Document:

Exhibit 4.1

 

	
  

  	
   

  	
  NOT
  VALID UNLESS COUNTERSIGNED BY TRANSFER AGENT.

  	
   

  	
  “THE
  SHARES REPRESENTED BY THIS 

  
	
  INCORPORATED
  UNDER THE LAWS OF THE STATE OF NEVADA.

  	
   

  	
  CERTIFICATE
  ARE ADJUSTED TO REFLECT 

  
	
   

  	
   

  	
  A 1 FOR
  10 REVERSE SPLIT EFFECTIVE BY 

  
	
   

  	
   

  	
  THE
  CORPORATION ON 2/14/2008.

  
	
   

  	
   

  	
   

  
	
  PROUROCARE MEDICAL INC.

  	
   

  	
  XXXXXXXXXXXXXXXX

  
	
  

  AUTHORIZED COMMON STOCK: 50,000,000 SHARES · PAR VALUE: $0.00001

  	
   

  	
  

  
	
   

  	
   

  	
  CUSIP NO. 74373C 20 6

  
	
   

  	
   

  	
   

  
	
  THIS  CERTIFIES THAT

   

  	
   

  	
   

  
	
  Is
  The Record Holder Of

  	
   

  	
   

  
	
   

  
	
  Shares
  of PROUROCARE MEDICAL INC. Common Stock

  transferable on the books
  of the Corporation in person or by duly authorized attorney  upon surrender of this Certificate properly
  endorsed.  This Certificate is not
  valid until countersigned by the Transfer Agent and registered by the
  Registrar.

  
	
   

  
	
  Witness the facsimile seal of the Corporation and the facsimile signatures
  of its duly authorized officers.

  
	
   

  
	
  Dated:

  
	
   

  
	
   

  
	
   

  
	
  /s/ Richard C. Carlson

  	
   

  
	
  PRESIDENT

  	
  [SEAL]

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ David F. Koenig

  	
   

  
	
  SECRETARY

  	
   

  
										

 

	
   INTERWEST
  TRANSFER CO. INC. P.O. BOX 17136/SALT LAKE CITY, UTAH 84117

  	
   

  	
  COUNTERSIGNED
  & REGISTERED

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  COUNTERSIGNED  Transfer Agent-Authorized
  Signature

  

 

#6 ·
Copyrights© 2004 / Reynolds Graphics. Inc. / Salt Lake City, Urah

 

 

The
following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.

 

	
  TEN
  COM 

  	
  -

  	
  as
  tenants in common

  	
   

  	
  UNIF
  GIFT MIN ACT -

  	
   

  	
  Custodian

  	
   

  
	
  TEN
  ENT

  	
  -

  	
  as
  tenants by the entireties

  	
   

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  
	
  JT
  TEN

  	
  -

  	
  as
  joint tenants with right of

  	
   

  	
   

  	
  under Uniform Gifts to Minors

  
	
   

  	
   

  	
  survivorship
  and not as tenants

  	
   

  	
   

  	
   

  	
  Act

  	
   

  
	
   

  	
   

  	
  in
  common

  	
   

  	
   

  	
   

  	
  (State)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Additional abbreviations may also be used though not in the above
  list.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For Value Received,
                           
  hereby sell, assign and transfer unto

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  
	
  (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
  ASSIGNEE)

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
														

 

Shares of the capital
stock represented by the within certificate, and do hereby irrevocably
constitute and appoint _________________

 

                                                                                                                                                                           Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

 

	
  Dated

  	
   

  	
   

  

 

 

 

	
  NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
  AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
  ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER

  

 

· NOTICE SIGNATURE
GUARANTEED:

 

SIGNATURE(S) MUST
BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED NATIONAL STOCK
EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK). OR A TRUST COMPANY. THE
GUARANTEEING FIRM MUST BE A MEMBER OF THE MEDALLION
GUARANTEE PROGRAM.

 

TRANSFER FEE WILL APPLY

 

***FOR MEDALLION GUARANTEE USE ONLY***Exhibit 10.51

 

EXECUTION VERSION

 

 

 

AMENDED AND RESTATED

 

CREDIT AND SECURITY AGREEMENT

 

dated as of

 

January 27, 2009

 

among

 

UFP TECHNOLOGIES, INC.,

 

MOULDED FIBRE TECHNOLOGY, INC.,

 

SIMCO INDUSTRIES, INC.,

 

SIMCO AUTOMOTIVE TRIM, INC.,

 

STEPHENSON & LAWYER, INC.

 

and

 

PATTERSON PROPERTIES CORPORATION

 

as joint and several borrowers,

 

the GUARANTORS 

from time to time party hereto,

 

and

 

BANK OF AMERICA, N.A.,

 

as Lender

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  1

  	
  DEFINITIONS

  	
  1

  
	
  1.1

  	
  Defined Terms

  	
  1

  
	
  1.2

  	
  Terms Generally

  	
  21

  
	
  1.3

  	
  Accounting Terms; GAAP

  	
  22

  
	
  1.4

  	
  Joint and Several
  Obligations; Designated Financial Officers

  	
  22

  
	
  ARTICLE
  2

  	
  THE
  CREDITS

  	
  22

  
	
  2.1

  	
  Revolving Loans

  	
  22

  
	
  2.2

  	
  Term Loans

  	
  24

  
	
  2.3

  	
  LIBOR Borrowings

  	
  26

  
	
  2.4

  	
  Letters of Credit and
  Acceptances

  	
  27

  
	
  2.5

  	
  Expiration, Termination or
  Reduction of Revolving Credit Commitment

  	
  30

  
	
  2.6

  	
  Payments

  	
  30

  
	
  2.7

  	
  Prepayment of Loans

  	
  31

  
	
  2.8

  	
  Fees

  	
  33

  
	
  2.9

  	
  Increased Costs

  	
  34

  
	
  2.10

  	
  Taxes

  	
  35

  
	
  ARTICLE
  3

  	
  GUARANTEE
  BY GUARANTORS

  	
  36

  
	
  3.1

  	
  The Guarantee

  	
  36

  
	
  3.2

  	
  Obligations Unconditional

  	
  36

  
	
  3.3

  	
  Reinstatement

  	
  37

  
	
  3.4

  	
  Subrogation

  	
  37

  
	
  3.5

  	
  Remedies

  	
  37

  
	
  3.6

  	
  Instrument for the Payment
  of Money

  	
  37

  
	
  3.7

  	
  Continuing Guarantee

  	
  37

  
	
  3.8

  	
  General Limitation on
  Amount of Obligations Guaranteed

  	
  37

  
	
  ARTICLE
  4

  	
  THE
  COLLATERAL

  	
  38

  
	
  4.1

  	
  Grant of Security Interest

  	
  38

  
	
  4.2

  	
  Special Warranties and
  Covenants of the Credit Parties

  	
  39

  
	
  4.3

  	
  Collection of Proceeds of
  Accounts Receivable

  	
  42

  
	
  4.4

  	
  Fixtures, etc.

  	
  43

  
	
  4.5

  	
  Right of Lender to Dispose
  of Collateral, etc.

  	
  43

  
	
  4.6

  	
  Right of Lender to Use and
  Operate Collateral, etc.

  	
  44

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  4.7

  	
  Proceeds of Collateral

  	
  44

  
	
  ARTICLE
  5

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  44

  
	
  5.1

  	
  Organization; Powers

  	
  44

  
	
  5.2

  	
  Authorization;
  Enforceability

  	
  45

  
	
  5.3

  	
  Governmental Approvals; No
  Conflicts

  	
  45

  
	
  5.4

  	
  Financial Condition; No
  Material Adverse Change

  	
  45

  
	
  5.5

  	
  Properties

  	
  46

  
	
  5.6

  	
  Litigation and
  Environmental Matters

  	
  47

  
	
  5.7

  	
  Compliance with Laws and
  Agreements

  	
  47

  
	
  5.8

  	
  Investment and Holding
  Company Status

  	
  47

  
	
  5.9

  	
  Taxes

  	
  47

  
	
  5.10

  	
  ERISA

  	
  47

  
	
  5.11

  	
  Disclosure

  	
  48

  
	
  5.12

  	
  Capitalization

  	
  48

  
	
  5.13

  	
  Subsidiaries

  	
  48

  
	
  5.14

  	
  Material Indebtedness,
  Liens and Agreements

  	
  49

  
	
  5.15

  	
  Federal Reserve
  Regulations

  	
  49

  
	
  5.16

  	
  Solvency

  	
  49

  
	
  5.17

  	
  Force Majeure

  	
  50

  
	
  5.18

  	
  Accounts Receivable

  	
  50

  
	
  5.19

  	
  Labor and Employment
  Matters

  	
  51

  
	
  5.20

  	
  Bank Accounts

  	
  51

  
	
  5.21

  	
  Certain Obligations
  Respecting Subsidiaries

  	
  51

  
	
  ARTICLE
  6

  	
  CONDITIONS

  	
  52

  
	
  6.1

  	
  Effective Time

  	
  52

  
	
  6.2

  	
  Each Extension of Credit

  	
  55

  
	
  6.3

  	
  Michigan Real Estate Term
  Loan Effective Time

  	
  55

  
	
  ARTICLE
  7

  	
  AFFIRMATIVE
  COVENANTS

  	
  56

  
	
  7.1

  	
  Financial Statements and
  Other Information

  	
  56

  
	
  7.2

  	
  Notices of Material Events

  	
  58

  
	
  7.3

  	
  Existence; Conduct of
  Business

  	
  59

  
	
  7.4

  	
  Payment of Obligations

  	
  59

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  7.5

  	
  Maintenance of Properties;
  Insurance

  	
  59

  
	
  7.6

  	
  Books and Records;
  Inspection Rights

  	
  59

  
	
  7.7

  	
  Fiscal Year

  	
  60

  
	
  7.8

  	
  Compliance with Laws

  	
  60

  
	
  7.9

  	
  Use of Proceeds

  	
  60

  
	
  7.10

  	
  Certain Obligations
  Respecting Subsidiaries

  	
  60

  
	
  7.11

  	
  ERISA

  	
  60

  
	
  7.12

  	
  Environmental Matters;
  Reporting

  	
  61

  
	
  7.13

  	
  Matters Relating to
  Additional Real Property Collateral

  	
  61

  
	
  7.14

  	
  Cash Deposits/Bank
  Accounts

  	
  61

  
	
  ARTICLE
  8

  	
  NEGATIVE
  COVENANTS

  	
  62

  
	
  8.1

  	
  Indebtedness

  	
  62

  
	
  8.2

  	
  Liens

  	
  62

  
	
  8.3

  	
  Contingent Liabilities

  	
  63

  
	
  8.4

  	
  Fundamental Changes; Asset
  Sales

  	
  63

  
	
  8.5

  	
  Investments; Hedging
  Agreements

  	
  66

  
	
  8.6

  	
  Restricted Junior Payments

  	
  66

  
	
  8.7

  	
  Transactions with
  Affiliates

  	
  66

  
	
  8.8

  	
  Restrictive Agreements

  	
  67

  
	
  8.9

  	
  Sale-Leaseback
  Transactions

  	
  67

  
	
  8.10

  	
  Fixed Charge Coverage
  Ratio

  	
  67

  
	
  8.11

  	
  Lines of Business

  	
  67

  
	
  8.12

  	
  Other Indebtedness

  	
  67

  
	
  8.13

  	
  Modifications of Certain
  Documents

  	
  67

  
	
  ARTICLE
  9

  	
  EVENTS
  OF DEFAULT

  	
  68

  
	
  9.1

  	
  Events of Default

  	
  68

  
	
  9.2

  	
  Receivership

  	
  70

  
	
  ARTICLE
  10

  	
  MISCELLANEOUS

  	
  71

  
	
  10.1

  	
  Notices

  	
  71

  
	
  10.2

  	
  Waivers; Amendments

  	
  71

  
	
  10.3

  	
  Expenses; Indemnity;
  Damage Waiver

  	
  72

  
	
  10.4

  	
  Successors and Assigns

  	
  73

  

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  10.5

  	
  Survival

  	
  74

  
	
  10.6

  	
  Counterparts; Integration;
  References to Agreement; Effectiveness

  	
  74

  
	
  10.7

  	
  Severability

  	
  74

  
	
  10.8

  	
  Right of Setoff

  	
  74

  
	
  10.9

  	
  Subordination by Credit
  Parties

  	
  75

  
	
  10.10

  	
  Governing Law;
  Jurisdiction; Consent to Service of Process

  	
  75

  
	
  10.11

  	
  WAIVER OF JURY TRIAL

  	
  76

  
	
  10.12

  	
  Arbitration

  	
  76

  
	
  10.13

  	
  Headings

  	
  77

  
	
  10.14

  	
  Confidentiality

  	
  77

  

 

iv

 

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

 

THIS
AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT dated as of January 27,
2009 (this “Agreement”) is by and among UFP Technologies, Inc., a
Delaware corporation, Moulded Fibre Technology, Inc., a Maine corporation,
Simco Industries, Inc., a Michigan corporation, Simco Automotive Trim, Inc.,
a Michigan corporation, Stephenson & Lawyer, Inc., a Michigan
corporation, and Patterson Properties Corporation, a Michigan corporation, as
joint and several borrowers, the guarantors from time to time party hereto, and
BANK OF AMERICA, N.A., as Lender.

 

This
Agreement amends, restates and supersedes the Credit and Security Agreement
dated as of February 28, 2003 (as amended, the “Prior Credit Agreement”)
by and among UFP Technologies, Inc., Moulded Fibre Technology, Inc.,
Simco Industries, Inc. and Simco Automotive Trim, Inc., as joint and
several borrowers, the guarantors from time to time party thereto, and Bank of
America, N.A. (as assignee of Banc of America Leasing & Capital LLC,
successor to Fleet Capital Corporation), as Lender.

 

The
parties hereto agree as follows:

 

ARTICLE 1

 

Definitions

 

1.1           Defined
Terms.  As used in this
Agreement, the following terms have the meanings specified below:

 

“Acceptance
Agreement” means the Lender’s standard form of agreement for Acceptances,
substantially in the form of Exhibit F, as the same may be modified
or replaced by the Lender from time to time.

 

“Acceptances”
means acceptance transactions not involving a letter of credit in support of
trade obligations of the Credit Parties pursuant to this Agreement.

 

“Additional
Mortgage” has the meaning assigned to such term in Section 7.13(a).

 

“Additional
Mortgaged Property” means any Real Property Asset that is now owned or
leased, or hereinafter acquired, by the Credit Parties, which the Lender
determines to acquire a Mortgage on following the Closing Date.

 

“Advance
Request” means a written request signed by a Designated Financial Officer
for a Borrowing in accordance with subsection 2.1(b), in substantially the
form of Exhibit B-4 annexed hereto.

 

“Affiliate”
means, with respect to a specified Person, another Person that Controls or is
Controlled by or is under common Control with the Person specified.

 

“Applicable Margin” and “Applicable Unused
Fee Rate” means, for any Type of Loans (a) for the Initial Payment
Period (as defined below) the following percentages per annum:

 

	
  Applicable Margin (% per annum) 

  	
   

  	
  Applicable Unused Fee Rate

  	
   

  
	
  Base Rate Loans

  	
   

  	
  LIBOR Loans

  	
   

  	
   (% per annum)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  -0.25

  	
  %

  	
  1.00

  	
  %

  	
  0.15

  	
  %

  

 

and
(b) for any
Payment Period (as defined below) other than the Initial Payment Period, the
respective rates indicated below for Loans of such Type opposite the applicable
Fixed Charge Coverage Ratio indicated below (or as provided in the final
paragraph of this definition, for part of a Payment Period):

 

1

 

	
   

  	
   

  	
  Applicable Margin (% per annum)

  	
   

  	
   

  	
   

  
	
  Fixed Charge Coverage 

  Ratio

  	
   

  	
  Base Rate Loans

  	
   

  	
  LIBOR Loans,

  Acceptances,

  LC Margin

  	
   

  	
  Applicable Unused Fee

  Rate (% per annum)

  	
   

  
	
  Greater than or
  equal to 1.75 to 1.00

  	
   

  	
  -0.25

  	
  %

  	
  1.00

  	
  %

  	
  0.15

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Greater than
  1.50 to 1.00 but less than 1.75 to 1.00

  	
   

  	
  -0.25

  	
  %

  	
  1.25

  	
  %

  	
  0.20

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less than 1.50
  to 1.00

  	
   

  	
  0.00

  	
  %

  	
  1.50

  	
  %

  	
  0.20

  	
  %

  

 

For
purposes hereof, a “Payment Period” means (i) initially, the period
commencing on the Closing Date to and including the fifth Business Day after
the date of delivery of the financial statements required by subsection 7.1(b) and
the Compliance Certificate required by subsection 7.1(c) for the fiscal
period of the Credit Parties ended December 31, 2008 (the “Initial
Payment Period”), and (ii) thereafter, the period commencing on the
day immediately succeeding the last day of the prior Payment Period to but not
including the fifth Business Day after the earlier of (x) the due date of
the next Compliance Certificate required to be delivered by the Borrowers to
the Lender pursuant to subsection 7.1(c) concurrently with the delivery
by the Borrowers of the financial statements required by subsection 7.1(b) to
be delivered to the Lender for the periods ended March 31st, June 30th, September 30th and December 31st of each year, or (y) the date of the
actual receipt by the Lender of such Compliance Certificate.  Subject to and in accordance with the final
paragraph of this definition, the Applicable Margin and Applicable Unused Fee
Rate shall be effective for each Payment Period (or in the circumstances
described in the final paragraph of this definition, such portion of a Payment
Period).

 

The
Applicable Margin and Applicable Unused Fee Rate for any Payment Period except
the Initial Payment Period shall be determined on the basis of the Compliance
Certificates required to be delivered to the Lender pursuant to
subsection 7.1(c) concurrently with the delivery by the Borrowers of
the corresponding financial statements required by subsection 7.1(b) to be
delivered to the Lender for the periods ended March 31st, June 30th, September 30th and December 31st of each year, setting forth, among other
things, a calculation of the Fixed Charge Coverage Ratio as at the last day of
the fiscal quarter immediately preceding such Payment Period.

 

Anything
in this Agreement to the contrary notwithstanding, the Applicable Margin and
Applicable Unused Fee Rate shall be the rates applicable when the Fixed Charge
Coverage Ratio is less than 1.50 to 1.00 if the Compliance Certificate required
to be delivered by subsection 7.1(c) and the financial statements required
by subsection 7.1(b), respectively, shall not be delivered within five Business
Days after the same shall be due (but only with respect to the portion of such
Payment Period prior to the delivery of such certificate).

