherwise) which the Holder of this Warrant at any time shall be entitled to receive, or shall have received, upon the exercise of this Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or other Securities pursuant to Section 4 or otherwise. 
  
 “Person” shall mean any individual, firm, partnership, corporation, trust, joint venture, association, joint stock company, limited
liability company, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof, and shall include any successor (by merger or otherwise) of such entity. 
  

 4 

 “Purchase Price” shall have the meaning assigned to it in the introduction to this
Warrant. 
  
 “Registration Rights Agreement”
shall mean the Registration Rights Agreement dated as of the date hereof, as amended or otherwise modified from time to time. 
  
 “Restricted Securities” shall mean (i) any Warrants bearing the applicable legend set forth in Section 10.1, (ii) any shares of Common
Stock (or Other Securities) issued or issuable upon the exercise of this Warrant which are (or, upon issuance, will be) evidenced by a certificate or certificates bearing the applicable legend set forth in such Section, and (iii) any shares of
Common Stock (or Other Securities) issued subsequent to the exercise of any of this Warrant as a dividend or other distribution with respect to, or resulting from a subdivision of the outstanding shares of Common Stock (or Other Securities) into a
greater number of shares by reclassification, stock splits or otherwise, or in exchange for or in replacement of the Common Stock (or Other Securities) issued upon such exercise, which are evidenced by a certificate or certificates bearing the
applicable legend set forth in such Section. 
  
 “Rights” shall have the meaning assigned to it in Section 3.10. 
  
 “Securities Act” shall mean the Securities Act of 1933, as amended from time to time, and the rules and regulations thereunder, or any successor statute. 
  
 “UM Holdings Shares” shall mean the shares of Common Stock
issuable to UM Holdings Ltd. upon conversion of shares of Series B Convertible Preferred Stock issued on the date hereof. 
  
 “Warrant” shall have the meaning assigned to it in the introduction to this Warrant. 
  
 “Warrant Shares” shall mean any and all shares of Common
Stock issued upon exercise of this Warrant. 
  
 2. EXERCISE OF
WARRANT. 
  
 2.1. Manner of Exercise; Payment of the
Purchase Price. (a) This Warrant may be exercised by the Holder hereof, in whole or in part, at any time or from time to time prior to 5:00 p.m., New York City time, on the Expiration Date, by surrendering to the Company at its principal office
this Warrant, with the form of Election to Purchase Shares attached hereto as Exhibit A (or a reasonable facsimile thereof) duly executed by the Holder and accompanied by payment of the Purchase Price for the number of shares of Common Stock
specified in such form. 
  
 (b) Payment of the Purchase Price may
be made as follows (or by any combination of the following): (i) in United States currency by cash or delivery of a certified check or bank draft payable to the order of the Company or by wire transfer to the Company, (ii) by cancellation of all or
any part of the unpaid principal amount of Loans held by the Holder in an amount equal to the Purchase Price, (iii) by cancellation of such number of shares of Common Stock otherwise issuable to the Holder upon such exercise as shall be specified in
such Election 

  

 5 

 
to Purchase Shares, such that the excess of the aggregate Current Market Price of such specified number of shares on the date of exercise over the portion of
the Purchase Price attributable to such shares shall equal the Purchase Price attributable to the shares of Common Stock to be issued upon such exercise, in which case such amount shall be deemed to have been paid to the Company and the number of
shares issuable upon such exercise shall be reduced by such specified number, or (iv) by surrender to the Company for cancellation certificates representing shares of Common Stock of the Company owned by the Holder (properly endorsed for transfer in
blank) having a Current Market Price on the date of Warrant exercise equal to the Purchase Price. 
  
 2.2. When Exercise Effective. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to, and the Purchase Price shall have been received by, the Company as provided in Section 2.1, and, to the extent permitted by law, at such time the Person or Persons in whose name or
names any certificate or certificates for Common Stock (or Other Securities) shall be issuable upon such exercise as provided in Section 2.3 shall be deemed to have become the holder or holders of record thereof for all purposes. 
  
 2.3. Delivery of Stock Certificates, etc.; Charges, Taxes and
Expenses. (a) As soon as practicable after each exercise of this Warrant, in whole or in part, and in any event within seven (7) Business Days thereafter, the Company shall cause to be issued in the name of and delivered to the Holder hereof or,
subject to Section 10, as the Holder may direct, 
  
 (i) a certificate or certificates for the number of shares of Common Stock (or Other Securities) to which the Holder shall be entitled upon such exercise plus, in lieu of issuance of any fractional share to which the Holder would otherwise
be entitled, if any, a check for the amount of cash equal to the same fraction multiplied by the Exercise Price per share on the date of Warrant exercise, and 
  

(ii) in case such exercise is for less than all of the shares of Common Stock purchasable under this Warrant, a new Warrant or Warrants
of like tenor, for the balance of the shares of Common Stock purchasable hereunder. 
  
 (b) Issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the initial Holder hereof for any issue or transfer tax or other incidental expense, in respect
of the issuance of such certificates, all of which such taxes and expenses shall be paid by the Company. 
  
 2.4. Exercise Disputes. In the case of any dispute with respect to the number of shares to be issued upon exercise of this Warrant, the Company
shall promptly issue such number of shares of Common Stock that is not disputed and shall submit the disputed determinations or arithmetic calculations to the Holder via facsimile within five (5) Business Days of receipt of the Holder’s
Election to Purchase Shares. If the Holder and the Company are unable to agree as to the determination of the number of issuable shares within five (5) Business Days of such disputed determination or arithmetic calculation being submitted to the
Holder, then the Company shall, in accordance with this Section, submit via facsimile the disputed determination to an independent reputable accounting firm of national standing, selected by the 

  

 6 

 
Company and reasonably acceptable to the Holders. The Company shall cause such accounting firm to perform the determinations or calculations and notify the
Company and the Holder of the results within forty-eight (48) hours from the time it receives the disputed determinations or calculations. Such accounting firm’s determination shall be binding upon all parties absent manifest error. The Company
shall, on the next Business Day, issue certificate(s) representing the appropriate number of shares of Common Stock in accordance with such accounting firm’s determination and this Section. All fees and expenses of such determinations and
calculations shall be borne by the Company. 
  
 2.5. Company to
Reaffirm Obligations. The Company shall, at the time of each exercise of this Warrant, upon the request of the Holder hereof, acknowledge in writing its continuing obligation to afford to such Holder all rights to which such Holder shall
continue to be entitled after such exercise in accordance with the terms of this Warrant, provided that if the Holder of this Warrant shall fail to make any such request, such failure shall not affect the continuing obligation of the Company
to afford such rights to the Holder. 
  
 2.6. Tax Basis.
The Company and the Holders shall mutually agree as to the tax basis of this Warrant for purposes of the Internal Revenue Code of 1986, as amended, and the treatment of this Warrant under such Code by each of the Company and the Holder shall be
consistent with such agreement. 
  
 3. ADJUSTMENT OF COMMON
STOCK ISSUABLE UPON EXERCISE. 
  
 3.1. General; Warrant
Quantity. This Warrant evidences the right to purchase a number of shares of Common Stock equal to the Warrant Quantity, subject to adjustment and readjustment as provided in this Section 3. 
  
 3.2. Adjustment of Warrant Quantity. 
  
 3.2.1. Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or sell Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 3.3 or 3.4 but excluding Additional Shares of
Common Stock purchasable upon exercise of Rights referred to in Section 3.10) without consideration or for a consideration per share less than the Current Market Price in effect immediately prior to such issue or sale, then, and in each such case,
subject to Section 3.8, the Warrant Quantity shall be increased, concurrently with such issue or sale, to an amount determined by multiplying such Warrant Quantity by a fraction 
  
 (a) the numerator of which shall be the number of shares of Common Stock outstanding immediately after such
issue or sale, provided that, for the purposes of this Section 3.2.1, (i) immediately after any Additional Shares of Common Stock are deemed to have been issued pursuant to Section 3.3 or 3.4, such Additional Shares shall be deemed to be
outstanding, and (ii) treasury shares shall not be deemed to be outstanding, and 
  
 (b) the denominator of which shall be the sum of (x) the number of shares of Common Stock outstanding immediately prior to such issue or
sale and (y) the number of 

  

 7 

 
shares of Common Stock which the aggregate consideration received by the Company for the total number of such Additional Shares of Common Stock so issued or
sold would purchase at such Current Market Price. 
  
 3.2.2.
Extraordinary Dividends and Distributions. In case the Company at any time or from time to time after the date hereof shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of other
or additional stock or other securities or property or Options by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement) on the Common Stock other than (a) a dividend payable in Additional Shares of
Common Stock or (b) a regularly scheduled cash dividend (at a rate not in excess of the rate of the last regularly scheduled cash dividend theretofore paid) payable out of consolidated earnings or earned surplus, determined in accordance with
generally accepted accounting principles, or (c) a dividend of Rights referred to in Section 3.10 hereof, then, in each such case, the Company shall pay to the Holder of this Warrant, at the time such dividend or distribution is paid to the holders
of the Common Stock, an amount equal to the product of (i) the Warrant Quantity and (ii) the Fair Value at such time of such dividend or distribution applicable to one share of Common Stock. 
  
 3.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue, sell, grant or assume, or shall fix a record date for the determination of holders of any class of securities of the Company entitled to receive, any Options or Convertible
Securities (whether or not the rights thereunder are immediately exercisable, but exclusive of options or convertible securities excluded from the definition of Additional Shares of Common Stock), then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating thereto, without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue, sale, grant or assumption or, in case such a record
date shall have been fixed, as of the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), provided that such Additional Shares of Common Stock
shall not be deemed to have been issued unless (i) the consideration per share (determined pursuant to Section 3.5) of such shares would be less than the Current Market Price in effect on the date of and immediately prior to such issue, sale, grant
or assumption or immediately prior to the close of business on such record date (or, if the Common Stock trades on an ex-dividend basis, on the date prior to the commencement of ex-dividend trading), as the case may be, and (ii) such Additional
Shares of Common Stock are not purchasable pursuant to Rights referred to in Section 3.10, and provided, further, that in any such case in which Additional Shares of Common Stock are deemed to be issued. 
  
 (a) whether or not the Additional Shares of Common Stock
underlying such Options or Convertible Securities are deemed to be issued, no further adjustment of the Warrant Quantity shall be made upon the subsequent issue or sale of Convertible Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible Securities, except in the case of any such Options or Convertible Securities which contain provisions requiring an adjustment, 

  

 8 

 
subsequent to the date of the issue or sale thereof, of the number of Additional Shares of Common Stock issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities by reason of (x) a change of control of the Company, (y) the acquisition by any Person or group of Persons of any specified number or percentage of the voting securities of the Company or (z) any
similar event or occurrence, each such case to be deemed hereunder to involve a separate issuance of Additional Shares of Common Stock, Options or Convertible Securities, as the case may be; 
  
 (b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of Additional Shares of Common Stock issuable, upon the exercise, conversion or exchange thereof (by change of
rate or otherwise), the Warrant Quantity computed upon the original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options, or the rights of conversion or exchange
under such Convertible Securities, which are outstanding at such time; 
  
 (c) upon the expiration (or purchase by the Company and cancellation or retirement) of any such Options which shall not have been exercised or the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation or retirement of any such Convertible Securities the rights of conversion or exchange under which) shall not have been exercised, the Warrant Quantity computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence of the record date, or date prior to the commencement of ex-dividend trading, as the case may be, with respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration (or such cancellation or retirement, as the case may be), be recomputed as if: 
  
 (i) in the case of Options for Common Stock or Convertible Securities, the only Additional Shares of Common Stock issued or sold were the
Additional Shares of Common Stock, if any, actually issued or sold upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options, whether or not exercised, plus the consideration actually received by the Company upon such exercise, or for the issue or sale of all such Convertible Securities which were
actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and 
  
 (ii) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued or sold upon the exercise
of such Options were issued at the time of the issue or sale, grant or assumption of such Options, and the consideration received by the Company for the Additional 