 

“Base
Rate” means, for any day, a per annum rate equal to the greater of (a) the
Prime Rate for such day; or (b) the Federal Funds Rate for such day, plus
0.50%.   Any change in the Base Rate due
to a change in the Prime Rate or the Federal Funds Rate shall be effective from
and including the effective date of such change in the Prime Rate or the
Federal Funds Rate, respectively.

 

“Board”
means the Board of Governors of the Federal Reserve System of the United States
of America.

 

2

 

“Borrower”
means (a) UFP Technologies, Inc., Moulded Fibre Technology, Inc.,
Simco Industries, Inc., Simco Automotive Trim, Inc., Stephenson &
Lawyer, Inc., and Patterson Properties Corporation, individually, and (b) all
of UFP Technologies, Inc., Moulded Fibre Technology, Inc., Simco
Industries, Inc., Simco Automotive Trim, Inc., Stephenson &
Lawyer, Inc., and Patterson Properties Corporation, collectively, as joint
and several borrowers.

 

“Borrowing”
means Loans of a particular Class of the same Type, made, converted or
continued on the same date and, in the case of LIBOR Loans, as to which a
single LIBOR Interest Period is in effect.

 

“Borrowing
Base” means, at the relevant time of reference thereto, an amount
determined by the Lender by reference to the most recent Borrowing Base
Certificate/Collateral Update Certificate delivered to the Lender pursuant to Section 2.1(b) which
is equal to the sum of:

 

	
  (a)

  	
   

  	
  85%
  of Eligible Accounts, provided that at no time shall more than $500,000 in
  the aggregate of all outstanding Eligible Accounts arise from the sale of
  tooling to account debtors, plus

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
   

  	
  the
  lesser of:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)

  	
  the
  sum of:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (A)
  

  	
  50%
  of Eligible Raw Material Inventory,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  plus

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (B)
  

  	
  50%
  of Eligible Finished Goods Inventory,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
  $7,000,000,
  minus

  
	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
   

  	
  reserves
  for foreign exchange, interest rate derivative exposure, letter of credit
  exposure, acceptances exposure and such other reserves as the Lender in its
  reasonable credit judgment  shall deem
  appropriate from time to time;

  

 

In
determining the Borrowing Base from time to time, the Lender may, but shall not
be required to, rely upon reports or analyses generated by the Credit Parties
(including, without limitation, Borrowing Base Certificates/Collateral Update
Certificates) and reports or analyses generated by or on behalf of the
Lender.  Notwithstanding anything to the
contrary set forth herein, the Lender may in its reasonable credit judgment at
any time and from time to time, adjust the percentages of Eligible Accounts,
Eligible Raw Materials Inventory, Eligible Finished Goods Inventory and undrawn
amount of Documentary LCs included within the Borrowing Base.  In addition, upon receipt by the Lender of an
inventory appraisal in form and substance satisfactory to the Lender from a
third party appraiser acceptable to the Lender, the Lender shall consider, in
the Lender’s sole discretion, increasing the Eligible Inventory advance rate to
the lesser of 65% of cost of Eligible Inventory or 85% of the net orderly
liquidation value of Eligible Inventory.

 

“Borrowing
Base Certificate” means a certificate signed by a Designated Financial
Officer certifying the amount of the Borrowing Base as of the date set forth
therein, in substantially the form of Exhibit B-1 annexed hereto.

 

3

 

“Business
Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in Boston, Massachusetts are authorized or required by law to
remain closed; provided that, when used in
connection with a LIBOR Loan, the term “Business Day” shall also exclude
any day on which banks are not open for dealings in U.S. dollar deposits in the
London interbank market.

 

“Capital
Expenditures” means, for any period, the sum for the Credit Parties
(determined on a consolidated basis without duplication in accordance with
GAAP) of the aggregate amount of expenditures made or liabilities incurred
during such period (including the aggregate amount of Capital Lease Obligations
incurred during such period) to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements, but excluding
repairs) computed in accordance with GAAP; provided that
such term shall not include any such expenditures in connection with any
replacement or repair of Property affected by a Casualty Event.

 

“Capital
Lease Obligations” of any Person means the obligations of such Person to
pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases
on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

 

“Cash
Management Bank” means Bank of America, N.A., in its capacity as the
provider of cash management services to the Credit Parties.

 

“Casualty
Event” means, with respect to any Property of any Person, any loss of or
damage to, or any condemnation or other taking of, such Property for which such
Person or any of its Subsidiaries receives insurance proceeds, or proceeds of a
condemnation award or other compensation.

 

“Change
in Law” means (a) the adoption of any law, rule or regulation
after the Closing Date, (b) any change after the Closing Date in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority or (c) compliance by the Lender or the Issuing Lender (or, for
purposes of subsection 2.9(b), by any lending office of the Lender or by
the Lender’s or the Issuing Lender’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law), other than a
request or directive to comply with any law, rule or regulation in effect
on the Closing Date, of any Governmental Authority made or issued after the
Closing Date.

 

“Change
of Control” means (a) any event, transaction or occurrence as a result
of which a majority of the seats (other than vacant seats) on the board of
directors of any Credit Party shall be occupied by Persons who were neither (i) nominated
by the board of directors of UFP nor (ii) appointed by directors so
nominated; or (b) the failure of UFP to own, directly or indirectly
through one or more Subsidiaries, 100% of the outstanding capital stock of each
of the other Credit Parties; or (c) the sale of all or substantially all
of the business or assets of any Credit Party; or (d) R. Jeffrey Bailly
and/or Ronald J. Lataille shall for any reason cease to serve in their present
capacities as officers of the Borrowers and the Borrowers shall fail within six
(6) months of the date that R. Jeffrey Bailly and/or Ronald J. Lataille
cease to serve in such capacities, to retain replacements for R. Jeffrey Bailly
and/or Ronald J. Lataille who have comparable industry experience and are
reasonably acceptable to the Lender.

 

“Class”
when used in reference to any Loan or Borrowing, refers to whether such Loan,
the Loans comprising such Borrowing or the Loans that the Lender is obligated
to make, are Revolving Loans, or a Term Loan.

 

“Closing
Date” means the date during which the Effective Time shall occur.

 

4

 

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

 

“Collateral”
means, collectively, all of the Property in which Liens are purported to be
granted hereunder and under the other Loan Documents as security for the
Obligations of the Credit Parties hereunder.

 

“Collateral
Update Certificate” means a certificate signed by a Designated Financial
Officer, in substantially the form of Exhibit B-2 annexed hereto.

 

“Compliance
Certificate” means a certificate signed by a Designated Financial Officer,
in substantially the form of Exhibit D annexed hereto, (a) certifying
as to whether a Default has occurred and, if a Default has occurred, specifying
the details thereof and any action taken or proposed to be taken with respect
thereto, (b) setting forth reasonably detailed calculations demonstrating
compliance with Section 8.10, and  (c) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 5.4 and,
if any such change has occurred, specifying the effect of such change on the
financial statements accompanying such certificate.

 

“Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled”
have meanings correlative thereto.  A
Person who owns or holds capital stock, beneficial interests or other
securities representing five percent (5%) or more of the Total Voting Power of
another Person shall be deemed, for purposes of this Agreement, to “control”
such other Person.

 

“Control
Agreement” means with respect to any Controlled Account, an agreement in
accordance with Section 4.3(b), in form and substance satisfactory to the
Lender, executed and delivered by the Credit Parties, the depository
institution at which such Controlled Account is maintained and the Lender in
accordance with Sections 4.3 and 7.14, as such agreement may be amended,
supplemented or otherwise modified from time to time.

 

“Controlled
Account “ has the meaning assigned to such term in Section 4.3(a).

 

“Copyrights”
means all copyrights, whether statutory or common law, owned by or assigned to
the Credit Parties, and all exclusive and nonexclusive licenses to the Credit
Parties from third parties or rights to use copyrights owned by such third
parties, including, without limitation, the registrations, applications and
licenses listed on Schedule 5.5 hereto, along with any and all (a) renewals
and extensions thereof, (b) income, royalties, damages, claims and
payments now and hereafter due and/or payable with respect thereto, including,
without limitation, damages and payments for past, present or future
infringements thereof, (c) rights to sue for past, present and future
infringements thereof, and (d) foreign copyrights and any other rights
corresponding thereto throughout the world.

 

“Credit
Parties” (i) until such time as any acquired or newly created
Subsidiary of the Borrowers shall become a Subsidiary Guarantor of the
Obligations of the Borrowers hereunder, the Borrowers; and (ii) from and
after such time as any acquired or newly created Subsidiary of the Borrowers
shall become a Subsidiary Guarantor of the Obligations of the Borrowers
hereunder, the Borrowers and all Subsidiary Guarantors.

 

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

 

5

 

“Designated
Financial Officer” means an individual holding one or more of the following
offices with each of the Credit Parties or otherwise having executive
responsibilities for financial matters and listed in Schedule 1.4
hereto:  chief financial officer,
principal accounting officer, treasurer, assistant treasurer or controller.

 

“Disclosed
Matters” means the actions, suits and proceedings and the environmental
matters disclosed in Schedule 5.6.

 

“Discount
Rate for Acceptances” means a per annum rate equal to the Applicable Margin
in effect for LIBOR Loans minus .25%.

 

“Disposition”
means any sale, assignment, transfer or other disposition of any property
(whether now owned or hereafter acquired) by any Credit Party to any
Person  other than to another Credit
Party excluding (a) the granting of Liens permitted hereunder and (b) any
sale, assignment, transfer or other disposition of (i) any property sold
or disposed of in the ordinary course of business and on ordinary business
terms, (ii) any property no longer used or useful in the business of the
Credit Parties and (iii) any Collateral pursuant to an exercise of
remedies by the Lender hereunder or under any other Loan Document.

 

“Effective
Time” means the time specified in a written notice from the Lender when the
conditions specified in Section 6.1 are satisfied (or waived in accordance
with Section 10.2).

 

“Eligible
Accounts” means (a) the aggregate face amount of the accounts
receivable outstanding and owed to the Credit Parties as determined in accordance
with GAAP consistently applied and as entered on the books and records of the
Credit Parties in the ordinary course of the 
business operations of the Credit Parties which satisfy each of the
requirements set forth below, minus (b) without duplication, the
aggregate amount of any returns, discounts (which may, at the Lender’s option,
be calculated on the shortest term), claims, credits, chargebacks, contra
accounts, aged credit balances, allowances or excise taxes of any nature
(whether issued, owing, granted or outstanding):

 

(i)                                     the subject goods have been sold and/or
services have been rendered on an absolute sale basis and on an open account
basis to an account debtor which is not (A) the United States government
or any agency thereof or other Person such that the Assignment of Claims Act
would apply to the pledge of receivables of such account debtor, unless the
Assignment of Claims Act has been complied with to the satisfaction of the
Lender or (B) an Affiliate of any Credit Party;

 

(ii)                                  an invoice (in form and substance acceptable
to the Lender) has been sent to the applicable account debtor and bears an
invoice date contemporaneous with or later than the date of sale of such goods
or rendering of such service;

 

(iii)                               the account receivable does not arise from a
sale to the account debtor on a bill-and-hold, guaranteed sale, progress
billing, sale-or-return, sale-on-assignment, sale-on-appraisal, consignment or
any other repurchase or return basis;

 

(iv)                              the account is not evidenced by chattel paper
or an instrument of any kind, and has not been reduced to judgment;

 

(v)                                 the account debtor is not insolvent or the
subject of any bankruptcy or insolvency proceedings of any kind;

 

6

 

(vi)                              the account debtor is credit worthy and not
experiencing financial difficulties that could reasonably be expected to affect
the collectability of the account;

 

(vii)                           the account debtor is an entity organized under the laws of one of the
United States, whose main office is also located within the United States
(including Puerto Rico as within the United States), or, if the account debtor
is not such an entity organized and located within the United States, the
account is insured by a letter of credit issued or confirmed by a bank
acceptable to the Lender or by other credit enhancements, in each case in form
and substance satisfactory to the Lender;

 

(viii)                        the account receivable is a valid and legally enforceable obligation of
the account debtor thereunder, it is not subject to recoupment, offset (other
than discount for prompt payment) or other defense on the part of such account
debtor or to any claim on the part of such account debtor denying liability
thereunder;

 

(ix)                                the account receivable is not subject to any Lien of any kind except
for the Lien of the Lender securing the obligations of the Credit Parties under
this Agreement;

 

(x)                                   the account receivable has not remained
outstanding in whole or in part for more than (A) ninety (90) days after
the invoice date or (B) sixty (60) days after the due date;

 

(xi)                                the account receivable does not arise out of a transaction (direct or
indirect) with an employee, officer, agent, director or stockholder of any
Credit Party;

 

(xii)                             the account receivable is not owing from (i) an
account debtor from whom twenty-five percent (25%)  or
more of the dollar amount of all accounts receivable are deemed ineligible
under clause (x) above, provided that this clause (xii) shall not apply to
any accounts receivable arising from the sale of tooling to account debtors;

 

(xiii)                          the total unpaid accounts receivable owing
from such account debtor do not exceed thirty percent (30%)  of
all Eligible Accounts;

 

(xiv)                         the account receivable constitutes Collateral in which the Lender has a
First Priority Lien securing the Obligations of the Credit Parties under this
Agreement;

 

(xv)                            the Credit Parties have not made an agreement
with the account debtor to extend the time of payment of the subject account
receivable;

 

(xvi)                         the account debtor is
not located in Minnesota (or any other jurisdiction which adopts a statute or
other requirement with respect to which any Person that obtains business from
within such jurisdiction or is otherwise subject to such jurisdiction’s tax law
must file a “Business Activity Report” (or other applicable report) or make any
other required filings in a timely manner in order to enforce its claims in
such jurisdiction’s courts or arising under such jurisdiction’s laws);
provided, that accounts receivable which would be Eligible Accounts but for the
terms of this clause (xvi) shall nonetheless be deemed to be Eligible Accounts
if the Credit Parties have filed a “Business Activity Report” (or other
applicable report) with the applicable state office or are qualified to do
business in such jurisdiction and, at the time the account receivable was
created, was qualified to do business in such jurisdiction or had on file with
the applicable state office a current “Business Activity Report” (or other
applicable report); and

 

(xvii)                      the account receivable is denominated in U.S.
Dollars; and

 

7

 

(xviii)                   with respect to any account receivable
arising from the sale of tooling to account debtors, such account receivable
has not been rejected by the Lender.

 

provided,
however, that (A) the
Lender may in its reasonable credit judgment exclude particular accounts from
the definition of Eligible Accounts and may impose additional and/or more
restrictive eligibility or valuation criteria than those set forth above as
preconditions for any account to be deemed to be an Eligible Account hereunder,
and (B) an account deemed to be an Eligible Account at any one point in
time may be excluded by the Lender in its reasonable credit judgment at a
future point in time.

 

“Eligible
Inventory” means inventory of the Credit Parties recorded on the books and
records of the Credit Parties in the ordinary course of the business operations
of the Credit Parties valued on a first in first out basis at the lower of (a) the
fair market value of such inventory, or (b) the cost charged by suppliers
which are not Affiliates of the Credit Parties, which inventory satisfies each
of the following requirements:

 

(i)                                     is in good and merchantable condition and is
not work in process;

 

(ii)                                  meets all standards imposed by any government
agency having regulatory authority over such goods and/or their use,
manufacture and/or sale;

 

(iii)                               has been physically received in the
continental United States by the Credit Parties and is located at a facility
owned or leased by the Credit Parties; provided that no inventory located at a
leased facility shall be deemed to be “Eligible Inventory” hereunder unless the
landlord of such facility shall have entered into an agreement satisfactory in
form and substance to the Lender acknowledging the Liens of the Lender and
granting the Lender unrestricted access to such inventory;

 

(iv)                              is currently useable or currently salable in
the normal course of the business operations, or, as respects raw materials, is
incorporated or is being held to be incorporated in customer products being
produced or provided by the Credit Parties;

 

(v)                                 does not constitute excess, obsolete,
unsaleable, shopworn, seconds, damaged or unfit inventory;

 

(vi)                              has not remained in the possession of the
Credit Parties for more than 180-days  or has not
otherwise been determined by the Lender in its reasonable credit judgment to
constitute slow-moving inventory;

 

(vii)                           does not arise from a sale to an account
debtor on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis;

 

(viii)                        is not subject to any Lien of any kind except
for the Lien of the Lender securing Obligations under this Agreement;

 

(ix)                                has not been sold to any Person;

 

(x)                                   does not constitute raw materials
specifically printed for a customer with the Customer’s name or Customer’s
trademarks;

 

(xi)                                does not constitute customer labels; and

 

8

 

(xii)                             constitutes Collateral in which the Lender
has a First Priority Lien securing the obligations of the Credit Parties under
this Agreement;

 

provided,
however, that (A) the
aggregate amount of Eligible Inventory shall be computed net of such reserves
for slow moving and other ineligible inventory as the Lender shall deem
appropriate, (B) the Lender may in its reasonable credit judgment exclude
particular items of inventory from the definition of Eligible Inventory and may
impose additional and/or more restrictive eligibility or valuation criteria
than those set forth above as preconditions for any item of inventory to be
deemed to be Eligible Inventory hereunder, and (C) inventory deemed to be
Eligible Inventory at any one point in time may be excluded by the Lender in
its reasonable credit judgment at a future point in time.

 

“Eligible
Finished Goods Inventory” means that portion of Eligible Inventory
consisting of finished goods.

 

“Eligible
Raw Materials Inventory” means that portion of Eligible Inventory
consisting of raw materials.

 

“Environmental
Laws” means all applicable laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to
health and safety matters.

 

“Environmental
Liability” means any liability, contingent or otherwise (including any liability
for damages, costs of environmental remediation, fines, penalties or
indemnities), of any Credit Party directly or indirectly resulting from or
based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of
any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the
release or threatened release of any Hazardous Materials into the environment
or (e) any contract, agreement or other consensual arrangement pursuant to
which liability is assumed or imposed with respect to any of the foregoing.

 

“Equity
Rights” means, with respect to any Person, any subscriptions, options,
warrants, commitments, preemptive rights or agreements of any kind (including
any stockholders’ or voting trust agreements) for the issuance or sale of, or
securities convertible into, any additional shares of capital stock of any
class, or partnership or other ownership interests of any type in, such Person.

 

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

 

“ERISA
Affiliate” means any trade or business (whether or not incorporated) that,
together with the Credit Parties, is treated as a single employer within the
meaning of Section 414(b), (c), (m) or (o) of the Code.  Notwithstanding the foregoing, for purposes
of any liability related to a Multiemployer Plan under Title IV of ERISA, the
term “ERISA Affiliate” means any trade or business that, together with the
Credit Parties, is treated as a single employer within the meaning of Section 4001(b) of
ERISA.