  

 9 

 
Shares of Common Stock deemed to have then been issued was the consideration actually received by the Company for the issue, sale, grant or assumption of all
such Options, whether or not exercised, plus the consideration deemed to have been received by the Company (pursuant to Section 3.5) upon the issue or sale of such Convertible Securities with respect to which such Options were actually exercised;

  
 (d) no readjustment pursuant to subdivision
(b) or (c) above shall have the effect of decreasing the Warrant Quantity by an amount in excess of the amount of the adjustment thereof originally made in respect of the issue, sale, grant or assumption of such Options or Convertible Securities;
and 
  
 (e) in the case of any such Options which
expire by their terms not more than 30 days after the date of issue, sale, grant or assumption thereof, no adjustment of the Warrant Quantity shall be made until the expiration or exercise of all such Options, whereupon such adjustment shall be made
in the manner provided in subdivision (c) above. 
  
 3.4.
Treatment of Stock Dividends, Stock Splits, etc. In case the Company at any time or from time to time after the date hereof shall declare or pay any dividend on the Common Stock payable in Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), then, and in each such case, Additional Shares of Common Stock shall be deemed to
have been issued (a) in the case of any such dividend, immediately after the close of business on the record date for the determination of holders of any class of securities entitled to receive such dividend, or (b) in the case of any such
subdivision, at the close of business on the day immediately prior to the day upon which such corporate action becomes effective. 
  
 3.5. Computation of Consideration. For the purposes of this Section 3, 
  
 (a) the consideration for the issue or sale of any Additional Shares of Common Stock shall, irrespective of
the accounting treatment of such consideration, 
  
 (i) insofar as it consists of cash, be computed at the net amount of cash received by the Company, without deducting any expenses paid or incurred by the Company or any commissions or compensations paid or concessions or discounts allowed
to underwriters, dealers or others performing similar services in connection with such issue or sale, 
  
 (ii) insofar as it consists of property (including securities) other than cash, be computed at the Fair Value thereof at the time of such
issue or sale, and 
  
 (iii) in case Additional
Shares of Common Stock are issued or sold together with other stock or securities or other assets of the Company for a consideration which covers both, be the portion of such consideration so received, computed as provided in clauses (i) and (ii)
above, allocable to such Additional 

  

 10 

 
Shares of Common Stock, such allocation to be determined in the same manner that the Fair Value of property not consisting of cash is to be determined as
provided in the definition of ‘Fair Value’ herein; 
  
 (b) Additional Shares of Common Stock deemed to have been issued pursuant to Section 3.3, relating to Options and Convertible Securities, shall be deemed to have been issued for a consideration per share determined by
dividing 
  
 (i) the total amount, if any,
received and receivable by the Company as consideration for the issue, sale, grant or assumption of the Options or Convertible Securities in question, plus the minimum aggregate amount of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration to protect against dilution) payable to the Company upon the exercise in full of such Options or the conversion or exchange of such
Convertible Securities or, in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, in each case computing such consideration as
provided in the foregoing subdivision (a), 
  
 by

  
 (ii) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number to protect against dilution) issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities; and 
  
 (c) Additional Shares of Common Stock deemed to have been issued pursuant to Section 3.4, relating to stock dividends, stock splits, etc., shall be deemed to have been issued for no consideration. 
  
 3.6. Adjustments for Combinations, etc. In case the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or otherwise, into a lesser number of shares of Common Stock, the Warrant Quantity in effect immediately prior to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately decreased. 
  
 3.7. Dilution in Case of Other Securities. In case any Other Securities shall be issued or sold or shall become subject to issue or sale upon the conversion or exchange of any stock (or Other Securities) of the
Company (or any issuer of Other Securities or any other Person referred to in Section 4) or to subscription, purchase or other acquisition pursuant to any Options issued or granted by the Company (or any such other issuer or Person) for a
consideration such as to dilute, on a basis consistent with the standards established in the other provisions of this Section 3, the purchase rights granted by this Warrant, then, and in each such case, the computations, adjustments and
readjustments provided for in this Section 3 with respect to the Warrant Quantity shall be made as nearly as possible in the manner so provided and applied to 

  

 11 

 
determine the amount of Other Securities from time to time receivable upon the exercise of the Warrants, so as to protect the holders of the Warrants against
the effect of such dilution. 
  
 3.8. De Minimis
Adjustments. If the amount of any adjustment of the Warrant Quantity required pursuant to this Section 3 would be less than one tenth (1/10) of one percent (1%) of the Warrant Quantity in effect at the time such adjustment is otherwise so
required to be made, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall
aggregate a change in the Warrant Quantity of at least one tenth (1/10) of one percent (1%) of such Warrant Quantity. All calculations under this Warrant shall be made to the nearest one-hundredth of a share. 
  
 3.9. Abandoned Dividend or Distribution. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution (which results in an adjustment to the Warrant Quantity under the terms of this Warrant) and shall, thereafter, and before such
dividend or distribution is paid or delivered to shareholders entitled thereto, legally abandon its plan to pay or deliver such dividend or distribution, then any adjustment made to the Warrant Quantity by reason of the taking of such record shall
be reversed, and any subsequent adjustments, based thereon, shall be recomputed. 
  
 3.10. Shareholder Rights Plan. Notwithstanding the foregoing, in the event that the Company shall distribute “poison pill” rights pursuant to a “poison pill” shareholder rights plan (the
“Rights”), the Company shall, in lieu of making any adjustment pursuant to Section 3.2.1 or Section 3.2.2 hereof, make proper provision so that each Holder who exercises a Warrant after the record date for such distribution and prior to
the expiration or redemption of the Rights shall be entitled to receive upon such exercise, in addition to the shares of Common Stock issuable upon such exercise, a number of Rights to be determined as follows: (i) if such exercise occurs on or
prior to the date for the distribution to the holders of Rights of separate certificates evidencing such Rights (the “Distribution Date”), the same number of Rights to which a holder of a number of shares of Common Stock equal to the
number of shares of Common Stock issuable upon such exercise at the time of such exercise would be entitled in accordance with the terms and provisions of and applicable to the Rights; and (ii) if such exercise occurs after the Distribution Date,
the same number of Rights to which a holder of the number of shares into which the Warrant so exercised was exercisable immediately prior to the Distribution Date would have been entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights. 
  
 4.
CONSOLIDATION, MERGER, ETC. 
  
 4.1. Adjustments for
Consolidation, Merger, Sale of Assets, Reorganization, etc. In case the Company after the date hereof shall (a) consolidate with or merge into any other Person and shall not be the continuing or surviving corporation of such consolidation or
merger, or (b) permit any other Person to consolidate with or merge into the Company and the Company shall be the continuing or surviving Person but, in connection with such consolidation or merger, the Common Stock or Other Securities shall be
changed into or exchanged for stock or other securities of any other Person or cash or any other property, or (c) transfer all or substantially all of its properties or assets to any other Person, or (d) effect a capital reorganization or 

  

 12 

 
reclassification of the Common Stock or Other Securities, (other than a capital reorganization or reclassification resulting in the issue or Additional
Shares of Common Stock for which adjustment in the Purchase Price is provided in section 3.2.1 or 3.2.2), then, and in the case of each such transaction, proper provision shall be made so that, upon the basis and the terms and in the manner provided
in this Warrant, the Holder of this Warrant, upon the exercise hereof at any time after the consummation of such transaction, shall be entitled to receive (at the aggregate Purchase Price in effect at the time of such consummation for all Common
Stock or Other Securities issuable upon such exercise immediately prior to such consummation), in lieu of the Common Stock or Other Securities issuable upon such exercise prior to such consummation, the highest amount of securities, cash or other
property to which such Holder would actually have been entitled as a shareholder upon such consummation if such Holder had exercised this Warrant immediately prior thereto, subject to adjustments (subsequent to such consummation) as nearly
equivalent as possible to the adjustments provided for in Sections 3 through 5, provided that if a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than 50% of the outstanding shares of Common
Stock, and if the Holder so designates in a notice given to the Company on or before the date immediately preceding the date of the consummation of such transaction, the Holder of this Warrant shall be entitled to receive upon surrender of this
Warrant the highest amount of securities, cash or other property to which it would actually have been entitled as a shareholder if the Holder of this Warrant had exercised this Warrant prior to the expiration of such purchase, tender or exchange
offer and accepted such offer, subject to adjustments (from and after the consummation of such purchase, tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in Sections 3 through 5. 
  
 4.2. Assumption of Obligations. Notwithstanding anything contained in
this Warrant or in the Financing Agreement to the contrary, the Company shall not effect any of the transactions described in clauses (a) through (d) of Section 4.1 unless, prior to the consummation thereof, each Person (other than the Company)
which may be required to deliver any stock, securities, cash or property upon the exercise of this Warrant as provided herein shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder of this Warrant, (a) the
obligations of the Company under this Warrant (and if the Company shall survive the consummation of such transaction, such assumption shall be in addition to, and shall not release the Company from, any continuing obligations of the Company under
this Warrant), (b) the obligations of the Company to the Holder under the Registration Rights Agreement and (c) the obligation to deliver to the Holder such shares of stock, securities, cash or property as, in accordance with the foregoing
provisions of this Section 4, the Holder may be entitled to receive. Nothing in this Section 4 shall be deemed to authorize the Company to enter into any transaction not otherwise permitted by the Financing Agreement. 
  
 5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which
the provisions of Section 3 or Section 4 hereof are not strictly applicable or if strictly applicable would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles of such Sections,
then, in each such case, the Company shall appoint a firm of independent certified public accountants of recognized national standing (which shall be reasonably acceptable to the Holder), which shall give their opinion on the adjustment, if any, on
a basis consistent with the essential intent and principles established in Section 3, necessary to preserve, without dilution, the purchase rights represented by this 

  

 13 

 
Warrant. Upon receipt of such opinion, the Company shall promptly mail a copy thereof to the Holder and shall make the adjustments described therein.

  
 6. NO DILUTION OR IMPAIRMENT. The Company shall not, by
amendment of its certificate of incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Warrant
against dilution or other impairment. Without limiting the generality of the foregoing, the Company shall (a) not permit the par value of any shares of stock receivable upon the exercise of this Warrant to exceed the amount payable therefor upon
such exercise, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of stock, free from all liens, security interests, encumbrances (in each of the
foregoing cases, other than those imposed by the Holder), taxes, preemptive rights and charges on the exercise of the Warrants from time to time outstanding, (c) not take any action which results in an increase of the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise of this Warrant if that total number of issuable shares would exceed the total number of shares of Common Stock (or Other Securities) then authorized by the
Company’s certificate of incorporation and available for the purpose of issue upon such exercise, and (d) shall not issue any capital stock of any class which is preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding-up, unless the rights of the holders thereof shall be limited to a fixed sum or percentage of par value or a sum determined by reference to a formula based on a published index of interest rates, an
interest rate publicly announced by a financial institution or a similar indicator of interest rates in respect of participation in dividends and to a fixed sum or percentage of par value in any such distribution of assets. 
  
 7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable upon the exercise of this Warrant (e.g., by reason of the issuance of Additional Shares of Common Stock or Convertible Securities), the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate, signed by the Chairman of the Board, President or one of the Vice Presidents of the Company, and by the Chief Financial Officer, the
Treasurer or one of the Assistant Treasurers of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the method of calculation thereof and the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued and (b) the number of shares of Common Stock outstanding or deemed to be
outstanding on a Fully Diluted Basis. The Company shall forthwith mail a copy of each such certificate to each holder of a Warrant and shall, upon the written request at any time of any holder of a Warrant, furnish to such holder a like certificate.
The Company shall also keep copies of all such certificates at its principal office and shall cause the same to be available for inspection at such office during normal business hours by any holder of a Warrant or any prospective purchaser of a
Warrant designated by the holder thereof. The Company shall upon the request in writing of the Holder (at the Company’s expense), retain independent public accountants of recognized national standing selected by the 

  

 14 

 
Board of Directors of the Company to make any computation required in connection with adjustments under this Warrant, and a certificate signed by such firm
shall be conclusive evidence of the correctness of such adjustment, which shall be binding on the Holder and the Company. 
  