 

“ERISA
Event” means (a) a “reportable event”, as defined in Section 4043
of ERISA or the regulations issued thereunder for which the notice requirement
has not been waived with respect to any Pension Plan, (b) the existence
with respect to any Pension Plan of an “accumulated funding deficiency” (as
defined in Section 412 of the Code or Section 302 of ERISA), whether
or not waived, (c) the filing pursuant to Section 412(d) of the Code
or Section 303(d) of ERISA of an application for a waiver of the
minimum funding standard with respect to any Pension Plan, (d) the
incurrence by any Credit Party or 

 

9

 

any
ERISA Affiliate of any liability under Title IV of ERISA with respect to the
termination of any Pension Plan, (e) the receipt by any Credit Party or
any ERISA Affiliate from the PBGC or 
plan administrator of any notice relating to an intention to terminate
any Pension Plan or Pension Plans or to appoint a trustee to administer any
Pension Plan, or (f) the receipt by any Credit Party or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from any
Credit Party or any ERISA Affiliate of any notice of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA.

 

“Event
of Default” has the meaning assigned to such term in Section 9.1.

 

“Excess
Availability” means, as of any date of determination thereof, the
difference between (a) the lesser of (i) the Revolving Credit
Commitment at such time and (ii) the Borrowing Base at such time, and (b) the
Revolving Credit Exposure at such time.

 

“Excluded
Taxes” means, with respect to the Lender, the Issuing Lender or any other
recipient of any payment to be made by or on account of any Obligation
hereunder, (a) income, net worth or franchise taxes imposed on (or
measured by) its net income or net worth by the United States of America, or by
the jurisdiction under the laws of which such recipient is organized or in
which its principal office is located or, in the case of the Lender, in which
its lending office is located or in which it is taxable solely on account of
some connection other than the execution, delivery or performance of this
Agreement or the receipt of income hereunder, and (b) any branch profits
taxes imposed by the United States of America or any similar tax imposed by any
other jurisdiction in which any Borrower is located.

 

“Existing
Debt” means (i) Indebtedness of the Credit Parties existing as of the
Effective Time which is being repaid in full with the proceeds of the Loans
made by the Lender at the Effective Time and (ii) Indebtedness of the
Credit Parties existing as of the Effective Time which is permitted to remain
outstanding after the Effective Time under Section 8.1 and is listed on Schedule
8.1 hereto.

 

“Existing
Equipment Term Loan” means the Existing Equipment Term Loan made by the
Lender to the Borrowers under the Prior Loan Agreement in the amount of
$2,018,523.90, as more fully described in Section 2.2(a)(i).

 

“Existing
Equipment Term Loan Maturity Date” means January 27, 2016, or such
earlier date as provided in Section 2.7 or Section 9.1.

 

“Existing
Equipment Term Note” means the Second Amended and Restated Equipment Term
Note, in the form of Exhibit A-2 annexed hereto, issued by the
Borrowers in favor of the Lender and evidencing the Existing Equipment Term
Loan.

 

“Existing
Letters of Credit” means those certain letters of credit issued by the
Issuing Lender under the Prior Credit Agreement outstanding as of the Closing
Date and listed on Schedule 8.1 hereto.

 

“Federal
Funds Rate” means (a) the weighted average of interest rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers on the applicable Business Day (or on the
preceding Business Day, if the applicable day is not a Business Day), as
published by the Federal Reserve Bank of New York on the next Business Day; or (b) if
no such rate is published on the next Business Day, the average rate (rounded
up, if necessary, to the nearest 1/8 of 1%) charged to Lender on the applicable
day on such transactions, as determined by Lender.

 

10

 

“First
Priority” means, with respect to any Lien purported to be created in any
Collateral pursuant to any Collateral Document, that such Lien is the most
senior Lien (other than Permitted Liens) to which such Collateral is subject.

 

“Fixed Charge Coverage Ratio” means, for any
period, the ratio of:

 

(a)                                  Operating Cash Flow of
the Credit Parties for the
period of four consecutive fiscal quarters ending on or most recently ended
prior to the date of measurement, to

 

(b)                                 the sum for the Credit
Parties (determined on a consolidated basis without duplication in accordance
with GAAP), of

 

(i) the aggregate amount of Interest Expense for
such period, plus

 

(ii) the aggregate amount of regularly scheduled
payments of principal in respect of Indebtedness for borrowed money (including
the principal component of any payments in respect of Capital Lease
Obligations) paid or required to be paid during such period.

 

For purposes of calculating Fixed Charge Coverage Ratio
at any time, the Credit Parties shall be permitted to offset (without
duplication) the income taxes described in subsection (b)(i) of the
definition of “Operating Cash Flow” below with state or federal income tax
refunds received by the Credit Parties during such period, but only in an
amount less than or equal to the amount described in subsection (b)(i) of
the definition of “Operating Cash Flow” for such period.

 

“GAAP”
means generally accepted accounting principles in the United States of America.

 

“Governmental
Authority” means the government of the United States of America, any other
nation or any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

 

“Guarantee”
means a guarantee, an endorsement, a contingent agreement to purchase or to
furnish funds for the payment or maintenance of, or otherwise to be or become
contingently liable under or with respect to, the Indebtedness, other
obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor’s
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank or other financial institution to issue a
letter of credit or other similar instrument for the benefit of another Person,
but excluding endorsements for collection or deposit in the ordinary course of
business.  The terms “Guarantee”
and “Guaranteed” used as a verb shall have a correlative meaning.  The amount of any Guarantee shall be deemed
to be an amount equal to the stated or determinable amount of the primary
obligations in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder).

 

“Guarantor”
means any Person, including, without limitation, the Subsidiary Guarantors,
which is a guarantor hereunder as of the Effective Time or which becomes a
guarantor hereunder after the Effective Time.

 

11

 

“Hazardous
Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum
or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all
other substances or wastes of any nature, in each case regulated or subject to
regulation pursuant to any Environmental Law.

 

“Hazardous
Materials Indemnity Agreement” means the Hazardous Materials Indemnity
Agreement dated as of February 28, 2003 by and among the Credit Parties
and the Lender, as such agreement may be amended, supplemented or otherwise
modified from time to time.

 

“Hedging
Agreement”  means any interest rate
protection agreement, foreign currency exchange agreement, commodity price
protection agreement or other interest or currency exchange rate or commodity
price hedging arrangement.

 

“Indebtedness”
means, for any Person, without duplication: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, advance,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person
to pay the deferred purchase or acquisition price of Property or services,
other than trade accounts payable (other than for borrowed money) arising, and
accrued expenses and deferred taxes incurred and paid, in the ordinary course
of business; (c) Capital Lease Obligations of such Person; (d) obligations
of such Person in respect of Hedging Agreements; and (e) obligations of
such Person in respect of letters of credit or similar instruments issued or
accepted by banks and other financial institutions for the account of such
Person.  The Indebtedness of any Person
shall include the Indebtedness of any other entity (including any partnership
in which such Person is a general partner) to the extent such Person is liable
therefor as a result of such Person’s ownership interest in or other relationship
with such entity, except to the extent the terms of such Indebtedness provide
that such Person is not liable therefor.

 

“Indemnified
Taxes” means all Taxes other than (a) Excluded Taxes and Other Taxes
and (b) amounts constituting penalties or interest imposed with respect to
Excluded Taxes or Other Taxes.

 

“Intercompany
Indebtedness” has the meaning assigned to such term in Section 10.9.

 

“Interest
Expense” means, for any period, the sum, without duplication, for the
Credit Parties (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all interest in respect of
Indebtedness during such period, but excluding capitalized debt acquisition
costs (including fees and expenses related to this Agreement) plus (b) the
net amounts payable (or minus the net amounts receivable) in respect of
Hedging Agreements accrued during such period (whether or not actually paid or
received during such period) excluding reimbursement of legal fees and other
similar transaction costs and excluding payments required by reason of the
early termination of Hedging Agreements in effect on the date hereof plus
(c) all fees, including letter of credit and Acceptances fees and
expenses, (but excluding reimbursement of legal fees) incurred in respect of
Indebtedness during such period.

 

“Investment”
means, for any Person: (a) the acquisition (whether for cash, Property,
services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership, limited liability company or other ownership interests
or other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any “short sale” or any sale of any
securities at a time when such securities are not owned by the Person entering
into such short sale); (b) the making of any deposit with, or advance,
loan or other extension of credit to, any other Person (including the purchase
of Property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell 

 

12

 

such
Property to such Person, but excluding any such advance, loan or extension of
credit representing the purchase price of inventory or supplies sold by such
Person in the ordinary course of business provided that in no event shall the
term of any such inventory or supply advance, loan or extension of credit
exceed 180 days); or (c) the entering into of any Guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of any
other Person and (without duplication) any amount committed to be advanced,
lent or extended to such Person. 
Notwithstanding the foregoing, Capital Expenditures shall not be deemed “Investments”
for purposes hereof.

 

“IP
Collateral” means, collectively, the Collateral relating to intellectual
property rights of the Credit Parties hereunder or under any other Loan
Document.

 

“Issuing
Lender” means Bank of America, N.A., in its capacity as an issuer of
Letters of Credit and Acceptances hereunder.

 

“Landlord
Waiver and Consent” means, with respect to any Leasehold Property, a
letter, certificate or other instrument in writing from the lessor under the
related lease, in form approved by the Lender in its sole discretion.

 

“LC/Acceptance
Disbursement” means a payment made by the Issuing Lender pursuant to a
Letter of Credit or an Acceptance Agreement.

 

“LC
and Acceptances Sublimit” means a sublimit of the Revolving Credit
Commitment available for the issuance of Letters of Credit and Acceptances for
the account of the Borrowers in an aggregate maximum amount available to be
drawn equal to $5,000,000.

 

“Leasehold
Property” means any leasehold interest of any Credit Party as lessee under
any lease of real property, other than any such leasehold interest designated
from time to time by the Lender in its sole discretion as not being required to
be included in the Collateral and not being of material importance to the
business or operations of the Credit Parties.

 

“Lender”
means Bank of America, N.A. or any other party which becomes a lender
hereunder.

 

“Letter
of Credit” means any letter of credit issued on a standby basis or in
support of trade obligations of the Credit Parties pursuant to this Agreement.

 

“LIBOR”
means, for any Interest Period with respect to a LIBOR Loan, the per annum rate
of interest (rounded up, if necessary, to the nearest 1/8th of 1%), determined
by Lender at approximately 11:00 a.m. (London time) two Business Days
prior to commencement of such Interest Period, for a term comparable to such
Interest Period, equal to (a) the British Bankers Association LIBOR Rate (“BBA
LIBOR”), as published by Reuters (or other commercially available source
designated by Lender); or (b) if BBA LIBOR is not available for any
reason, the interest rate at which Dollar deposits in the approximate amount of
the LIBOR Loan would be offered by Lender’s London branch to major banks in the
London interbank Eurodollar market.  If
the Board imposes a Reserve Percentage with respect to LIBOR deposits, then LIBOR
shall be the foregoing rate, divided by 1 minus the Reserve Percentage.

 

“LIBOR
Daily Floating Rate” means a fluctuating rate of interest per annum equal
to BBA LIBOR, as published by Reuters (or other commercially available source
providing quotations of BBA LIBOR as selected by Lender from time to time), as
determined for each Business Day at approximately 11:00 a.m. London time
two (2) London Banking Days prior to the date in question, for U.S. Dollar
deposits (for delivery on the first day of such interest period) with a one
month term, as adjusted from time to time in Lender’s sole discretion for
reserve requirements, deposit insurance assessment rates and 

 

13

 

other
regulatory costs.  If the BBA LIBOR Daily
Floating Rate is not available for any reason, then such rate will be
determined by such alternate method as reasonably selected by Lender.

 

“LIBOR
Interest Period” means with respect to any LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrowers may elect; provided, that (i) if
any LIBOR Interest Period would end on a day other than a Business Day, such
LIBOR Interest Period shall be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall in the next calendar month,
in which case such LIBOR Interest Period shall end on the next preceding
Business Day and (ii) any LIBOR Interest Period that commences on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such LIBOR Interest Period)
shall end on the last Business Day of the last calendar month of such LIBOR
Interest Period.  For purposes hereof,
the date of a Borrowing initially shall be the date on which such Borrowing is
made and thereafter shall be the effective date of the most recent conversion
or continuation of such Borrowing. 
Notwithstanding the foregoing, if any LIBOR Interest Period for any
Revolving Credit Borrowing would otherwise end after the Revolving Credit
Maturity Date, such LIBOR Interest Period shall end on the Revolving Credit
Maturity Date.

 

“LIBOR
Request” means a written request signed by a Designated Financial Officer
for the conversion of Base Rate Loans or LIBOR Daily Floating Rate Loans into
LIBOR Loans or for the continuation of an existing LIBOR Loan for an additional
LIBOR Interest Period in accordance with Section 2.3, in substantially the
form of Exhibit B-3 annexed hereto.

 

“Lien”
means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing),
other than an operating lease, relating to such asset and (c) in the case
of securities, any purchase option, call or similar right of a third party with
respect to such securities.

 

“Loan
Documents” means this Agreement, the Revolving Credit Note, the Existing
Equipment Term Note, the Massachusetts Real Estate Term Note, the Michigan Real
Estate Term Note, the Control Agreements, the Mortgages, the Stock Pledge
Agreement, the Hazardous Materials Indemnity Agreement, each Letter of Credit,
each Acceptance, agreements between the Borrowers and the Lender (or any of its
affiliates) relating to Letters of Credit and Acceptances, and any other
instruments or documents executed and delivered or to be delivered to the
Lender from time to time pursuant to this Agreement, as the same may be
supplemented and amended from time to time in accordance with their respective
terms.

 

“Loans”
means the Revolving Loans, the Existing Equipment Term Loan, the Massachusetts
Real Estate Term Loan and the Michigan Real Estate Term Loan.

 

“Lock
Box” has the meaning assigned to such term in Section 4.3(a).

 

“Lockbox
Agreement” means with respect to any Lock Box  of
the Credit Parties, an agreement in accordance with Section 4.3(b), in
form and substance satisfactory to the Lender, executed and delivered by the
Credit Parties, the depository institution at which such Lock Box is maintained
and the Lender at the Effective Time, as such agreement may be amended,
supplemented or otherwise modified from time to time.

 

14

 

“Massachusetts
Real Estate Term Loan” means the Massachusetts Real Estate Term Loan made
by the Lender to the Borrowers pursuant to the Prior Loan Agreement in the
amount of $1,846,000 as more fully described in Section 2.2(a)(ii).

 

“Massachusetts
Real Estate Term Loan Maturity Date” means January 27, 2016, or such
earlier date as provided in Section 2.7 or Section 9.1.

 

“Massachusetts
Real Estate Term Note” means the Second Amended and Restated Massachusetts
Real Estate Term Note, substantially in the form of Exhibit A-4 annexed
hereto, issued by the Borrowers in favor of the Lender and evidencing the
Massachusetts Real Estate Term Loan.

 

“Massachusetts
Real Property” means the Borrowers’ owned real property located in
Georgetown, Massachusetts.

 

“Material
Adverse Effect” means, any event, circumstance, happening or condition,
which, in the Lender’s reasonable discretion, has resulted or could result in a
material adverse effect on (a) the business, assets, financial condition
or prospects of the Credit Parties taken as a whole, (b) the ability of
any Credit Party to pay or perform any of its obligations under this Agreement
or the other Loan Documents or (c) any of the rights of or benefits
available to the Lender under this Agreement and the other Loan Documents.

 

“Material
Indebtedness” means Indebtedness (other than the Loans, Letters of Credit
or Acceptances), including, without limitation, obligations in respect of one
or more Hedging Agreements, in an aggregate principal amount exceeding  $50,000.  For
purposes of determining Material Indebtedness, the “principal amount” of the
obligations of any Person in respect of a Hedging Agreement at any time shall
be the maximum aggregate amount (giving effect to any netting agreements) that
such Person would be required to pay if such Hedging Agreement were terminated
at such time.

 

“Material
Leasehold Property” means a Leasehold Property reasonably determined by the
Lender to be of material value as Collateral or of material importance to the
operations of the Credit Parties.

 

“Material
Owned Property” means any real property owned by any Credit Party that is
reasonably determined by the Lender to be of material value as Collateral or of
material importance to the operations of the Credit Parties following the
Closing Date.

 

“Material
Rental Obligations” means obligations of the Credit Parties to pay rent
under any one or more operating leases with respect to any real or personal
property that is material to the business of the Credit Parties.

 

“Michigan
Real Estate Term Loan” means the Michigan Real Estate Term Loan to be made
by the Lender to the Borrowers in accordance with Section 2.2(b)(ii), in
the amount of the lesser of (i) $4,000,000 and (ii) 80% of the
appraised value of the Michigan Property, based upon the results of an appraisal
obtained by the Lender with respect to the such property.

 

“Michigan
Real Estate Term Loan  Closing Date”
means the date during which the Michigan Real Estate Term Loan  Effective Time shall occur.

 

“Michigan
Real Estate Term Loan  Effective Time”
means the time specified in a written notice from the Lender when the
conditions specified in Section 6.3 are satisfied (or waived in accordance
with Section 10.2).

 

15

 

“Michigan
Real Estate Term Loan Maturity Date” means January 27, 2016, or such
earlier date as provided in Section 2.7 or Section 9.1.

 

“Michigan
Real Estate Term Note” means the Michigan Real Estate Term Note,
substantially in the form of Exhibit A-5 annexed hereto, issued by
the Borrowers in favor of the Lender and evidencing the Michigan Real Estate
Term Loan.

 

“Michigan
Real Property” means the Borrowers’ owned real property located in
Kentwood, Michigan.

 

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

 

“Mortgage”
means a security instrument (whether designated as a deed of trust or a
mortgage, leasehold mortgage, assignment of leases and rents or by any similar
title) executed and delivered by any Credit Party in such form as may be
approved by the Lender in its sole and reasonable discretion, in each case with
such changes thereto as may be recommended by the Lender’s local counsel based
on local laws or customary local practices, and (b) at the Lender’s option,
in the case of an Additional Mortgaged Property, an amendment to an existing
Mortgage, in form satisfactory to the Lender, adding such Additional Mortgaged
Property to the Real Property Assets encumbered by such existing Mortgage, in
either cases as such security instrument or amendment may be amended,
supplemented or otherwise modified from time to time.

 

“Mortgaged
Property” means the Massachusetts Real Property, the Michigan Real
Property, and each Additional Mortgaged Property.