 8. NOTICES OF CORPORATE ACTION. In the event of: 
  
 (a) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to
receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or 
  
 (b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any consolidation or merger involving the Company and any other Person, any transaction or series of transactions in which more than 50% of the voting securities of the Company are transferred to
another Person, or any transfer, sale or other disposition of all or substantially all the assets of the Company to any other Person, or 
  
 (c) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, 
  
 the Company shall mail to the Holder a notice specifying (i) the date or expected date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right, and (ii) the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, sale, disposition, dissolution, liquidation or winding-up is to take place and the time, if any such time is to be fixed, as of which the holders of record of Common Stock (or Other Securities) shall be entitled to exchange their shares of
Common Stock (or Other Securities) for the securities or other property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 45 days prior to the date therein specified. 
  
 9.
REGISTRATION OF COMMON STOCK . If any shares of Common Stock required to be reserved for purposes of exercise of this Warrant require registration with or approval of any governmental authority under any federal or state law (other than the
Securities Act) before such shares may be issued upon exercise, the Company shall, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered or approved, as the case may be. At any such time as
the Common Stock is listed on any national securities exchange, the Company shall, at its expense, obtain promptly and maintain the approval for listing on each such exchange, upon official notice of issuance, the shares of Common Stock issuable
upon exercise of this Warrant and maintain the listing of such shares after their issuance; and the Company shall also list on such national securities exchange, shall register under the Exchange Act and shall maintain such listing of, any Other
Securities that at any time are issuable upon exercise of this Warrant, if and at the time that any securities of the same class shall be listed on such national securities exchange by the Company. 
  

 15 

 10. RESTRICTIONS ON TRANSFER. 
  
 10.1. Restrictive Legends. Except as otherwise permitted by this Section 10, this Warrant (including any Warrant
issued upon the transfer of this Warrant) shall be stamped or otherwise imprinted with a legend in substantially the following form: 
  
 THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT. 
  
 Except as otherwise permitted by this Section 10, each certificate for Common Stock (or Other
Securities) issued upon the exercise of this Warrant, and each certificate issued upon the transfer of any such Common Stock (or Other Securities), shall be stamped or otherwise imprinted with a legend in substantially the following form:

  
 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN CERTAIN
COMMON STOCK PURCHASE WARRANT ISSUED BY THE COMPANY PURSUANT TO THE FINANCING AGREEMENT, DATED AS OF JULY 16, 2003, BETWEEN THE COMPANY AND THE HOLDER. A COMPLETE AND CORRECT COPY OF SUCH WARRANT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE
AND WILL BE FURNISHED TO THE HOLDER OF SUCH SECURITIES UPON WRITTEN REQUEST AND WITHOUT CHARGE. 
  
 10.2. Transfer to Comply With the Securities Act. Restricted Securities may not be sold, assigned, pledged, hypothecated, encumbered or in any
manner transferred or disposed of (a “Transfer”), in whole or in part, except in compliance with the provisions of the Securities Act and state securities or Blue Sky laws and the terms and conditions hereof. 
  
 10.3. Termination of Restrictions. The restrictions imposed by this
Section 10 on the transferability of Restricted Securities shall cease and terminate as to any particular Restricted Securities (a) when a registration statement with respect to the sale of such securities shall have been declared effective under
the Securities Act and such securities shall have been 

  

 16 

 
disposed of in accordance with such registration statement, (b) when such securities are sold pursuant to Rule 144 (or any similar provision then in force)
under the Securities Act, or (c) when, in the opinion of both counsel for the Holder and counsel for the Company, such restrictions are no longer required or necessary in order to protect the Company against a violation of the Securities Act upon
any sale or other disposition of such securities without registration thereunder. Whenever such restrictions shall cease and terminate as to any Restricted Securities, the Holder shall be entitled to receive from the Company, without expense, new
securities of like tenor not bearing the applicable legends required by Section 9.1. 
  
 10.4. Exempt Transfers. The restrictions on the transfer of this Warrant or the Warrant Shares set forth in this Section 10 shall not apply to an affiliate of the Holder. 
  
 11. REPRESENTATIONS OF COMPANY. 
  
 11.1. Organization and Qualification. The Company is a corporation
duly organized and validly existing in good standing under the laws of the jurisdiction in which it is incorporated, and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company is duly
qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary. 
  
 11.2. Authorization; Enforcement; Compliance with Other Instruments. (a) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this Warrant and the Registration Rights Agreement and to issue the Warrant Shares in accordance with this Warrant, (b) the execution and delivery of this Warrant and the
Registration Rights Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby, including, without limitation, the issuance of this Warrant and the reservation for issuance and the issuance of the Warrant
Shares, upon exercise of this Warrant, have been duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its Board of Directors or its stockholders, (c) the Registration Rights
Agreement and this Warrant have been duly executed and delivered by the Company, and (d) the Registration Rights Agreement and this Warrant constitute the valid and binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of
creditors’ rights and remedies. 
  
 11.3.
Capitalization. As of the date hereof, the authorized capital stock of the Company consists of 20,000,000 shares of Common Stock, par value $0.10 per share, of which as of the date hereof, 8,830,962 shares are issued and outstanding, and
500,000 shares of Preferred Stock, of which as of the date hereof, 32,886 shares are issued and outstanding. All of the outstanding shares of capital stock have been validly issued and are fully paid and nonassessable. No shares of capital stock are
subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company. Except as contemplated by this Warrant and for the securities listed on Schedule 11.3 attached hereto, as of the date hereof,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, 

  

 17 

 
any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, and (ii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of
any of their securities under the Securities Act (except the Registration Rights Agreement and the registration rights agreement, dated as of December 21, 2001, among the Company, First Union National Bank and FSC Corp. and the CIT Registration
Rights Agreement). There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of this Warrant or, upon exercise of this Warrant, the issuance of Warrant Shares, except for
anti-dilution provisions which have been validly waived on or prior to the date hereof in respect of the issuance of this Warrant and, upon exercise of this Warrant, the issuance of Warrant Shares. 
  
 11.4. Issuance of Warrants and Warrant Shares. This Warrant is duly
authorized and, upon issuance in accordance with the terms hereof, will be validly issued, fully paid and non-assessable, free from all taxes, liens and charges with respect to the issue thereof, and shall not be subject to preemptive rights or
other similar rights of stockholders of the Company. The Warrant Shares have been duly authorized and reserved for issuance upon exercise of this Warrant, and upon such exercise, will be validly issued, fully paid and non-assessable, free from all
taxes, liens and charges with respect to the issue thereof, and will not be subject to preemptive rights or other similar rights of stockholders of the Company. 
  

11.5. No Conflicts. The execution, delivery and performance of the Registration Rights Agreement and this Warrant by the Company, and the
consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Warrant Shares) will not (i) result in a violation of any organizational documents governing the Company or (ii)
violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any material agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected. The Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or
governmental or regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Registration Rights Agreement or this Warrant in accordance with the terms hereof or thereof. All
consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. 
  
 11.6. Investment Company Status. The Company is not and, upon issuance
of this Warrant or the Warrant Shares, will not be an “investment company,” a company controlled by an “investment company” or an “affiliated person” of, or “promoter” or “principal underwriter” for,
an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended. 
  

 18 

 12. AVAILABILITY OF INFORMATION. So long as the Company shall not have filed a registration
statement pursuant to Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company shall, at any time and from time to time, upon the request of any holder of Restricted Securities and
upon the request of any Person designated by such holder as a prospective purchaser of any Restricted Securities, furnish in writing to such holder or such prospective purchaser, as the case may be, a statement as of a date not earlier than 12
months prior to the date of such request of the nature of the business of the Company and the products and services it offers and copies of the Company’s most recent balance sheet and profit and loss and retained earnings statements, together
with similar financial statements for such part of the two preceding fiscal years as the Company shall have been in operation, all such financial statements to be audited to the extent audited statements are reasonably available, provided
that, in any event the most recent financial statements so furnished shall include a balance sheet as of a date less than 16 months prior to the date of such request, statements of profit and loss and retained earnings for the 12 months preceding
the date of such balance sheet, and, if such balance sheet is not as of a date less than six months prior to the date of such request, additional statements of profit and loss and retained earnings for the period from the date of such balance sheet
to a date less than six months prior to the date of such request. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company shall timely file the reports required to be filed by it under the Securities Act and the Exchange Act (including but not limited to the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph
(c) of Rule 144 adopted by the Commission under the Securities Act)) and will take such further action as any holder of Restricted Securities may reasonably request, all to the extent required from time to time to enable such holder to sell
Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as such rules may be amended from time to time, or (b) any other rule or
regulation now existing or hereafter adopted by the Commission. Upon the request of any holder of Restricted Securities, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. 
  
 13. RESERVATION OF STOCK, ETC. The Company shall at all times reserve
and keep available, solely for issuance and delivery upon exercise of this Warrant, the number of shares of Common Stock (or Other Securities) from time to time issuable upon exercise of this Warrant at the time outstanding. All shares of Common
Stock (or Other Securities) issuable upon exercise of this Warrant shall be duly authorized and, when issued upon such exercise or conversion, shall be validly issued and, in the case of shares, fully paid and nonassessable, with no liability on the
part of the holders thereof, and, in the case of all securities, shall be free from all taxes, liens, security interests, encumbrances (in each of the foregoing cases, other than those imposed by the Holder), taxes, preemptive rights and charges.
The transfer agent for the Common Stock, which may be the Company (“Transfer Agent”), and every subsequent Transfer Agent for any shares of the Company’s capital stock issuable upon the exercise of any of the purchase rights
represented by this Warrant, are hereby irrevocably authorized and directed at all times until the Expiration Date to reserve such number of authorized and unissued shares as shall be requisite for such purpose. The Company shall keep copies of this
Warrant on file with the Transfer Agent for the Common Stock and with every subsequent Transfer Agent for any shares of the Company’s capital stock issuable upon the 
  

 19 

 
exercise of the rights of purchase represented by this Warrant. The Company shall supply such Transfer Agent with duly executed stock certificates for such
purpose. All Warrants surrendered upon the exercise of the rights thereby evidenced shall be canceled, and such canceled Warrants shall constitute sufficient evidence of the number of shares of stock which have been issued upon the exercise of such
Warrants. Subsequent to the Expiration Date, no shares of stock need be reserved by the Company in respect of any unexercised portion of this Warrant. 
  
 14. REGISTRATION AND TRANSFER OF WARRANTS; CALL RIGHT. 
  
 14.1. Warrant Register; Ownership of Warrants. This Warrant shall be numbered and shall be registered in a warrant register (the “Warrant
Register”) as it is issued and transferred, which Warrant Register shall be maintained by the Company at its principal office or, at the Company’s election and expense, by a warrant agent or the Company’s transfer agent. The Company
shall be entitled to treat the registered Holder of this Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Warrant on the part of any
other Person, and shall not be affected by any notice to the contrary, except that, if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of this Warrant for all
purposes. Subject to Section 10, a Warrant, if properly assigned, may be exercised by a new holder without a new Warrant first having been issued. 
  
 14.2. Transfer of Warrants. Subject to compliance with Section 9, if applicable, this Warrant and all rights hereunder are transferable in whole or
in part, without charge to the Holder hereof, upon surrender of this Warrant with a properly executed Form of Assignment attached hereto as Exhibit B at the principal office of the Company. Upon any partial transfer, the Company shall at its expense
issue and deliver to the Holder a new Warrant of like tenor, in the name of the Holder, which shall be exercisable for such number of shares of Common Stock with respect to which rights under this Warrant were not so transferred. 
  
 14.3. Replacement of Warrants. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement reasonably satisfactory in form and
amount to the Company or, in the case of any such mutilation, on surrender of such Warrant to the Company at its principal office and cancellation thereof, the Company at its expense shall execute and deliver, in lieu thereof, a new Warrant of like
tenor. 
  