 

“Net Cash Payments” means,

 

(a)                                  with respect to any Casualty Event, the
aggregate amount of cash proceeds of insurance, condemnation awards and other
compensation received by the Credit Parties in respect of such Casualty Event
net of (i) reasonable expenses incurred by the Credit Parties in
connection therewith and (ii) contractually required repayments of
Indebtedness to the extent secured by a Lien on such property and (iii) any
income and transfer taxes payable by the Credit Parties in respect of such
Casualty Event;

 

(b)                                 with respect to any Disposition, the
aggregate amount of all cash payments received by the Credit Parties directly
or indirectly in connection with such Disposition, whether at the time of such
Disposition or after such Disposition under deferred payment arrangements or
Investments entered into or received in connection with such Disposition, net
of (i) the amount of any legal, title, transfer and recording tax
expenses, commissions and other fees and expenses payable by the Credit Parties
in connection therewith, (ii) any Federal, state and local income or other
Taxes estimated to be payable by the Credit Parties as a result thereof, (iii) any
repayments by the Credit Parties of Indebtedness to the extent that such
Indebtedness is secured by a Lien on the property that is the subject of such
Disposition and the transferee of (or holder of a Lien on) such property
requires that such Indebtedness be repaid as a condition to the purchase of
such property, and (iv) any repayments by the Credit Parties to minority
stockholders if and to the extent permitted hereby; and

 

(c)                                  with respect to any incurrence of
Indebtedness or offering of equity securities, the aggregate amount of all cash
proceeds received by the Credit Parties therefrom less all legal, underwriting and
similar fees and expenses incurred in connection therewith.

 

16

 

“Non-Financed
Capital Expenditures” means Capital
Expenditures paid in cash and not financed with Indebtedness for borrowed
money; provided that Capital Expenditures
financed with the proceeds of Revolving Loans shall be deemed to constitute “Non-Financed
Capital Expenditures” for purposes of this Agreement.

 

“Obligations”
means (a) the aggregate outstanding principal balance of and all interest
on the Loans made by the Lender to the Borrowers (including any interest
accruing after the commencement of any proceeding by or against any Borrower
under the federal bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
and any other interest that would have accrued but for the commencement of such
proceeding, whether or not any such interest is allowed as a claim enforceable
against any Borrower in any such proceeding), and (b) all LC/ Acceptance
Disbursements, overdraft obligations, fees, costs, charges, expenses and other
obligations from time to time owing to the Lender, the Issuing Lender, the Cash
Management Bank, or any other Affiliate of the Lender by the Credit Parties
hereunder or under any other Loan Document or in respect of any Hedging
Agreement, cash management agreement, operating or deposit account, commercial
credit card and merchant card services, automated clearinghouse services,
leases or other banking product or service from time to time made available to
the Credit Parties by the Lender, the Issuing Lender, the Cash Management Bank
or any other Affiliate of the Lender.

 

“Operating
Cash Flow” means, for any period, (a) the net income of the Credit Parties
(determined on a consolidated basis without duplication in accordance with
GAAP) for such period, plus (b) to the extent deducted in
calculating net income (without
duplication) (i) income taxes accrued during such period, (ii) extraordinary
or unusual losses (including losses from discontinued operations) during such
period, (iii) depreciation, amortization and other non-cash charges
accrued for such period, and (iv) interest and fees in respect of
Indebtedness (including amounts accrued or paid in respect of Hedging
Agreements) during such period (whether or not actually paid in cash during
such period), minus (c) to the extent such items were added in
calculating net income (without
duplication) (i) extraordinary or unusual gains (including gains from
discontinued operations) during such period, (ii) the aggregate amount of all Non-Financed Capital Expenditures during such
period, (iii) the aggregate amount of dividends and distributions
permitted to be paid under Section 8.6 and actually paid in cash during
such period, and (iv) proceeds received during such period in
respect of Casualty Events and Dispositions.

 

“Other
Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement and the other Loan Documents, provided that there shall be excluded from “Other Taxes” all
Excluded Taxes.

 

“Patents”
means all patents issued or assigned to and all patent applications made by the
Credit Parties and, to the extent that the grant of a security interest does
not cause a breach or termination thereof, all exclusive and nonexclusive
licenses to the Credit Parties from third parties or rights to use patents
owned by such third parties, including, without limitation, the patents, patent
applications and licenses listed on Schedule 5.5 hereto, along with any
and all (a) inventions and improvements described and claimed therein, (b) reissues,
divisions, continuations, extensions and continuations-in-part thereof, (c) income,
royalties, damages, claims and payments now and hereafter due and/or payable
under and with respect thereto, including, without limitation, damages and
payments for past or future infringements thereof, (d) rights to sue for
past, present and future infringements thereof, and (e) any other rights
corresponding thereto throughout the world.

 

“Pension
Plan” means any Plan that is a defined benefit pension plan subject to the
provisions of Title IV of ERISA or Section 412 of the Code or Section 302
of ERISA, and in respect of which any 

 

17

 

Credit
Party or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.

 

“Permitted
Acquisitions” has the meaning assigned to such term in subsection
8.4(c)(iii).

 

“Permitted
Investments” means:

 

(a)                                  direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the
United States of America (or by any agency thereof to the extent such
obligations are backed by the full faith and credit of the United States of America),
in each case maturing within one year from the date of acquisition thereof;

 

(b)                                 investments in commercial paper maturing within
270 days from the date of acquisition thereof and having, at such date of
acquisition, the highest credit rating obtainable from Standard and Poor’s
Ratings Service or from Moody’s Investors Service, Inc.;

 

(c)                                  investments in certificates of deposit,
banker’s acceptances and time deposits maturing within 180 days from the date
of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State thereof
which has a combined capital and surplus and undivided profits of not less than
$250,000,000;

 

(d)                                 fully collateralized repurchase agreements
with a term of not more than 30 days for securities described in clause (a) above
and entered into
with a financial institution satisfying the criteria described in clause (c) above;

 

(e)                                  advances, loans and extensions of credit to
any director, officer or employee of the Credit Parties, if the aggregate
outstanding amount of all such advances, loans and extensions of credit
(excluding travel advances in the ordinary course of business) does not at any
time exceed $25,000;

 

(f)                                    capital contributions by any Credit Party to
any other Credit Party and Intercompany Indebtedness; and

 

(g)                                 investments in money market mutual funds that
are rated AAA by Standard &
Poor’s Rating Service.

 

“Permitted
Liens” has the meaning set forth in Section 8.2.

 

“Person”
means any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, Governmental Authority or other
entity.

 

“Plan”
means any employee benefit plan within the meaning of Section 3(3) of
ERISA in which any Credit Party or any ERISA Affiliate is an “employer” as
defined in Section 3(5) of ERISA, including, but not limited to, any
Pension Plan or Multiemployer Plan.

 

“Post-Default
Rate” means a rate per annum equal to the Base Rate plus the
Applicable Margin plus two percent (2%).

 

“Prime
Rate” means the rate of interest announced by Lender from time to time as
its prime rate.  Such rate is set by
Lender on the basis of various factors, including its costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may 

 

18

 

be
priced at, above or below such rate.  Any
change in such rate announced by Lender shall take effect at the opening of
business on the day specified in the public announcement of such change.

 

“Property”
means any interest of any kind in property or assets, whether real, personal or
mixed, and whether tangible or intangible.

 

“Proprietary
Rights” has the meaning assigned to such term in Section 5.5(b).

 

“PTO”
means the United States Patent and Trademark Office or any successor or
substitute office in which filings are necessary or, in the opinion of the Lender,
desirable in order to create or perfect Liens on any IP Collateral.

 

“Real
Property Asset” means, at any time of determination, any and all real
property owned or leased by the Credit Parties.

 

“Registered
Proprietary Rights” has the meaning assigned to such term in Section 5.5(c).

 

“Reimbursement
Obligation” has the meaning assigned to such term in Section 2.4(d).

 

“Related
Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

 

“Reserve
Percentage” means the reserve percentage (expressed as a decimal, rounded
up to the nearest 1/8th of 1%) applicable to member banks under regulations
issued from time to time by the Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) with respect to Eurocurrency funding (currently referred to as “Eurocurrency
liabilities”).

 

“Restricted
Junior Payment” means (i) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock of, or other equity
interest in, any Credit Party now or hereafter outstanding, except a dividend
payable solely in shares of stock or other equity interests, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
of, or other equity interest in, any Credit Party now or hereafter outstanding,
(iii) any payment made to retire, or to obtain the surrender of, any
outstanding warrants, options or other rights to acquire shares of any class of
stock of, or other equity interest in, any Credit Party, (iv) any payment
or prepayment of principal of, premium, if any, or interest on, or redemption
purchase, retirement, defeasance (including economic or legal defeasance),
sinking fund or similar payment with respect to, any Subordinated Indebtedness,
and (v) any payment made to any Affiliates of any Credit Party in respect
of management, consulting or other similar services provided to any Credit
Party.

 

“Restrictive
Agreements” has the meaning assigned to such term in Section 5.13(b).

 

“Revolving
Credit Availability Period” means the period from and including the
Effective Time to but excluding the earlier of (a) the Revolving Credit
Maturity Date and (b) the date of termination of the Revolving Credit
Commitment, as terminated by the Borrowers pursuant to Section 2.7 or by
the Lender pursuant to Section 9.1.

 

“Revolving
Credit Commitment” means the commitment of the Lender to make Revolving
Loans as such commitment may be reduced from time to time pursuant to Section 2.5.  The original maximum amount of the Revolving
Credit Commitment is equal to $17,000,000.

 

19

 

“Revolving
Credit Exposure” means at any time the sum of (a) the outstanding
principal amount of Revolving Loans at such time, (b) the Total LC and
Acceptances Exposure at such time.

 

“Revolving
Credit Maturity Date” November 30, 2013.

 

“Revolving
Credit Note” means the Second Amended and Restated Revolving Credit Note,
substantially in the form of Exhibit A-1 annexed hereto, issued by
the Borrowers in favor of the Lender.

 

“Revolving
Loan” means a Loan made pursuant to Section 2.1(a) that utilizes
the Revolving Credit Commitment.

 

“Solvency
Certificate” means a certificate in substantially the form of Exhibit E
annexed hereto executed by the Chief Financial Officer of the Borrowers and
delivered to the Lender on the Closing Date.

 

“Special
Counsel” means Edwards Angell Palmer & Dodge LLP, in its capacity
as special counsel to Bank of America, N.A., as Lender of the credit facilities
contemplated hereby.

 

“Stock
Pledge Agreement” means the Stock Pledge Agreement dated as of February 28,
2003 by and between UFP and the Lender with respect to the capital stock of
each of the Credit Parties owned by UFP or its Subsidiaries, as the same may be
modified or amended from time to time with the consent of the Lender.

 

“Subordinated
Indebtedness” means any Indebtedness of the Credit Parties incurred after
the Closing Date with the consent of the Lender that by its terms (or by the
terms of the instrument under which it is outstanding and to which appropriate
reference is made in the instrument evidencing such Subordinated Indebtedness)
is made subordinate and junior in right of payment to the Loans and to the
other Obligations of the Credit Parties by provisions in form and substance
reasonably satisfactory to the Lender and Special Counsel.

 

“Subsidiary”
means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent’s consolidated financial statements if such financial statements
were prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing
more than 50% of the ordinary voting power or, in the case of a partnership,
more than 50% of the general partnership interests are, as of such date, owned,
controlled or held, or (b) that is, as of such date, otherwise Controlled,
by the parent and/or one or more subsidiaries of the parent.  References herein to “Subsidiaries”
shall, unless the context requires otherwise, be deemed to be references to
Subsidiaries of the Borrowers.

 

“Subsidiary
Guarantor” means, collectively, any Subsidiary of the Borrowers which
becomes a Guarantor hereunder after the Effective Time.

 

“Taxes”
means any and all present or future taxes, levies, imposts, duties, deductions,
charges or withholdings imposed by any Governmental Authority.

 

“Term
Loans” means, collectively, the Existing Equipment Term Loan, the
Massachusetts Real Estate Term Loan and the Michigan Real Estate Term Loan.

 

20

 

“Term
Notes” means, collectively, the Existing Equipment Term Note, the
Massachusetts Real Estate Term Note and the Michigan Real Estate Term Note.

 

“Total
LC and Acceptances Exposure” means, at any time, the sum of (a) 100%
of the aggregate undrawn amount of all outstanding standby and documentary
Letters of Credit at such time plus (b) the aggregate amount of all
LC/Acceptance Disbursements that have not yet been reimbursed by or on behalf
of the Borrowers at such time, plus (c) all amounts of outstanding
Acceptances issued by the Lender for the account of the Borrowers at such time,
including any Acceptances which have not been paid at the maturity thereof and
which have not been added to the principal of the Revolving Loans.

 

“Total
Voting Power” means, with respect to any Person, the total number of votes
which holders of securities having the ordinary power to vote, in the absence
of contingencies, are entitled to cast in the election of directors of such
Person.

 

“Trademarks”
means all trademarks (including service marks), federal and state trademark
registrations and applications made by the Credit Parties, common law
trademarks and trade names owned by or assigned to the Credit Parties, all
registrations and applications for the foregoing and all exclusive and
nonexclusive licenses from third parties of the right to use trademarks of such
third parties, including, without limitation, the registrations, applications,
unregistered trademarks, service marks and licenses listed on Schedule 5.5
hereto, along with any and all (a) renewals thereof, (b) income,
royalties, damages and payments now and hereafter due and/or payable with
respect thereto, including, without limitation, damages, claims and payments
for past or future infringements thereof, (c) rights to sue for past,
present and future infringements thereof, and (d) foreign trademarks,
trademark registrations, and trade name applications for any thereof and any
other rights corresponding thereto throughout the world.

 

“Type”
when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined
by reference to the LIBOR Rate, the Base Rate or the LIBOR Daily Floating Rate.

 

“UCC”
means the Uniform Commercial Code (or any similar or equivalent legislation) as
in effect in any applicable jurisdiction.

 

“UFP”
means UFP Technologies, Inc., a Delaware corporation.

 

“U.S.
Dollars” or “$” refers to lawful money of the United States of
America.

 

“Wholly
Owned Subsidiary” means, with respect to any Person at any date, any
corporation, limited liability company, partnership, association or other
entity of which securities or other ownership interests representing 100% of
the equity or ordinary voting power (other than directors’ qualifying shares)
or, in the case of a partnership, 100% of the general partnership interests
are, as of such date, directly or indirectly owned, controlled or held by such
Person or one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.

 

“Withdrawal
Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.

 

1.2                                 Terms Generally.  The
definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined.  Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The words “include”,
“includes” and “including” 

 

21

 

shall
be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (c) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement and (e) the words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.

 

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

 

1.4                                 Joint and Several Obligations;
Designated Financial Officers.

 

(a)          All Obligations of the
Credit Parties hereunder shall be joint and several.  Any notice, request, waiver, consent or other
action made, given or taken by any Credit Party shall bind all Credit Parties.

 

(b)         Each Credit Party hereby
authorizes each of the Designated Financial Officers listed in Schedule 1.4
hereto to act as agent for each Credit Party and to execute and deliver on
behalf of each Credit Party such notices, requests, waivers, consents,
certificates and other documents, and to take any and all actions required or
permitted to be delivered or taken by any Credit Party hereunder.  The Borrowers may replace any of the
Designated Financial Officers listed in Schedule 1.4 hereto or add any
additional Designated Financial Officers by delivering written notice to the
Lender specifying the names of each new Designated Financial Officer and the
offices held by each such Person.  Each
Credit Party hereby agrees that any such notices, requests, waivers, consents,
certificates and other documents executed, delivered or sent by any Designated
Financial Officer and any such actions taken by any Designated Financial
Officer shall bind each Credit Party.

 

ARTICLE 2

 

The Credits

 

2.1                                 Revolving Loans.

 

(a)          Revolving Credit Commitment.  Subject to the terms and conditions set forth
herein, the Lender agrees to make Revolving Loans to the Borrowers from time to
time during the Revolving Credit Availability Period in an aggregate principal
amount that will not result in the Revolving Credit Exposure exceeding the
lesser of (i) the Revolving Credit Commitment at such time 

 

22

 

and (ii) the Borrowing
Base at such time.  Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrowers
may borrow, prepay and reborrow Revolving Loans.

 

(b)         Funding of Revolving Loans.  The Borrowers shall deliver to the Lender on
each Business Day not later than 1:00 p.m., Boston, Massachusetts time, by
facsimile or electronic mail transmission, a Borrowing Base Certificate in
substantially the form of Exhibit B-1 hereto, setting forth the
Borrowing Base as of the close of business on the immediately preceding
Business Day.  So long as no Default or
Event of Default shall have occurred and be continuing or shall result
therefrom, on each Business Day not later than 3:30 p.m. Boston,
Massachusetts time, the Lender shall make a Revolving Loan to the Borrowers in
an amount equal to the amount requested by the Borrowers in the Borrowing Base
Certificate delivered to the Lender that Business Day, by crediting such amount
to one or more accounts of the Borrowers maintained with the Lender; provided that Revolving Loans made to finance the
reimbursement of an LC/Acceptance Disbursement under any Letter of Credit or
Acceptance as provided in Section 2.4(e) shall be remitted by the
Lender to the Issuing Lender.

 

(c)          Interest on Revolving Loans.  Subject to Section 2.3 hereof, each
Revolving Loan made to the Borrowers by Lender hereunder shall bear interest at
a rate per annum equal to the LIBOR Daily Floating Rate plus the Applicable
Margin, or, if the Borrowers shall notify the Lender in writing that the
Borrowers shall so desire, the Base Rate plus the Applicable Margin.  Notwithstanding the foregoing, (i) all Revolving
Loans which are not paid when due shall automatically bear interest until paid
in full at the Post-Default Rate, (ii) during the period when any Event of
Default of the type described in clauses (g), (h) or (i) of Section 9.1
shall have occurred and be continuing, the principal of all Revolving Loans
hereunder shall automatically bear interest, after as well as before judgment,
at the Post-Default Rate, (iii) if there shall occur and be continuing any
Event of Default (other than an Event of Default of the type described in
clauses (g), (h) or (i) of Section 9.1), following written
notice delivered to the Borrowers from the Lender, the principal of all
Revolving Loans hereunder shall bear interest, after as well as before
judgment, at the Post-Default Rate during the period beginning on the date such
Event of Default first occurred, and ending on the date such Event of Default
is cured or waived.  Accrued interest on
each Revolving Loan shall be payable in arrears on the first day of each month;
provided that interest accrued at the
Post-Default Rate shall be payable on demand, and all accrued interest on
Revolving Loans shall be payable upon expiration of the Revolving Credit
Availability Period.  All interest hereunder
shall be computed on the basis of a year of 360 days, and in each case shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day).

 

(d)         Repayment of Revolving Loans.  The Borrowers unconditionally promise to pay
to the Lender the then unpaid principal amount of the Revolving Loans on the
Revolving Credit Maturity Date.  In
addition, if following any reduction in the Revolving Credit Commitment or at
any other time the Revolving Credit Exposure shall exceed the lesser of (i) the
Revolving Credit Commitment at such time, or (ii) the Borrowing Base at
such time, the Borrowers shall first, repay Revolving Loans in an aggregate
amount equal to such excess, and second, provide cash collateral for Total LC
and Acceptances Exposure as specified in Section 2.4(g) in an
aggregate amount equal to such excess.

 

(e)          Loan Account.  The Lender shall maintain in accordance with
its usual practice an account evidencing the indebtedness of the Borrowers to
the Lender resulting from each Revolving Loan made by the Lender, including the
amounts of principal and interest payable and paid to the Lender from time to
time hereunder.  The entries made in the
account maintained pursuant to this subsection 2.1(e) shall be prima facie
evidence of the existence and amounts of the obligations recorded therein; provided that the failure of the Lender to maintain such
account or any error therein 

 

23

 

shall not in any manner
affect the obligation of the Borrowers to repay the Revolving Loans in
accordance with the terms of this Agreement.

 

(f)            Revolving Credit Note.  Prior to the Closing Date, the Borrowers
shall prepare, execute and deliver to the Lender a Revolving Credit Note in the
principal amount of the Revolving Credit Commitment.

 

(g)         Treatment of Revolving Loans
Outstanding under Prior Credit Agreement.  In the event that any Revolving Loans under
(and as defined in) the Prior Credit Agreement shall remain outstanding on the
Closing Date, then such loans shall be continued as Revolving Loans hereunder.

 

2.2                                 Term Loans.

 

(a)          Existing Equipment Term Loan
and Massachusetts Real Estate Term Loan.

 

(i)                                     The Existing
Equipment Term Loan is comprised of the aggregate amount of principal and
interest outstanding on the Equipment Term Loan under (and as defined in) the
Prior Credit Agreement.  Such loans shall
remain outstanding on the Closing Date, and shall be continued as the Existing
Equipment Term Loan hereunder.

 

(ii)                                  The
Massachusetts Real Estate Term Loan is comprised of the aggregate amount of
principal and interest outstanding on the Real Estate Term Loan under (and as
defined in) the Prior Credit Agreement. 
Such loan shall remain outstanding on the Closing Date, and shall be
continued as the Massachusetts Real Estate Term Loan hereunder.

 

(b)         Funding of the Michigan Real
Estate Term Loan. Subject to the terms and conditions set forth
herein, the Lender agrees to fund the Michigan  Real Estate Term Loan on
the Michigan Real Estate Term Loan Closing Date.  Principal amounts of the Michigan Real Estate
Term Loan that have been repaid or prepaid may not be reborrowed.

 

(c)          Interest on the Term Loans.  Subject to Section 2.3 hereof, the
outstanding principal amount of the Term Loans shall bear interest at a rate
per annum equal to the LIBOR Daily Floating Rate plus the Applicable Margin,
or, if the Borrowers shall notify the Lender in writing that the Borrowers
shall so desire, the Base Rate plus the Applicable Margin.  Notwithstanding the foregoing, (i) any
portion of the Term Loans which is not paid when due shall automatically bear
interest until paid in full at the Post-Default Rate, (ii) during the
period when any Event of Default of the type described in clauses (g), (h) or
(i) of Section 9.1 shall have occurred and be continuing, the
outstanding principal balance of the Term Loans shall automatically bear
interest, after as well as before judgment, at the Post-Default Rate, (iii) if
there shall occur and be continuing any Event of Default (other than an Event
of Default of the type described in clauses (g), (h) or (i) of Section 9.1),
following written notice delivered to the Borrowers from the Lender, the
outstanding principal balance of the Term Loans shall bear interest, after as
well as before judgment, at the Post-Default Rate during the period beginning
on the date such Event of Default first occurred, and ending on the date such
Event of Default is cured or waived. 
Accrued interest on the outstanding principal balance of the Term Loans
shall be payable in arrears on the first day of each month; provided that interest accrued at the Post-Default Rate
shall be payable on demand, and all accrued interest on the (x) Existing
Equipment Term Loan shall be payable on each date that any portion of the
principal of the Existing Equipment Term Loan shall be payable hereunder and on
the Existing Equipment Term Loan Maturity Date, (y) Massachusetts Real
Estate Term Loan shall be payable on each date that any portion of the
principal of the Massachusetts Real Estate Term Loan shall be payable hereunder
and on the Massachusetts Real Estate Term Loan Maturity Date, and (z) Michigan
Real Estate Term Loan 

 

24

 

shall be payable on each
date that any portion of the principal of the Michigan Real Estate Term Loan
shall be payable hereunder and on the Michigan Real Estate Term Loan Maturity
Date.  All interest hereunder shall be
computed on the basis of a year of 360 days, and in each case shall be payable
for the actual number of days elapsed (including the first day but excluding
the last day).  Notwithstanding this Section 2.2(c),
subject to Section 8.5(b), the Borrowers may elect to fix the rate of
interest on one or more of the Term Loans pursuant to a Hedging Agreement.

 

(d)         Repayment of Term Loans.

 

(i)                                     Repayment of
Existing Equipment Term Loan.  The Borrowers hereby unconditionally promise
to pay to the Lender monthly principal installments in respect of the Existing
Equipment Term Loan on the first day of each month commencing February 1,
2009 in equal monthly installments calculated based on the full principal
amount of the Existing Equipment Term Loan, amortizing on a seven-year direct
reduction amortization schedule.  To the
extent not previously paid, the Existing Equipment Term Loan shall be due and
payable in full on the Existing Equipment Term Loan Maturity Date.

 

(ii)                                  Repayment of
Massachusetts Real Estate Term Loan and Michigan Real Estate Term Loan.

 

(A)                              The Borrowers
hereby unconditionally promise to pay to the Lender monthly principal
installments in respect of the Massachusetts Real Estate Term Loan on the first
day of each month commencing February 1, 2009 in equal monthly
installments calculated based on the full principal amount of the Massachusetts
Real Estate Term Loan, amortizing on a twenty-year direct reduction
amortization schedule.  To the extent not
previously paid, the Massachusetts Real Estate Term Loan shall be due and
payable in full on the Massachusetts Real Estate Term Loan Maturity Date.

 

(B)                                The Borrowers
hereby unconditionally promise to pay to the Lender monthly principal
installments in respect of the Michigan Real Estate Term Loan on the first day
of each month commencing March 1, 2009 in equal monthly installments
calculated based on the full principal amount of the Michigan Real Estate Term
Loan, amortizing on a twenty-year direct reduction amortization schedule.  To the extent not previously paid, the
Michigan Real Estate Term Loan shall be due and payable in full on the Michigan
Real Estate Term Loan Maturity Date.

 

Notwithstanding any of the foregoing, following the expiration or
termination of the Revolving Credit Commitment for any reason, if the Borrowers
shall obtain a revolving credit facility with a third party lender to replace
in whole or in part the Revolving Loan contemplated herein, the Borrower shall
simultaneously prepay the entire Term Loans (unless sooner repaid hereunder).

 

(e)          Loan Account.  The Lender shall maintain in accordance with
its usual practice an account evidencing the indebtedness of the Borrowers to
the Lender in respect of the Term Loans, including the amounts of principal and
interest payable and paid to the Lender from time to time hereunder.  The entries made in the account maintained
pursuant to this subsection  2.2(e) shall be prima facie evidence of
the existence and amounts of the obligations recorded therein; provided that
the failure of the Lender to maintain such account or any error therein shall
not in any manner affect the obligation of the Borrowers to repay the Term
Loans in accordance with the terms of this Agreement.

 

25

 

(f)            Term Notes.  Prior to the Closing Date or the Michigan
Real Estate Term Loan Closing Date, as applicable, the Borrowers shall prepare,
execute and deliver to the Lender the Term Notes evidencing the Borrowers’
obligations in respect of the applicable Term Loans.

 

2.3                                 LIBOR Borrowings.

 

(a)          General.  The entire principal balance of the Term
Loans and each Revolving Loan initially shall be a LIBOR Daily Floating Rate
Loan, or, if the Borrowers shall notify the Lender in writing that the
Borrowers shall so desire, a Base Rate Loan. 
Thereafter, the Borrowers may elect to convert all or any portion of the
Term Loans or any portion of the outstanding Revolving Loans to a LIBOR
Borrowing.  The Borrowers may elect
different options for continuations and conversions with respect to different
portions of the affected Borrowing, in which case the Loans comprising each
such portion shall be considered a separate Borrowing.  The Borrowers shall not be permitted to
select any LIBOR Interest Period for any LIBOR Borrowing that ends after the
Revolving Credit Maturity Date, the Existing Equipment Term Loan Maturity Date,
the Massachusetts Real Estate Term Loan Maturity Date or the Michigan Real
Estate Term Loan Maturity Date.

 

(b)         Interest on LIBOR Borrowings.  Each LIBOR Borrowing shall bear interest
during the applicable LIBOR Interest Period at a rate per annum equal to the
LIBOR Rate plus the Applicable Margin. 
Notwithstanding the foregoing, (i) all LIBOR Borrowings which are
not paid when due shall automatically be converted into Base Rate Borrowings
and shall bear interest until paid in full at the Post-Default Rate, (ii) during
the period when any Event of Default of the type described in clauses (g),
(h) or (i) of Section 9.1 shall have occurred and be continuing,
all LIBOR Borrowings shall automatically be converted into Base Rate Borrowings
and shall bear interest, after as well as before judgment, at the Post-Default
Rate, (iii) if there shall occur and be continuing any Event of Default
(other than an Event of Default of the type described in clauses (g), (h) or
(i) of Section 9.1), following written notice delivered to the
Borrowers from the Lender, all LIBOR Borrowings shall automatically be
converted into Base Rate Borrowings and shall bear interest, after as well as
before judgment, at the Post-Default Rate during the period beginning on the
date such Event of Default first occurred, and ending on the date such Event of
Default is cured or waived.  Accrued
interest on each LIBOR Borrowing shall be payable in arrears on the first day
of each month and on the last Business Day of the LIBOR Interest Period
applicable to such LIBOR Borrowing; provided that
interest accrued at the Post-Default Rate shall be payable on demand.  All interest hereunder shall be computed on
the basis of a year of 360 days, and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).

 

(c)          Procedure for Requesting
LIBOR Borrowings.  To request
that any portion of the Term Loan or the outstanding Revolving Loans be
converted into a LIBOR Borrowing, or, to request that any LIBOR Borrowing
continue as a LIBOR Borrowing for an additional LIBOR Interest Period, the
Borrowers shall submit to the Lender a LIBOR Request, in substantially the form
of Exhibit B-3 hereto and setting forth all of the information
required to be set forth therein, by electronic mail or facsimile transmission,
not later than 1:00 p.m., Boston, Massachusetts time, three Business Days
before the date of the proposed conversion or continuation of such
Borrowing.  Each such LIBOR Request made
by the Borrowers shall be irrevocable. 
Subject to the provisions of subsection 2.3(f) and provided that no
Default or Event of Default shall have occurred and be continuing, upon receipt
of a LIBOR Request, the Lender shall on the requested date of conversion or
continuation (i) convert the Base Rate Loan or LIBOR Daily Floating Rate
Loan, as applicable, requested to be converted into a LIBOR Loan for the LIBOR
Interest Period set forth in such LIBOR Request and/or (ii) continue the
LIBOR Loan requested to be continued as a LIBOR Loan for the additional LIBOR
Interest Period set forth in such LIBOR Request.

 

26

 

(d)         Incomplete LIBOR Requests.  If any LIBOR Request is incomplete in any
respect, then such LIBOR Request shall be void and the Borrowing which was the
subject matter of such LIBOR Request shall continue as a Base Rate Borrowing or
LIBOR Daily Floating Rate Loan, as applicable. 
If, with respect to any existing LIBOR Borrowing, the Borrowers fail to
deliver a LIBOR Request to continue such LIBOR Borrowing at least three
Business Days prior to the expiration of the LIBOR Interest Period for such
existing LIBOR Borrowing, such LIBOR Borrowing shall automatically convert to a
LIBOR Daily Floating Rate Loan at the expiration of such LIBOR Interest Period.

 

(e)          Limit on LIBOR Borrowings.  At the commencement of each LIBOR Interest
Period for a LIBOR Borrowing, such Borrowing shall be in an aggregate amount at
least equal to $250,000 or any greater multiple of $100,000.  Borrowings of more than one Type and Class may
be outstanding at the same time; provided that
there shall not at any time be more than a total of five (5) LIBOR
Borrowings outstanding.

 

(f)            Alternate Rate of Interest.  If prior to the commencement of any LIBOR
Interest Period for a LIBOR Borrowing, the Lender determines that (i) adequate
and reasonable means do not exist for ascertaining the LIBOR Rate for such
LIBOR Interest Period, (ii) the LIBOR Rate for such LIBOR Interest Period
will not adequately and fairly reflect the cost to the Lender of making or
maintaining LIBOR Borrowings, or (iii) as a result of any Change in Law it
is unlawful or impossible for the Lender to make or maintain any LIBOR
Borrowing; then in each case the Lender shall give notice thereof to the
Borrowers as promptly as practicable thereafter and, until the Lender notifies
the Borrowers that the circumstances giving rise to such notice no longer
exist, any LIBOR Request submitted by the Borrowers shall be ineffective; provided that if as a result of a Change in Law the Lender
is prohibited from maintaining any outstanding LIBOR Borrowing, upon notice
from the Lender, the Borrowers shall immediately (A) convert such LIBOR
Borrowing to a Base Rate Loan, or (B) repay such LIBOR Borrowing in full,
together with all interest accrued thereon and all fees and other amounts
payable to the Lender hereunder (in either case, subject to the provisions of
subsection 2.3(g) of this Agreement with respect to redeployment
costs).  This section shall also be
applicable, mutatis mutandis, to Loans bearing
interest at the LIBOR Daily Floating Rate.

 

(g)         Break Funding Payments.  In the event of (i) the payment of any
principal of any LIBOR Loan other than on the last day of the LIBOR Interest
Period applicable thereto (including as a result of an Event of Default), (ii) the
conversion of any LIBOR Loan other than on the last day of the LIBOR Interest
Period applicable thereto, or (iii) the failure to borrow, convert,
continue or prepay any LIBOR Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice is permitted to be revocable
and is revoked in accordance herewith), then, in any such event, the Borrowers
shall compensate the Lender for the loss, cost and expense attributable to such
event, as determined by the Lender in a manner consistent with its customs and
practices.  In the event that the Lender
is entitled to receive compensation pursuant to this subsection 2.3(g), the
Lender shall deliver a certificate to the Borrowers setting forth the amount or
amounts that the Lender is entitled to receive, and the Borrowers shall pay
such amount or amounts within three (3) days after receipt of such
certificate.

 

2.4                                 Letters of Credit and Acceptances.

 

(a)          General.  Subject to the terms and conditions set forth
herein, in addition to the Revolving Loans provided for in Section 2.1,
any Borrower may request the issuance of Letters of Credit and Acceptances for
its own account by the Issuing Lender, in a form reasonably acceptable to the
Issuing Lender (which, in the case of Acceptance, shall include submission of
an Acceptance Agreement and such other agreements and documents as may be
required by the Lender in its sole 

 

27

 

discretion), at any time and
from time to time during the Revolving Credit Availability Period.  Letters of Credit and Acceptances issued
hereunder shall constitute utilization of the Revolving Credit Commitment.  In the event of any inconsistency between the
terms and conditions of this Agreement and the terms and conditions of any form
of letter of credit application, Acceptance Agreement or other agreement
submitted by any Borrower to, or entered into by any Borrower with, the Issuing
Lender relating to any Letter of Credit or Acceptance, the terms and conditions
of this Agreement shall control.  Each
Acceptance shall be in an amount not less than $1,000,000.

 

(b)         Notice of Issuance,
Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of an Letter of
Credit (or the amendment, renewal or extension of an outstanding Letter of
Credit) or an Acceptance, the Borrowers shall deliver to the Issuing Lender and
the Lender by electronic or facsimile transmission (reasonably in advance of
the requested date of issuance, amendment, renewal or extension) a letter of
credit application or Acceptance Agreement (as applicable) in the form required
by the Issuing Lender.  A Letter of
Credit shall be issued, amended, renewed or extended, and an Acceptance shall
be issued, only if (and upon issuance, amendment, renewal or extension of each
Letter of Credit or upon issuance of an Acceptance, the Borrowers shall be
deemed to represent and warrant that), after giving effect to such issuance,
amendment, renewal or extension (i) the Total LC and Acceptances Exposure
at such time shall not exceed the LC and Acceptances Sublimit, and (ii) the
Revolving Credit Exposure at such time shall not exceed the lesser of (A) the
Revolving Credit Commitment at such time, and (B) the Borrowing Base at
such time.

 

(c)          Expiration Date.  Each Letter of Credit shall expire (without
giving effect to any extension thereof by reason of an interruption of
business) at or prior to the close of business on the earlier of (i) the
date 365 days, in the case of standby Letters of Credit, or 180 days, in the
case of documentary Letters of Credit, after the date of the issuance of such
Letter of Credit (or, in the case of any renewal or extension thereof, 365 days
or 180 days, as applicable, after such renewal or extension) provided that any such standby Letter of Credit may provide
for automatic extensions thereof to a date not later than 365 days beyond its
current expiration date, and (ii) the date that is thirty Business Days
prior to the Revolving Credit Maturity Date. 
Each Acceptance shall expire at or prior to the close of business on the
earlier of (i) the date 180 days after the date of the issuance of such
Acceptance and (ii) the date that is thirty Business Days prior to the
Revolving Credit Maturity Date.  No
Letter of Credit or Acceptance may be extended beyond the date that is thirty
Business Days prior to the Revolving Credit Maturity Date.