 14.4. Adjustments To Number of Shares.
Notwithstanding any adjustment in the number or kind of shares of Common Stock purchasable upon exercise of this Warrant, any Warrant theretofore or thereafter issued may continue to express the same number and kind of shares of Common Stock as are
stated in this Warrant, as initially issued. 
  
 14.5.
Fractional Shares. Notwithstanding any adjustment pursuant to Section 3 in the number of shares of common Stock covered by this Warrant or any other provision of this warrant, the Company shall not be required to issue fractions of shares
upon exercise of this Warrant or to distribute certificates which evidence fractional shares. In lieu of fractional shares, the Company shall make payment to the Holder, at the time of exercise of this Warrant as herein 

  

 20 

 
provided, in an amount in cash equal to such fraction multiplied by the Current Market Price of a share of Common Stock on the date of Warrant exercise.

  
 14.6. Call Right. If the Company has fully repaid the
Obligations prior to the one year anniversary of the date of issuance of this Warrant, and subject to the provisions of this Section 14.6, the Company shall have the right to purchase all (but not less than all) of the unexercised portion of this
Warrant from the Holder. The Company may exercise its call right on the date of repayment of the Obligations by providing written notice to the Holder (the “Call Notice”). Any exercise by the Company of its call right shall be irrevocable.
The closing of the purchase by the Company, and the sale by the Holder, of this Warrant, following exercise by the Company of its call right (the “Call Closing”) shall be held at the principal office of Holder or its legal counsel on the
second (2nd) business day following Holder’s receipt of the Company’s Call Notice. At the Call Closing, Holder shall deliver the unexercised portion of this Warrant to the Company against receipt from the Company of the aggregate Call
Price (as defined below) therefor in cash by wire transfer of immediately available funds to Holder’s designated account. As used herein: “Call Price” shall mean prior to the six-month anniversary of the date of this Warrant, the
higher of (a) $125,000 and (b) the Current Market Price, and after such six-month anniversary of the date of this Warrant, the higher of (a) $250,000 and (b) the Current Market Price. If Holder tenders this Warrant at the Call Closing and the
Company fails to tender payment of the required aggregate Call Price at the Call Closing, then the Company’s call right shall thereupon terminate and be of no force or effect, notwithstanding its previous exercise thereof, and the Company shall
indemnify Holder against all costs, expenses (including without limitation reasonable attorneys’ fees), losses and damages paid, suffered or incurred by Holder as a result of the Company’s exercise of such call right and failure to tender
such aggregate Call Price. 
  
 15. REMEDIES; SPECIFIC
PERFORMANCE. The Company stipulates that there would be no adequate remedy at law to the Holder of this Warrant in the event of any default or threatened default by the Company in the performance of or compliance with any of the terms of this
Warrant and accordingly, the Company agrees that, in addition to any other remedy to which the Holder may be entitled at law or in equity, the Holder shall be entitled to seek to compel specific performance of the obligations of the Company under
this Warrant, without the posting of any bond, in accordance with the terms and conditions of this Warrant in any court of the United States or any State thereof having jurisdiction, and if any action should be brought in equity to enforce any of
the provisions of this Warrant, the Company shall not raise the defense that there is an adequate remedy at law. Except as otherwise provided by law, a delay or omission by the Holder hereto in exercising any right or remedy accruing upon any such
breach shall not impair the right or remedy or constitute a waiver of or acquiescence in any such breach. No remedy shall be exclusive of any other remedy. All available remedies shall be cumulative. 
  
 16. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in this
Warrant shall be construed as conferring upon the Holder hereof any rights as a shareholder of the Company or as imposing any obligation on the Holder to purchase any securities or as imposing any liabilities on the Holder as a shareholder of the
Company, whether such obligation or liabilities are asserted by the Company or by creditors of the Company. 
  

 21 

 17. NOTICES. All notices and other communications (and deliveries) provided for or permitted
hereunder shall be made in writing by hand delivery, telecopier, any nationally-recognized courier guaranteeing overnight delivery or first class registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

  

	 If to the Company:
	 	 Cybex International, Inc.

	 	 	 10 Trotter Drive

	 	 	 Medway, Massachusetts, 02053

	 	 	 Attention: Arthur Hicks

	 	 	 Fax: (508) 533-5799

		
	 with copies to:
	 	 Archer & Greiner,

	 	 	 A Professional Corporation

	 	 	 One Centennial Square

	 	 	 Haddonfield, NJ 08033

	 	 	 Attention: James H. Carll

	 	 	 Fax: (856) 795-0574

		
	 If to Holder:
	 	 Hilco Capital LP

	 	 	 One Northbrook Place

	 	 	 5 Revere Drive, Suite 202

	 	 	 Northbrook, Illinois 60062

	 	 	 Attention: Portfolio Administrator

	 	 	 Fax: (847) 559-9330

		
	 with copies to:
	 	 Schulte Roth & Zabel LLP

	 	 	 919 Third Avenue

	 	 	 New York, New York 10022

	 	 	 Attn: Frederic L. Ragucci, Esq.

	 	 	 Fax No. (212) 593-5955

  
 All such notices and
communications (and deliveries) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when receipt is acknowledged, if telecopied; on the next Business Day, if timely delivered to a courier guaranteeing
overnight delivery; and five days after being deposited in the mail, if sent first class or certified mail, return receipt requested, postage prepaid; provided, that the exercise of any Warrant shall be effective in the manner provided in
Section 2. 
  
 18. AMENDMENTS. This Warrant and any term
hereof may not be amended, modified, supplemented or terminated, and waivers or consents to departures from the provisions hereof may not be given, except by written instrument duly executed by the party against which enforcement of such amendment,
modification, supplement, termination or consent to departure is sought. 
  