 

(d)         Reimbursement.  If the Issuing Lender shall make any
LC/Acceptance Disbursement in respect of a Letter of Credit or an Acceptance,
the Borrowers shall reimburse (each, a “Reimbursement Obligation”) the
Issuing Lender in respect of such LC/Acceptance Disbursement by paying to the
Lender for the account of the Issuing Bank an amount equal to such
LC/Acceptance Disbursement not later than 1:00 p.m., Boston, Massachusetts
time, on (i) the Business Day that the Borrowers receive notice of the
same, if such notice is received prior to 11:00 a.m., Boston,
Massachusetts time, or (ii) the Business Day immediately following the day
that the Borrowers receive such notice, if such notice is not received prior to
such time, provided that, subject to the conditions
to borrowing set forth herein, payment of each such Reimbursement Obligation
shall be made through the automatic funding of a Base Rate Borrowing in an
amount equal to the amount of such Reimbursement Obligation, and the Borrowers
hereby irrevocably authorize and direct the Lender to take such actions as may
necessary to effectuate such automatic funding of such Base Rate
Borrowings.  To the extent that any such
Reimbursement Obligation is paid through the automatic funding of a Base Rate
Borrowing, the Borrowers’ obligation to make such payment shall be discharged
and replaced by the resulting Base Rate Borrowing.  If the Borrowers cannot satisfy the
conditions to borrowing set forth herein such that the payment of any Reimbursement
Obligation cannot be made through the automatic funding of a Base Rate
Borrowing and the Borrowers shall fail 

 

28

 

to make such payment when
due, the Lender shall promptly pay to the Issuing Lender the unreimbursed portion
of such LC/Acceptance Disbursement. 
Promptly following receipt by the Lender of any payment from the
Borrowers pursuant to this paragraph, the Lender shall distribute such payment
to the Issuing Lender.

 

(e)          Obligations Absolute.  The Borrowers’ obligation to reimburse
LC/Acceptance Disbursements as provided in subsection 2.4(d) shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability
of any Letter of Credit or Acceptance agreement, or any term or provision
therein, (ii) any draft or other document presented under a Letter of
Credit or Acceptance proving to be forged, fraudulent or invalid in any respect
or any statement therein being untrue or inaccurate in any respect, (iii) payment
by the Issuing Lender to the beneficiary under a Letter of Credit or Acceptance
against presentation of a draft or other document that does not comply strictly
with the terms of such Letter of Credit or Acceptance and (iv) any other
event or circumstance whatsoever (other than gross negligence or willful
misconduct of the Issuing Lender), whether or not similar to any of the
foregoing, that might, but for the provisions of this Section 2.4,
constitute a legal or equitable discharge of the Borrowers’ obligations
hereunder.

 

(f)            Interim Interest.  If the Issuing Lender shall make any
LC/Acceptance Disbursement in respect of any Letter of Credit or Acceptance,
and if the Borrowers cannot satisfy the conditions to borrowing set forth
herein such that payment of the Reimbursement Obligation resulting from such
LC/Acceptance Disbursement cannot be made through the automatic funding of a
Base Rate Borrowing, then, unless the Borrowers shall reimburse such
LC/Acceptance Disbursement in full on the date such LC/Acceptance Disbursement
is made, the unpaid amount thereof shall bear interest, for each day from and
including the date such LC/Acceptance Disbursement is made to but excluding the
date that the Borrowers reimburse such LC/Acceptance Disbursement, at the rate
per annum then applicable to Base Rate Loans; provided
that, if the Borrowers fail to reimburse such LC/Acceptance Disbursement when
due pursuant to subsection 2.4(d), then interest calculated at the Post-Default
Rate shall accrue on the unpaid amount thereof. 
Interest accrued pursuant to this paragraph shall be for the account of
the Issuing Lender, except that interest accrued on and after the date of
payment by the Lender pursuant to subsection 2.4(d) shall be for the
account of the Lender to the extent of the payment.

 

(g)         Cash Collateralization.  If either (i) an Event of Default shall
occur and be continuing and the Borrowers receive notice from the Lender
demanding the deposit of cash collateral pursuant to this paragraph, or (ii) the
Borrowers shall be required to provide cash collateral for Total LC and
Acceptances Exposure pursuant to subsections  2.1(d) or 2.7(b), the
Borrowers shall immediately deposit with the Lender an amount in cash equal to,
in the case of an Event of Default, the Total LC and Acceptances Exposure as of
such date plus any accrued and unpaid interest thereon and, in the case of any
cash collateral required to be provided pursuant to subsections 2.1(d) or
2.7(b), the amount required under subsections 2.1(d) or 2.7(b), as
the case may be; provided that the obligation to
deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other
notice of any kind, upon the occurrence of any Event of Default described in
clause (g) or (h) of Section 9.1.  Such deposit shall be held by the Lender as
collateral in the first instance for the Total LC and Acceptances Exposure
under this Agreement and thereafter for the payment of any other obligations of
the Credit Parties hereunder.

 

(h)         Existing Letters of Credit.  All Existing Letters of Credit issued under
the Prior Credit Agreement which are outstanding on the Closing Date shall
remain outstanding after the 

 

29

 

Closing Date in accordance
with their terms and shall be treated for all purposes as if they were issued
by Issuing Lender pursuant to the terms of this Agreement.

 

2.5                                 Expiration, Termination or
Reduction of Revolving Credit Commitment.

 

(a)          Expiration of Revolving
Credit Commitment.  Unless
previously terminated, the Revolving Credit Commitment shall expire at the
close of business on the Revolving Credit Maturity Date.

 

(b)         Reduction of Revolving
Credit Commitment.  The
Borrowers may at any time and from time to time reduce the Revolving Credit
Commitment; provided that (i) each reduction of
the Revolving Credit Commitment shall be in an amount that is at least equal to
$500,000 or any greater multiple of $100,000, and (ii) the Borrowers shall
not reduce the Revolving Credit Commitment if, after giving effect to any
concurrent repayment, the total Revolving Credit Exposure would exceed the
total Revolving Credit Commitment.  The
Borrowers shall notify the Lender of any election to reduce the Revolving
Credit Commitment at least three Business Days prior to the effective date of
such reduction, specifying the effective date thereof.  Each notice of reduction of the Revolving
Credit Commitment shall be irrevocable. 
Each reduction of the Revolving Credit Commitment shall be permanent.

 

(c)          Optional Termination of
Revolving Credit Commitment.  The Borrowers shall have the right at any
time to terminate the Revolving Credit Commitment without prepayment penalty or
premium.  The Borrowers shall notify the
Lender of any election to terminate the Revolving Credit Commitment under this
subsection 2.5(c) in writing at least ninety (90) days prior to the effective
date of such termination, specifying the effective date thereof.  Each notice of termination of the Revolving
Credit Commitment shall be irrevocable. 
Any termination of the Revolving Credit Commitment shall be permanent.

 

2.6                                 Payments.

 

(a)          Payments Generally.  The Borrowers shall be obligated to make each
payment required to be made by the Borrowers hereunder (whether of principal,
interest, fees or reimbursement of LC/Acceptance Disbursements, or otherwise)
to Lender at its offices in Boston, Massachusetts, prior to 3:00 p.m.,
Boston, Massachusetts time, on the date when due (except that if any payment
shall be due on a day that is not a Business Day, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be payable for the period of such
extension).  All payments shall be made
in immediately available funds, in U.S. dollars without set-off or
counterclaim.  Any amounts received after
such time on any date may, in the discretion of the Lender, be deemed to have
been received on the next succeeding Business Day for purposes of calculating
interest thereon.  Notwithstanding
anything to the contrary set forth herein, subject to the conditions to the
funding of Revolving Loans set forth herein, all payments of interest, fees and
any other amounts due to be paid by the Borrowers hereunder shall be made
through the automatic funding of Base Rate Revolving Loans in amounts equal to
the amounts of such interest, fees or other amounts due to be paid by the
Borrowers hereunder, and the Borrowers hereby irrevocably authorize and direct
the Lender to take such actions as may be necessary to effectuate such
automatic funding of Base Rate Revolving Loans, and, upon funding of any such
Base Rate Revolving Loan, the Borrowers’ obligation to make such payment shall
be discharged and replaced by the resulting Base Rate Revolving Loan.  The Borrowers expressly acknowledge and agree
that (i) the Lender may, in its sole discretion, effectuate the automatic
funding of a Revolving Loan pursuant to this subsection 2.6(a) even though
at the time of, or after giving effect to, the funding of such Revolving Loans
the Revolving Credit Exposure exceeds 

 

30

 

the lesser of (x) the
Revolving Credit Commitment and (y) the Borrowing Base, and (ii) if
any one or more of the conditions to the funding of Revolving Loans cannot be
satisfied and the Lender, in its sole discretion, refuses to fund a Base Rate
Revolving Loan in an amount sufficient to satisfy the amount of any interest,
fees or other amounts due hereunder, the Borrowers shall remain obligated to
pay the full amount of such interest, fees or other amounts as and when the
same shall become due.

 

(b)         Application of Payments.  If at any time insufficient funds are
received by and available to the Lender to pay fully all amounts of principal,
unreimbursed LC/Acceptance Disbursements, interest and fees then due hereunder
under any circumstances, including, without limitation during, or as a result
of the exercise by the Lender of remedies hereunder or under any other Loan
Document and applicable law, such funds shall be applied (i) first, to pay
interest, fees, costs and expenses then due hereunder, (ii) second, to pay
principal and unreimbursed LC/Acceptance Disbursements then due hereunder, and (iii) third,
to any other Obligations then due from the Credit Parties to the Lender, the
Issuing Lender, the Cash Management Bank or any other Affiliate of the Lender.

 

(c)          Collection.  Any check, instrument or other item of
payment in favor of any Borrower remitted to the Cash Management Bank for
processing shall be subject to a collection charge equal to two days interest
on the amount thereof at the Base Rate plus the Applicable Margin, which
collection charges shall be payable by the Borrowers monthly in arrears on the
first Business Day of each month.

 

2.7                                 Prepayment of Loans.

 

(a)          Optional Prepayments of
Loans.  The Borrowers shall have the
right at any time and from time to time to prepay the Revolving Loans in whole
or in part, subject to the payment of any amounts due under subsection
2.3(g).  The Borrowers shall have the
right at any time and from time to time to prepay the Term Loans in whole or in
part, subject to prior notice in accordance with subsection 2.7(d),
subject to the payment of any amounts due under subsection 2.3(g), and provided that each such prepayment of the Term Loans shall
be in an amount that is at least equal to $250,000 or any greater multiple of
$100,000.

 

(b)         Mandatory Prepayments.  The Borrowers shall be obligated to, and
shall, make prepayments of the Loans hereunder (and reduce the Revolving Credit
Commitment hereunder) as follows:

 

(i)                                     Incurrence of
Debt.  Without limiting the
obligation of the Borrowers to obtain the consent of the Lender to any
incurrence of Indebtedness not otherwise permitted hereunder, the Borrowers
agree, on the closing of any incurrence of Indebtedness by any Credit Party
(other than Indebtedness permitted pursuant to Section 8.1) to prepay the
Loans hereunder (and provide cash collateral for Total LC and Acceptances
Exposure as specified in subsection 2.4(g)), and the Revolving Credit
Commitment hereunder shall be subject to automatic reduction, upon the date of
such incurrence of Indebtedness, in an aggregate amount equal to 100% of the
amount of the Net Cash Payments from such incurrence of Indebtedness received
by any Credit Party, such prepayment and reduction to be effected in each case
in the manner and to the extent specified in subsection 2.7(c) below.

 

(ii)                                  Sale or
Offering of Securities.  The
Borrowers agree on the closing of any offering or sale of equity securities by
any Credit Party, to prepay the Loans hereunder (and provide cash collateral
for Total LC and Acceptances Exposure as specified in subsection 2.4(g)), upon
the date of such sale or offering of securities, in an aggregate amount equal
to 100% of the 

 

31

 

amount of Net Cash Payments
from such offering of securities received by any such Credit Party (excluding
Net Cash Payments received in connection with Equity Rights issued or granted
to members of the Credit Parties’ boards of directors or employees that are
registered on Form S-8), such prepayment to be effected in each case in
the manner and to the extent specified in subsection 2.7(c) below.

 

(iii)                               Sale of Assets.  Without limiting the obligation of the
Borrowers to obtain the consent of the Lender to any Disposition not otherwise
permitted hereunder, the Borrowers agree, on the date of any Disposition by any
Credit Party, to prepay the Loans hereunder (and provide cash collateral for
Total LC and Acceptances Exposure as specified in subsection 2.4(g)), and
the Revolving Credit Commitment hereunder shall be subject to automatic
reduction, upon the date of such Disposition, in an aggregate amount equal to
100% of the amount of such Net Cash Payments from such Disposition received by
any Credit Party on the date of such Disposition, such payment and reduction to
be effected in each case and in the manner and to the extent specified in
subsection 2.7(c) below. 
Notwithstanding the forgoing, the Borrowers shall not be required to
make any prepayment of the Loans under this subsection 2.7(b)(iii) with
respect to the first $100,000 of aggregate Net Cash Payments received by the
Credit Parties from Dispositions after the Effective Time to the extent 100% of
such Net Cash Payments are utilized to replace the assets disposed of by the
Credit Parties in the Disposition within 90 days of each such Disposition.

 

(iv)                              Proceeds of
Casualty Events.  Upon the
receipt by the Lender or the Credit Parties of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any property of the Credit Parties, the Borrowers shall prepay the
Loans (and provide cash collateral for Total LC and Acceptances Exposure as
specified in subsection 2.4(g)), and the Revolving Credit Commitment shall
be subject to automatic reduction, in an aggregate amount equal to 100% of the
Net Cash Payments from such Casualty Event, such prepayment and reduction to be
effected in each case in the manner and to the extent specified in subsection
2.7(c) below; provided that
if there shall occur a Casualty Event and the aggregate market value of all
property affected by such Casualty Event shall be less than or equal to
$200,000, and if, at the time proceeds of insurance in respect of such Casualty
Event are received, no Event of Default shall have occurred and be continuing,
the Borrowers shall be entitled to utilize such insurance proceeds (in an
amount not in excess of $200,000) to repair or replace the property affected by
such Casualty Event within 90 days (it being understood that if proceeds of
insurance intended to be applied to repair or replace property are not in fact
applied within 90 days after receipt thereof, then such proceeds shall be
applied to the prepayment of Loans, cover for Total LC and Acceptances Exposure
and reduction of the Revolving Credit Commitment as provided in this clause (iv) at
the expiration of such 90 day period). 
For any Casualty Events in which the aggregate market value of all
property affected by such Casualty Event is greater than $200,000, with the Lender’s
prior written consent, which may be withheld in the Lender’s reasonable credit
judgment, the Borrowers shall be permitted to utilize such insurance proceeds
to repair or replace the property affected by such Casualty Event subject to
any restrictions or conditions as are provided in the Lender’s consent.

 

(c)          Application.  In the event of any mandatory prepayment of
Loans pursuant to subsections (b)(i), (b)(ii), (b)(iii) and (b)(iv) of
this Section 2.7, the proceeds shall be applied as follows:

 

(i)                                     first, to the
extent that Revolving Credit Exposure shall at such time exceed the lesser of (A) the
Revolving Credit Commitment at such time or (B) the Borrowing Base at such
time, such prepayment shall be applied to the repayment of Revolving Loans;

 

32

 

(ii)                                  second, if such
prepayment is made at a time when any part of the Term Loan remains
outstanding, such prepayment shall be applied to the repayment of the unpaid
principal balance of the Term Loan in inverse order of maturity; and

 

(iii)                               third, after
the Term Loan has been repaid in full, the amount of any mandatory prepayment
shall be applied to repay Revolving Loans, and, second, to provide cash
collateral for Total LC and Acceptances Exposure as specified in Section 2.4(g),
with a corresponding permanent reduction in the Revolving Credit Commitment
(except that no such corresponding permanent reduction in the total Revolving
Credit Commitment shall be required in connection with any prepayment pursuant
to subsection 2.7(b)(ii) above).

 

(d)         Notification of Certain
Prepayments.  The
Borrowers shall notify the Lender by telephone (confirmed by telecopy) of any
voluntary prepayment of any LIBOR Loan not later than 1:00 p.m., Boston,
Massachusetts time, three Business Days before the date of such
prepayment.  The Borrowers shall notify
the Lender of any mandatory prepayment of the Loans pursuant to subsection 2.7(b) hereunder
as soon as practicable.  Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid.

 

(e)          Prepayments Accompanied by
Interest.  All
prepayments of the Term Loans shall be accompanied by accrued interest through
the date of prepayment.

 

2.8                                 Fees.

 

(a)          Unused Fee.  The Borrowers shall pay to the Lender unused
fees in respect of the Revolving Credit Commitment, in an aggregate amount
equal to the product of (x) the Applicable Unused Fee Rate, multiplied by (y) the
daily average unused amounts of the Revolving Credit Commitment during the
period from and including the date on which the Effective Time shall occur to
but excluding the date on which the Revolving Credit Commitment
terminates.  Accrued unused fees shall be
payable monthly in arrears on the first day of each month and on the date on
which the Revolving Credit Commitment terminates.  All unused fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).

 

(b)         Letter of Credit Fees.  The Borrowers shall pay with respect to
Letters of Credit issued hereunder the following fees:

 

(i)                                     with respect to
each documentary or standby Letter of Credit issued hereunder, a fee to the
Lender which shall accrue at a rate per annum equal to (x) the Applicable
Margin for LIBOR Rate Revolving Loans multiplied by (y) the average
daily amount of outstanding Letters of Credit during the period from and
including the Closing Date to but excluding the date on which there shall no
longer be any Letters of Credit outstanding hereunder, and

 

(ii)                                  with respect to
each documentary or standby Letter of Credit issued hereunder, the Issuing
Lender’s standard fees with respect to the issuance, amendment, renewal or extension
of any Letter of Credit or processing of drawings thereunder.

 

Accrued
fees for Letters of Credit shall be computed on the basis of a year of 360 days
and shall be payable for the actual number of days elapsed (including the first
day but excluding the last day), and shall be payable monthly in arrears on the
first day of each month and on the date the Revolving Credit Commitment
terminates, commencing on the first such date to occur after the date hereof, provided that 

 

33

 

any
such fees accruing after the date on which the Revolving Credit Commitment
terminates shall be payable on demand.

 

(c)          Acceptances Fees.  The Borrowers shall pay with respect to
Acceptances issued hereunder the following fees:

 

(i)                                     with respect to
each Acceptance issued hereunder, a fee to the Lender which shall accrue at a
rate per annum equal to (x) (A) the Applicable Margin for LIBOR Rate
Revolving Loans minus (B) the Discount Rate for Acceptances, multiplied
by (y) the average daily amount of outstanding Acceptances during the
period from and including the Closing Date to but excluding the date on which
there shall no longer be any Acceptances outstanding hereunder, and

 

(ii)                                  with respect to
each Acceptance issued hereunder, the Issuing Lender’s standard fees with
respect to the issuance, amendment, renewal or extension of any Acceptances or
processing of drafts thereunder.

 

Accrued
fees for Acceptances shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day), and shall be payable monthly in arrears on the
first day of each month and on the date the Revolving Credit Commitment
terminates, commencing on the first such date to occur after the date hereof, provided that any such fees accruing after the date on which
the Revolving Credit Commitment terminates shall be payable on demand.

 

2.9                                 Increased Costs.

 

(a)          If any Change in Law shall:

 

(i)                                     impose, modify
or deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, the
Lender or the Issuing Lender; or

 

(ii)                                  impose on the
Lender or the Issuing Lender or the London interbank market any other condition
affecting this Agreement or LIBOR Loans made by the Lender or any Letter of
Credit;

 

and
the result of any of the foregoing shall be to increase the cost to the Lender
of making or maintaining any LIBOR Loan (or of maintaining its obligation to
make any such Loan) or to increase the cost to the Issuing Lender of issuing or
maintaining any Letter of Credit or to reduce the amount of any sum received or
receivable by the Lender or the Issuing Lender hereunder (whether of principal,
interest or otherwise), then the Borrowers will pay to the Lender or the
Issuing Lender, as the case may be, such additional amount or amounts as will
compensate the Lender or the Issuing Lender, as the case may be, for such
additional costs incurred or reduction suffered.

 

(b)         If the Lender or the Issuing
Lender reasonably determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on the
Lender’s or the Issuing Lender’s capital or on the capital of the Lender’s or
the Issuing Lender’s holding company, if any, as a consequence of this
Agreement or the Loans made by the Lender, or the Letters of Credit issued by
the Issuing Lender, to a level below that which the Lender or the Issuing
Lender or the Lender’s or the Issuing Lender’s holding company could have
achieved but for such Change in Law (taking into consideration the Lender’s or
the Issuing Lender’s policies and the 

 

34

 

policies of the Lender’s or
the Issuing Lender’s holding company with respect to capital adequacy), then
from time to time the Borrowers will pay to the Lender or the Issuing Lender,
as the case may be, such additional amount or amounts as will compensate the
Lender or the Issuing Lender, or the Lender’s or the Issuing Lender’s holding
company, for any such reduction suffered.

 

(c)          A certificate of the Lender
or the Issuing Lender setting forth the amount or amounts necessary to
compensate the Lender or the Issuing Lender or its holding company, as the case
may be, as specified in subsections 2.9(a) or 2.9(b) above shall be
delivered to the Borrowers and shall be conclusive so long as it reflects a
reasonable basis for the calculation of the amounts set forth therein and does
not contain any manifest error.  The
Borrowers shall pay the Lender or the Issuing Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.

 

(d)         Failure or delay on the part
of the Lender or the Issuing Lender to demand compensation pursuant to this Section 2.9
shall not constitute a waiver of the Lender’s or the Issuing Lender’s right to
demand such compensation; provided that
the Borrowers shall not be required to compensate the Lender or the Issuing
Lender pursuant to this Section 2.9 for any increased costs or reductions
incurred more than six months prior to the date that Lender or the Issuing
Lender, as the case may be, notifies the Borrowers of the Change in Law giving
rise to such increased costs or reductions and of Lender’s or the Issuing
Lender’s intention to claim compensation therefor; provided
further that, if the Change in Law
giving rise to such increased costs or reductions is (i) retroactive and (ii) occurred
within such six-month period, then the six-month period referred to above may
be extended to include the period of retroactive effect thereof, but in no
event any period prior to the Closing Date.

 

2.10                           Taxes.

 

(a)          Any and all payments by or
on account of any Obligations of the Borrowers hereunder shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrowers shall be required to deduct
any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.10) the Lender or the Issuing Lender (as the case may be)
receives an amount equal to the sum it would have received had no such deductions
been made, (ii) the Borrowers shall make such deductions and (iii) the
Borrowers shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.

 

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

 

(c)          The Borrowers shall
indemnify the Lender and the Issuing Lender, within 10 days after written
demand therefor, for the full amount of any Indemnified Taxes or Other Taxes
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 2.10) paid by the
Lender or the Issuing Lender, as the case may be (and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto during the
period prior to the Borrowers making the payment demanded under this paragraph
(c)), whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such
payment or liability delivered to the Borrowers by the Lender or the Issuing
Lender, shall be conclusive absent manifest error.

 

35

 

(d)   As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrowers to a Governmental Authority,
the Borrowers shall deliver to the Lender the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy
of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Lender.

 

ARTICLE 3

 

Guarantee by Guarantors

 

3.1           The
Guarantee.  The Guarantors
hereby guarantee to the Lender and the Issuing Lender and their respective
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations.  The Guarantors hereby further agree that if
the Borrowers shall fail to pay in full when due (whether at stated maturity,
by acceleration or otherwise) any of the Obligations, the Guarantors will
promptly pay the same, without any demand or notice whatsoever, and that in the
case of any extension of time of payment or renewal of any of the Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.

 

3.2           Obligations
Unconditional.  The
obligations of the Guarantors under Section 3.1 are absolute and
unconditional irrespective of the value, genuineness, validity, regularity or
enforceability of this Agreement, the other Loan Documents or any other
agreement or instrument referred to herein or therein, or any substitution, release
or exchange of any other guarantee of or security for any of the Obligations,
and, to the fullest extent permitted by applicable law, irrespective of any
other circumstance whatsoever that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor, it being the intent of
this Section 3.2 that the obligations of the Guarantors hereunder shall be
absolute and unconditional under any and all circumstances.  Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Guarantors hereunder which shall
remain absolute and unconditional as described above:

 

(i)            at any time or from time to time,
without notice to such Guarantors, the time for any performance of or
compliance with any of the Obligations shall be extended, or such performance
or compliance shall be waived;

 

(ii)           any of the acts mentioned in any of
the provisions hereof or of the other Loan Documents or any other agreement or
instrument referred to herein or therein shall be done or omitted;

 

(iii)          the maturity of any of the Obligations
shall be accelerated, or any of the Obligations shall be modified, supplemented
or amended in any respect, or any right hereunder or under the other Loan
Documents or any other agreement or instrument referred to herein or therein
shall be waived or any other guarantee of any of the Obligations or any
security therefor shall be released or exchanged in whole or in part or otherwise
dealt with; or

 

(iv)          any lien or security interest granted
to, or in favor of, the Lender or the Issuing Lender as security for any of the
Obligations shall fail to be perfected.

 

The
Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Lender or the
Issuing Lender exhaust any right, power or remedy or proceed against the
Borrowers hereunder or under the other Loan Documents or any other

 

36

 

agreement
or instrument referred to herein or therein, or against any other Person under
any other guarantee of, or security for, any of the Obligations.

 

3.3           Reinstatement.  The obligations of the Guarantors under this Article 3
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the Borrowers in respect of the Obligations is
rescinded or must be otherwise restored by any holder of any of the
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Lender and the Issuing Lender on demand for all reasonable costs and
expenses (including fees and expenses of counsel) incurred by the Lender or the
Issuing Lender in connection with such rescission or restoration, including any
such costs and expenses incurred in defending against any claim alleging that
such payment constituted a preference, fraudulent transfer or similar payment
under any bankruptcy, insolvency or similar law.

 

3.4           Subrogation.  Until such time as the Obligations shall have
been indefensibly paid in full, each of the Guarantors hereby waives all rights
of subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Federal
Bankruptcy Code of 1978, as amended) or otherwise by reason of any payment by
it pursuant to the provisions of this Article 3 and further agrees with
the Borrowers for the benefit of each creditor of the Borrowers (including,
without limitation, the Lender and the Issuing Lender) that any such payment by
it shall constitute a contribution of capital by such Guarantor to the
Borrowers.

 

3.5           Remedies.  The Guarantors agree that, as between the
Guarantors and the Lender, the Obligations of the Borrowers hereunder may be
declared to be forthwith due and payable as provided in Section 9.1 (and
shall be deemed to have become automatically due and payable in the
circumstances provided in Section 9.1) for purposes of Section 3.1
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such Obligations from becoming automatically due and payable)
as against the Borrowers and that, in the event of such declaration (or such
Obligations being deemed to have become automatically due and payable), such
Obligations (whether or not due and payable by the Borrowers) shall forthwith
become due and payable by the Guarantors for purposes of Section 3.1.

 

3.6           Instrument
for the Payment of Money. 
Each of the Guarantors hereby acknowledges that the guarantee in this Article 3
constitutes an instrument for the payment of money, and consents and agrees
that the Lender or the Issuing Lender, at its sole option, in the event of a
dispute by such Guarantor in the payment of any moneys due hereunder, shall
have the right to summary judgment or such other expedited procedure as may be
available for a suit on a note or other instrument for the payment of money.

 

3.7           Continuing
Guarantee.  The guarantee in
this Article 3 is a continuing guarantee, and shall apply to all
Obligations whenever arising.

 

3.8           General
Limitation on Amount of Obligations Guaranteed.  In any action or proceeding involving any
state or non-U.S. corporate law, or any state or Federal or non-U.S.
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of the Guarantors under Section 3.1
would otherwise be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under Section 3.1, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by the Guarantors, Lender, or other Person, be automatically limited and
reduced to the highest amount that is valid and enforceable and not
subordinated to the claims of other creditors as determined in such action or
proceeding.

 

37

 

ARTICLE 4

 

The Collateral

 

4.1           Grant of
Security Interest.  As
security for due and punctual payment and performance of the Obligations, each
Credit Party hereby grants to the Lender (for the ratable benefit of the
Lender, the Issuing Lender and the Cash Management Bank) a continuing security
interest in and lien on all tangible and intangible property and assets of such
Credit Party, whether now owned or existing or hereafter acquired or arising,
together with any and all additions thereto and replacements therefor and
proceeds and products thereof (collectively referred to for purposes of this Article 4
as “Collateral”), including without limitation the property described
below:

 

(a)   all tangible personal property, including
without limitation all present and future goods, inventory (including, without
limitation, all merchandise, raw materials, work in process, finished goods and
supplies), machinery, equipment, motor vehicles, rolling stock, tools,
furniture, fixtures, office supplies, computers, computer software and
associated equipment, whether now owned or hereafter acquired, including,
without limitation, all tangible personal property used in the operation of the
business of such Credit Party;

 

(b)   all rights under all present and future
authorizations, permits, licenses and franchises issued, granted or licensed to
such Credit Party for the operation of its business;

 

(c)   all Patents of such Credit Party;

 

(d)   all Trademarks of such Credit Party;

 

(e)   all Copyrights of such Credit Party;

 

(f)    the entire goodwill of business of such
Credit Party and all other general intangibles (including know-how, trade
secrets, customer lists, proprietary information, inventions, domain names,
methods, procedures and formulae) connected with the use of and symbolized by
any Patents, Trademarks or Copyrights of such Credit Party;

 

(g)   all rights under all present and future
vendor or customer contracts and all franchise, distribution, design,
consulting, construction, engineering, management and advertising and related
agreements;

 

(h)   all rights under all present and future
leases of real and personal property; and

 

all other personal property, including, without
limitation, all present and future accounts, accounts receivable, cash, cash equivalents,
deposits, deposit accounts, loss carry back, tax refunds, insurance proceeds,
premiums, rebates and refunds, choses in action, investment property,
securities, partnership interests, limited liability company interests,
contracts, contract rights, general intangibles (including without limitation,
all customer and advertiser mailing lists, intellectual property, patents,
copyrights, trademarks, trade secrets, trade names, domain names, goodwill,
customer lists, advertiser lists, catalogs and other printed materials,
publications, indexes, lists, data and other documents and papers relating
thereto, blueprints, designs, charts, and research and development, whether on
paper, recorded electronically or otherwise), all websites (including without limitation,
all content, HTML documents, audiovisual material, software, data, hardware,
access lines, connections, copyrights, trademarks, patents and trade secrets
relating to such websites) and domain names, any information stored on any
medium, including electronic medium, related to any of the personal property of
such Credit Party, all financial 

 

38

 

books and records and other books and records
relating, in any manner, to the business of such Credit Party, all proposals
and cost estimates and rights to performance, all instruments and promissory
notes, documents and chattel paper, and all debts, obligations and liabilities
in whatever form owing to such Credit Party from any person, firm or
corporation or any other legal entity, whether now existing or hereafter
arising, now or hereafter received by or belonging or owing to such Credit
Party; and all guaranties and security therefor, and all letters of credit and
other supporting obligations in respect of such debts, obligations and
liabilities.

 

Any of the foregoing terms which are defined in the
Uniform Commercial Code shall have the meaning provided in the Uniform
Commercial Code, as amended and in effect from time to time, as supplemented
and expanded by the foregoing.

 

4.2           Special
Warranties and Covenants of the Credit Parties.  Each Credit Party hereby warrants and
covenants to the Lender that:

 

(a)   Such Credit Party has delivered to the Lender
a Perfection Certificate in substantially the form of Exhibit C
hereto.  All information set forth in
such Perfection Certificate is true and correct in all material respects and
the facts contained in such Perfection Certificate are accurate in all material
respects as of the date of this Agreement. 
Each Credit Party agrees to supplement its Perfection Certificate
promptly after obtaining information which would require a correction or
addition to such Perfection Certificate.

 

(b)   No Credit Party will change its jurisdiction
of organization, principal or any other place of business, or the location of
any Collateral from the locations set forth in the Perfection Certificate
delivered by such Credit Party, or make any change in its name or conduct its
business operations under any fictitious business name or trade name, without,
in any such case, at least thirty (30) days’ prior written notice to the
Lender; provided that the inventory of such Credit Party may be in the
possession of manufacturers or processors in any jurisdiction in which all
necessary UCC financing statements have been filed by the Lender and with
respect to which the Lender has received waiver letters from all landlords,
warehousemen and processors in form and substance acceptable to Lender.

 

(c)   Except for Collateral that is obsolete or no
longer used in their business, the Credit Parties will keep the Collateral in
good order and repair (normal wear excepted) and adequately insured at all
times in accordance with the provisions of Section 7.5.  The Credit Parties will pay promptly when due
all taxes and assessments on the Collateral or for its use or operation, except
for taxes and assessments permitted to be contested as provided in Section 7.4.  Following the occurrence and during the
continuance of an Event of Default, the Lender may at its option discharge any
taxes or Liens to which any Collateral is at any time subject (other than
Permitted Liens), and may, upon the failure of the Credit Parties to do so in
accordance with this Agreement, purchase insurance on any Collateral and pay
for the repair, maintenance or preservation thereof, and each Credit Party
agrees to reimburse the Lender on demand for any payments or expenses incurred
by the Lender pursuant to the foregoing authorization and any unreimbursed
amounts shall constitute Obligations for all purposes hereof.

 

(d)   The Lender may from time to time request and
each Credit Party shall deliver copies of all customer lists and vendor lists.

 

(e)   To the extent, if any, that such Credit Party’s
signature is required therefor, each Credit Party will promptly execute and
deliver to the Lender such financing statements and amendments thereto,
certificates and other documents or instruments as may be necessary to enable
the Lender to perfect or from time to time renew the security interest granted
hereby, including,

 

39

 

without
limitation, such financing statements and amendments thereto, certificates and
other documents as may be necessary to perfect a security interest in any
additional Collateral hereafter acquired by such Credit Party or in any
replacements or proceeds thereof.  Each
Credit Party authorizes and appoints the Lender, in case of need, to execute
such financing statements, certificates and other documents pertaining to the
Lender’s security interest in the Collateral in its stead if such Credit Party’s
signature is required therefor and such Credit Party fails to so execute such
documents, with full power of substitution, as such Debtor’s attorney in fact.

 

(f)    Each Credit Party hereby irrevocably
authorizes the Lender, at any time and from time to time, to file in any
jurisdiction financing statements and amendments thereto that (i) indicate
the Collateral (x) as all assets of such Credit Party or words of similar
effect, regardless of whether any particular asset falls within the scope of Article 9
of the Uniform Commercial Code of the Commonwealth of Massachusetts or such
jurisdiction or (y) as being of an equal or lesser scope or with greater
detail and (ii) which contain any other information required by Article 9
of the Uniform Commercial Code (including Part 5 thereof) for the
sufficiency or filing office acceptance of any financing statement or
amendment, including whether (A) any Credit Party is an organization, the
type of organization and any organization identification number issued to such
Credit Party and (B) in the case of a financing statement filed as a
fixture filing or indicating Collateral as as-extracted collateral or timber to
be cut, a sufficient description of the real property to which the Collateral
relates.  The Credit Parties agree to
furnish any such information to the Lender promptly upon request.  Each Credit Party also ratifies its authorization
for the Lender to have filed in any Uniform Commercial Code jurisdiction any
like initial financing statements or amendments thereto if filed prior to the
date hereof.

 

(g)   Each Credit Party agrees that it will join
with the Lender in executing and, at its own expense, will file and refile, or
permit the Lender to file and refile such other documents (including, without
limitation, this Agreement and licenses to use software and other property
protected by copyright), in such offices (including, without limitation, the
PTO, the United States Copyright Office, and appropriate state patent,
trademark and copyright offices), as the Lender may reasonably deem necessary
or appropriate, wherever required or permitted by law in order to perfect and
preserve the rights and interests granted to the Lender in Patents, Trademarks
and Copyrights hereunder.  Each Credit
Party will give the Lender notice of each office at which records of such
Credit Party pertaining to all intangible items of Collateral are kept.  Except as may be provided in such notice, the
records concerning all intangible Collateral are and will be kept at the
address shown in the respective Perfection Certificate for such Credit Party as
the principal place of business of such Credit Party.

 

(h)   The Credit Parties are the sole and exclusive
owners of the websites and domain names listed on Schedule 4.2 hereto
and have registered such domain names with the applicable authority for
registration of the same which provides for the exclusive use by the Credit
Parties of such domain names.  The
websites do not contain any material, the publication of which may result in (a) the
violation of rights of any person or (b) a right of any person against the
publisher or distributor of such material.

 

(i)    The Credit Parties shall, annually by the
end of the first calendar quarter following the previous calendar year, provide
written notice to the Lender of all applications for registration of Patents,
Trademarks or Copyrights, to the extent such applications exist, made during
the preceding calendar year.  The Credit
Parties shall file and prosecute diligently all applications for registration
of Patents, Trademarks or Copyrights now or hereafter pending that would be
necessary to the business of the Credit Parties to which any such applications
pertain, and to do all acts, in any such instance, necessary to preserve and
maintain all rights in such registered Patents, Trademarks or

 

40

 

Copyrights unless
such Patents, Trademarks or Copyrights are not material to the business of the
Credit Parties, as reasonably determined by the Credit Parties consistent with
prudent and commercially reasonable business practices.  Any and all costs and expenses incurred in
connection with any such actions shall be borne by the Credit Parties.  Except in accordance with prudent and
commercially reasonable business practices, the Credit Parties shall not
abandon any right to file a Patent, Trademark or Copyright application or any
pending Patent, Trademark or Copyright application or any registered Patent,
Trademark or Copyright, in each case material to its business, without the
consent of the Lender.