 19. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this
Warrant otherwise requires: (1) words of any 

  

 22 

 
gender shall be deemed to include each other gender; (2) words using the singular or plural number shall also include the plural or singular number,
respectively; (3) the words “hereof”, “herein” and “hereunder” and words of similar import when used in this Warrant shall refer to this Warrant as a whole and not to any particular provision of this Warrant, and
Section and paragraph references are to the Sections and paragraphs of this Warrant unless otherwise specified; (4) the word “including” and words of similar import when used in this Warrant shall mean “including, without
limitation,” unless otherwise specified; (5) “or” is not exclusive; and (6) provisions apply to successive events and transactions. 
  
 20. GOVERNING LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to
the conflict of laws principles thereof). 
  
 21. COSTS AND
ATTORNEYS’ FEES. In the event that any action, suit or other proceeding is instituted concerning or arising out of this Warrant, the Company shall pay all of the Holder’s costs and reasonable attorneys’ fees incurred in each and
every such action, suit or other proceeding, including any and all appeals or petitions therefrom. 
  
 22. JUDICIAL PROCEEDINGS. Any legal action, suit or proceeding brought against the Company with respect to this Warrant may be brought in any
federal court of the Southern District of New York or any state court located in New York County, State of New York, and by execution and delivery of this Warrant, the Company hereby irrevocably and unconditionally waives any claim (by way of
motion, as a defense or otherwise) of improper venue, that it is not subject personally to the jurisdiction of such court, that such courts are an inconvenient forum or that this Warrant or the subject matter may not be enforced in or by such court.
The Company hereby irrevocably and unconditionally consents to the service of process of any of the aforementioned courts in any such action, suit or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, at
its address set forth or provided for in Section 17, such service to become effective 10 days after such mailing. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by law or commence
legal proceedings or otherwise proceed against any other party in any other jurisdiction to enforce judgments obtained in any action, suit or proceeding brought pursuant to this Section. 
  

 23 

 23. REGISTRATION RIGHTS AGREEMENT. The shares of Common Stock (and Other Securities) issuable upon
exercise of this Warrant (or upon conversion of any shares of Common Stock issued upon such exercise) shall constitute Registrable Securities (as such term is defined in the Registration Rights Agreement). Each holder of this Warrant shall be
entitled to all of the benefits afforded to a holder of any such Registrable Securities under the Registration Rights Agreement and such holder, by its acceptance of this Warrant, agrees to be bound by and to comply with the terms and conditions of
the Registration Rights Agreement applicable to such holder as a holder of such Registrable Securities. 
  

	CYBEX INTERNATIONAL, INC.
		
	 By:
	 	 /s/ Arthur W. Hicks, Jr.

	 	 	 Name:
Arthur W. Hicks, Jr.

	 	 	 Title: Chief Financial Officer

  

 24 

 EXHIBIT A to 
 Common Stock Purchase Warrant 
  
 ELECTION TO PURCHASE SHARES 
  
 The undersigned hereby
irrevocably elects to exercise the Warrant to purchase              shares of Common Stock, par value $0.10 per share (“Common Stock”), of Cybex International, Inc. and
hereby [makes payment of $                     therefor] [or] [makes payment therefor by application pursuant to Section 2.1(b)(ii) of the
Warrant of $                     aggregate principal amount of Notes (as defined in the Warrant)] [or] [makes payment therefor by reduction
pursuant to Section 2.1(b)(iii) of the Warrant of the number of shares of Common Stock otherwise issuable to the Holder upon Warrant exercise by              shares] [or] [makes
payment therefor by delivery of the following Common Stock Certificates of the Company (properly endorsed for transfer in blank) for cancellation by the Company pursuant to Section 2.1(b)(iv) of the Warrant, certificates of which are attached hereto
for cancellation 
  
 [list certificates by number and amount]].
The undersigned hereby requests that certificates for such shares be issued and delivered as follows: 
  
 ISSUE TO:                                    
                                        
                                        
                                        
                                        
                                        

(NAME) 
  
                                       
                                        
                                        
                                        
                                        
                                        
                    
 (ADDRESS, INCLUDING
ZIP CODE) 
  
                                       
                                        
                                        
                                        
                                        
                                        
                    
 (SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER) 
  
 DELIVER TO:                                    
                                        
                                        
                                        
                                        
                                 
  
                                       
                                        
                                        
                                        
                                        
                                        
                    
 (NAME) 
  
                                       
                                        
                                        
                                        
                                        
                                        
                    
 (ADDRESS, INCLUDING
ZIP CODE) 
  
 If the number of shares of Common Stock purchased
(and/or reduced) hereby is less than the number of shares of Common Stock covered by the Warrant, the undersigned requests that a new Warrant representing the number of shares of Common Stock not so purchased (or reduced) be issued and delivered as
follows: 
  
 ISSUE TO:                                    
                                        
                                        
                                        
                                        
                                        

(NAME OF HOLDER) 
  
                                       
                                        
                                        
                                        
                                        
                                        
                    
 (ADDRESS, INCLUDING
ZIP CODE) 
  
 DELIVER TO:                                    
                                        
                                        
                                        
                                        
                                 
 (NAME OF HOLDER) 
  
                                       
                                        
                                        
                                        
                                        
                                        
                    
 (ADDRESS, INCLUDING
ZIP CODE) 
  

	Dated:                     , 200  	 	 	 	 HOLDER

					
	 	 	 	 	 	 	By	 	  

	 	 	 	 	 	 	 	 	 Name:

	 	 	 	 	 	 	 	 	 Title:

 ASSIGNMENT 
  
 FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the Assignee named below all of the rights of the undersigned to purchase
Common Stock, par value $0.10 per share (“Common Stock”) of Cybex International, Inc. represented by the Warrant, with respect to the number of shares of Common Stock set forth below: 
  

	 Name of Assignee
	 	 Address
	 	 No. of Shares

  
 and does hereby irrevocably constitute
and appoint Cybex International, Inc. to make such transfer on its books maintained for that purpose, with full power of substitution in the premises. 
  

	 Dated:
                    , 200  
	 	 	 	 HILCO CAPITAL LP

					
	 	 	 	 	 	 	By	 	  

	 	 	 	 	 	 	 	 	 Name:

	 	 	 	 	 	 	 	 	 Title:

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