 

(j)    The domain name servers used in connection
with the domain names of the Credit Parties and all other relevant information
pertaining to such domain names, and the administrative contacts used in
connection with the registration of such domain names are identified on Schedule
4.2 hereof.  No Credit Party will
change such domain name servers without 10 days’ prior notice to the
Lender.  No Credit Party will cause a
change in the identity of any domain name administrative contact without 10
days’ prior notice to the Lender.

 

(k)   If any Credit Party is, now or at any time
hereafter, a beneficiary under a letter of credit now or hereafter, such Credit
Party will promptly notify the Lender thereof and, at the request and option of
the Lender, such Credit Party shall, pursuant to an agreement in form and
substance satisfactory to the Lender, either (i) arrange for the issuer
and any confirmer or other nominated person of such letter of credit to consent
to an assignment to the Lender of the proceeds of the letter of credit or (ii) arrange
for the Lender to become the transferee beneficiary of the letter of credit,
with the Lender agreeing, in each case, that the proceeds of the letter of
credit are to be applied by the Lender against the Obligations as provided in
this Agreement.

 

(l)            To the extent any Credit Party
shall, now or at any time hereafter, hold or acquire any promissory note or
other instrument or tangible chattel paper, such Credit Party will promptly
notify the Lender thereof and, at the request and option of the Lender, such
Debtor will deliver such promissory note or other instrument or tangible
chattel paper to the Lender to be held as Collateral hereunder, together with
an endorsement thereof reasonably satisfactory in form and substance to the
Lender.

 

(m)          If,
now or at any time hereafter, any Credit Party shall obtain or hold any
investment property or electronic chattel paper, such Credit Party will promptly notify the Lender
thereof and, at the request and option of the Lender, such Credit Party will
take or cause to be taken such steps as the Lender may reasonably request for
the Lender to obtain “control” (as provided in Sections 9-105 and 9-106 of the
Uniform Commercial Code of the Commonwealth of Massachusetts, as amended and in
effect from time to time) of such Collateral.

 

(n)           No
Credit Party holds any commercial tort claims, as defined in Article 9 of
the Uniform Commercial Code, except as indicated in the Perfection Certificate
attached hereto as Exhibit C. 
If any of the Credit Parties shall at any time acquire a commercial tort
claim, such Credit Party shall immediately notify the Lender in a writing
signed by such Credit Party of the brief details thereof and grant to the
Lender in such writing a security interest therein and in the proceeds thereof,
all upon the terms of this Agreement, with such writing to be in form and
substance reasonably satisfactory to the Lender.

 

(o)           If
any Credit Party has accounts receivable in respect of which the account debtor
is located in Minnesota, the Credit Parties represent and warrant that the
applicable Credit Party has filed and shall file all legally-required Notice of
Business Activities Reports and comparable reports with the appropriate
government authorities.

 

41

 

4.3           Collection
of Proceeds of Accounts Receivable.

 

(a)   Upon the request of the Lender (which request
may be made in its sole discretion), the Credit Parties shall (i) direct
all of their account debtors to make all payments on accounts receivable of the
Credit Parties directly to post office boxes (each a “Lock Box” and
collectively the “Lock Boxes”) under the control of the Cash Management
Bank, (ii) establish accounts (each a “Controlled Account” and
collectively the “Controlled Accounts”) in the Lender’s name for the
benefit of the Borrowers with the Cash Management Bank, into which all payments
received in the Lock Boxes shall be deposited, and into which the Credit
Parties will immediately deposit all payments made for inventory or services
sold or rendered by the Credit Parties and received by the Credit Parties in
the identical form in which such payments were made, whether by cash or check,
and (iii) cause each Subsidiary and Affiliate, and any other Person acting
for or in concert with the Credit Parties that receives any monies, checks,
notes, drafts or other payments relating to or as proceeds of accounts
receivable or other Collateral, to receive and hold such items in trust for,
and as the sole and exclusive property of, the Lender and, immediately upon
receipt thereof, shall remit the same (or cause the same to be remitted) in
hand to the Controlled Accounts; provided that,
for purposes of administrative convenience, the Lender may in its reasonable
discretion, permit the Credit Parties from time to time to maintain one or more
accounts with one or more financial institutions other than the Cash Management
Bank and with such maximum cash balances as the Lender deems appropriate, and
for which the Credit Parties may, at the discretion of the Lender, be permitted
to have direct access.

 

(b)   Each Credit Party acknowledges that the Cash
Management Bank is an Affiliate of the Lender and that the Cash Management Bank
and the Lender are parties to cash management agreements that confirm that the
Lender has dominion and control over all accounts of the Credit Parties or the
Lender maintained by the Cash Management Bank, and all funds from time to time
held in such accounts.  The Borrowers,
the Lender and the Cash Management Bank hereby agree that the Cash Management
Bank shall comply with any instructions originated by the Lender directing
disposition of funds in such accounts without further consent of the
Borrowers.  Upon the request of the
Lender (which request may be made in its sole discretion), (i) each Credit
Party agrees to enter into such Lockbox Agreements and Control Agreements with
the Cash Management Bank and the Lender as the Lender may reasonably request
and (ii) each Credit Party agrees to cause each financial institution
other than the Cash Management Bank with which a Lock Box and/or Controlled
Account has been established to, enter into a Lockbox Agreement and/or Control
Agreement, as applicable, confirming that the amounts on deposit in such Lock
Box and/or Controlled Account, as applicable, are the property of and are under
the control of the Lender, that such financial institution has no right to
setoff against such Lock Box or Controlled Account or against any other account
maintained by such financial institution into which the contents of such
Controlled Account are transferred, and that upon written notice from the
Lender, such financial institution shall wire, or otherwise transfer in
immediately available funds in a manner satisfactory to the Lender, funds
deposited in the Controlled Account on a daily basis as such funds are
collected.

 

(c)   The Credit Parties agree to pay all
reasonable fees, costs and expenses which the Credit Parties incur in
connection with opening and maintaining a Lock Box and Controlled Account.  All of such fees, costs and expenses which
remain unpaid pursuant to any Lock Box or Control Agreement with the Credit
Parties, to the extent same shall have been paid by the Lender hereunder, shall
constitute Loans hereunder, shall be payable to the Lender by the Credit
Parties upon demand, and, until paid, shall bear interest at the highest rate
then applicable to Loans hereunder.  All
checks, drafts, instruments and other items of payment or proceeds of
Collateral delivered to the Lender or the Cash Management Bank in kind shall be
endorsed by the Credit Parties, to the Lender, and, if that endorsement of any
such item shall not be made for any reason, the Lender and the Cash 

 

42

 

Management Bank
are each hereby irrevocably authorized to endorse the same on behalf of the
Credit Parties.  For the purpose of this
subsection 4.3(c), each Credit Party irrevocably hereby makes, constitutes and
appoints the Lender (and all Persons designated by the Lender for that purpose,
including, without limitation, the Cash Management Bank) as such Credit Party’s
true and lawful attorney and agent-in-fact (i) to endorse the name of the
such Credit Party upon said items of payment and/or proceeds of Collateral of
the Credit Parties and upon any chattel paper, document, instrument, invoice or
similar document or agreement relating to any account receivable of the Credit
Parties or goods pertaining thereto; (ii) to take control in any manner of
any item of payment or proceeds thereof; (iii) to have access to any Lock
Box or postal box into which any mail of the Credit Parties is deposited; and (iv) open
and process all mail addressed to the Credit Parties and deposited therein.

 

(d)   The Lender (and all Persons designated by the
Lender for such purpose, including, without limitation, the Cash Management
Bank) may, at any time and from time to time after the occurrence and during the
continuance of an Event of Default, whether before or after notification to any
account debtor and whether before or after the maturity of any of the
Obligations, (i) enforce collection of any accounts receivable or contract
rights of the Credit Parties by suit or otherwise; (ii) exercise all of
the rights and remedies of the Credit Parties with respect to proceedings
brought to collect any accounts receivable; (iii) surrender, release or
exchange all or any part of any accounts receivable of the Credit Parties, or
compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder; (iv) sell or assign any
account receivable of the Credit Parties upon such terms, for such amount and
at such time or times as the Lender deems advisable; (v) prepare, file and
sign the names of the Credit Parties on any proof of claim in bankruptcy or
other similar document against any account debtor indebted on an account
receivable of the Credit Parties; and (vi) do all other acts and things
which are necessary, in the Lender’s sole discretion, to fulfill the
Obligations of the Credit Parties under this Agreement and to allow the Lender
to collect the accounts receivable.  In
addition to any other provision hereof or in any of the other Loan Documents,
the Lender may at any time on or after the occurrence of an Event of Default,
at the sole expense of the Credit Parties, notify any parties obligated on any
of the accounts receivable of the Credit Parties to make payment directly to
the Lender of any amounts due or to become due thereunder.

 

4.4           Fixtures,
etc.  It is the intention of
the parties hereto that (except for Collateral located on any Mortgaged
Property) none of the Collateral shall become fixtures and each Credit Party
will take all such reasonable action or actions as may be necessary to prevent
any of the Collateral from becoming fixtures. 
Without limiting the generality of the foregoing, each Credit Party
will, if requested by the Lender, use commercially reasonable efforts to obtain
waivers of Liens, in form satisfactory to the Lender, from each lessor of real
property on which any of the Collateral is or is to be located to the extent
requested by the Lender.

 

4.5           Right of
Lender to Dispose of Collateral, etc.  Upon the occurrence of any Event of Default,
such Event of Default not having previously been waived, remedied or cured, but
subject to the provisions of the Uniform Commercial Code or other applicable
law, in addition to all other rights under applicable law and under the Loan
Documents, the Lender shall have the right to take possession of the Collateral
and, in addition thereto, the right to enter upon any premises on which the
Collateral or any part thereof may be situated and remove the same therefrom.  The Lender may require the Credit Parties to
make the Collateral (to the extent the same is moveable) available to the
Lender at a place to be designated by the Lender or transfer any information
related to the Collateral to the Lender by electronic medium.  Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Lender will give the Credit Parties at least seven (7) days’
prior written notice of the time and place of any public sale thereof or of the
time after which any private sale or any other intended disposition thereof is
to be made.  Any such notice shall be
deemed to meet any

 

43

 

requirement hereunder or under any applicable law (including the
Uniform Commercial Code) that reasonable notification be given of the time and
place of such sale or other disposition.

 

4.6           Right of
Lender to Use and Operate Collateral, etc.  Upon the occurrence and during the
continuance of any Event of Default, subject to the provisions of the Uniform
Commercial Code or other applicable law, the Lender shall have the right and
power (a) to take possession of all or any part of the Collateral, and to
exclude the Credit Parties and all persons claiming under the Credit Parties
wholly or partly therefrom, and thereafter to hold, store, and/or use, operate,
manage and control the same, and (b) to grant a license to use, or cause
to be granted a license to use, any or all of the Patents, Trademarks and
Copyrights (in the case of Trademarks, along with the goodwill associated
therewith), but subject to the terms of any licenses.  Upon any such taking of possession, the
Lender may, from time to time, at the expense of the Credit Parties, make all
such repairs, replacements, alterations, additions and improvements to and of
the Collateral as the Lender may deem proper. 
In any such case the Lender shall have the right to manage and control
the Collateral and to carry on the business and to exercise all rights and
powers of the Credit Parties in respect thereto as the Lender shall deem best,
including the right to enter into any and all such agreements with respect to
the operation of the Collateral or any part thereof as the Lender may see fit;
and the Lender shall be entitled to collect and receive all rents, issues,
profits, fees, revenues and other income of the same and every part
thereof.  Such rents, issues, profits,
fees, revenues and other income shall be applied to pay the expenses of holding
and operating the Collateral and of conducting the business thereof, and of all
maintenance, repairs, replacements, alterations, additions and improvements,
and to make all payments which the Lender may be required or may elect to make,
if any, for taxes, assessments, insurance and other charges upon the Collateral
or any part thereof, and all other payments which the Lender may be required or
authorized to make under any provision of this Agreement (including legal costs
and reasonable attorneys’ fees).  The
Lender shall apply the remainder of such rents, issues, profits, fees, revenues
and other income as provided in  Section 4.7.

 

4.7           Proceeds of
Collateral.  After deducting
all reasonable costs and expenses of collection, storage, custody, sale or
other disposition and delivery (including reasonable legal costs and attorneys’
fees) and all other charges against the Collateral, the Lender shall apply the
residue of the proceeds of any such sale or disposition to the Obligations in
accordance with the terms hereof  and any
surplus shall be returned to the Credit Parties or to any Person or party
lawfully entitled thereto.  In the event
the proceeds of any sale, lease or other disposition of the Collateral are
insufficient to pay all of the Obligations in full, the Credit Parties will be
liable for the deficiency, together with interest thereon at the Post-Default
Rate, and the cost and expenses of collection of such deficiency, including (to
the extent permitted by law), without limitation, reasonable attorneys’ fees,
expenses and disbursements.

 

ARTICLE 5

 

Representations and Warranties

 

Each
Credit Party represents and warrants to the Lender and the Issuing Lender as to
itself and each other Credit Party, that:

 

5.1           Organization;
Powers.  Each Credit Party has
been duly formed or organized and is validly existing and in good standing
under the laws of its jurisdiction of organization.  Each Credit Party has all requisite power and
authority to carry on its business as now conducted and is qualified to do
business in, and is in good standing in, every jurisdiction where such
qualification is required, except where the failure to have such power or
authority or to be so qualified or in good standing, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

 

44

 

5.2           Authorization;
Enforceability.  The borrowing
of the Loans and the grant of security interests pursuant to the Loan Documents
are within the power and authority of the Credit Parties and have been duly
authorized by all necessary action on the part of the Credit Parties.  This Agreement and the other Loan Documents
have been duly authorized, executed and delivered by the Credit Parties and
constitute legal, valid and binding obligations of the Credit Parties,
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.

 

5.3           Governmental
Approvals; No Conflicts.  The
borrowing of the Loans and the grant of the security interests pursuant to the
Loan Documents (a) do not require any consent or approval of, registration
or filing with, or any other action by, any Governmental Authority which has
not been obtained, except as disclosed on Schedule 5.3, (b) will
not violate any applicable law, policy or regulation or the organizational documents
of the Credit Parties or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or other
instrument binding upon the Credit Parties, or any assets, or give rise to a
right thereunder to require any payment to be made by the Credit Parties, and
such violation or default or right to payment would have a Material Adverse
Effect, and (d) except for the Liens created by the Loan Documents, will
not result in the creation or imposition of any Lien on any asset of the Credit
Parties.

 

5.4           Financial
Condition; No Material Adverse Change.

 

(a)   The Credit Parties have heretofore delivered
to the Lender the following financial statements:

 

(i)            the consolidated balance sheets and
statements of operations, shareholders’ equity and cash flows of the Credit
Parties, as of and for the fiscal years ended December 31, 2007, audited
and accompanied by an opinion of the Credit Parties’ independent public
accountants;

 

(ii)           the draft audited consolidated
balance sheet and statements of operations, shareholder’s equity and cash flows
of the Credit Parties, as of and for the nine month period ended on September 30,
2008, certified by a Designated Financial Officer that such financial
statements fairly present the financial condition of the Credit Parties as at
such date and the results of the operations of the Credit Parties for the
period ended on such date and that all such financial statements, including the
related schedules and notes thereto have been prepared in all material respects
in accordance with GAAP applied consistently throughout the periods involved,
except as disclosed on Schedule 5.4; and

 

(iii)          the projected consolidated balance
sheets, statements of operations and cash flows for the Credit Parties on a
quarterly basis for fiscal year 2009.

 

Except
as disclosed on Schedule 5.4, such financial statements (except for
the projections) present fairly, in all material respects, the respective
consolidated financial position and results of operations and cash flows of the
respective entities as of such respective dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes in the case of such unaudited or pro forma
statements.  The projections were prepared
by the Credit Parties in good faith and were based on assumptions that were
reasonable when made.

 

(b)   Except as disclosed on Schedule 5.4,
since December 31, 2007, there has been no material adverse change in the
business, assets, operations or condition, financial or otherwise, of the

 

45

 

Credit Parties
from that set forth in the December 31, 2007 financial statements referred
to in clause (i) of paragraph (a) above.

 

(c)   None of the Credit Parties has on the date
hereof any contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments in each case that are material, except as referred to or reflected
or provided for in the balance sheets as at the end of their respective fiscal
years ended December 31, 2007, referred to above, as provided for in Schedule 5.4
annexed hereto, or as otherwise permitted pursuant to this Agreement, or as
referred to or reflected or provided for in the financial statements described
in this Section 5.4.

 

5.5           Properties.

 

(a)   Each Credit Party has good and marketable
title to, or valid, subsisting and enforceable leasehold interests in, all its
Property material to its business.  All
machinery and equipment of the Credit Parties is in good operating condition
and repair (ordinary wear and tear excepted), and all necessary replacements of
and repairs thereto have be made so as to preserve and maintain the value and
operating efficiency of such machinery and equipment.  As of the date hereof, Schedule 5.5
annexed hereto contains a true, accurate and complete list of (i) all
owned equipment and all leased equipment, and (ii) all equipment leases
(together with all amendments, modifications, supplements, renewals or
extensions of any thereof).  Except as
specified in Schedule 5.5, each agreement listed in clause (ii) of
the immediately preceding sentence is in full force and effect and the
Borrowers have no knowledge of any default that has occurred and is continuing
thereunder, and each such agreement constitutes the legal, valid and binding
obligation of each applicable Credit Party, enforceable against such Credit
Party in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors’ rights generally or by equitable principles.

 

(b)   Set forth on Schedule 5.5 hereto is a
complete list of all Patents, Trademarks and Copyrights.  Each Credit Party owns, or is licensed to
use, all Patents, Trademarks and Copyrights and other intellectual property
material to its business (“Proprietary Rights”), and to the knowledge of
the Borrowers, the use thereof by the Credit Parties does not infringe upon the
rights of any other Person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

 

(c)   Schedule 5.5 clearly identifies all
Patents, Trademarks and Copyrights that have been duly registered in, filed in
or issued by the PTO or the United States Register of Copyrights (collectively,
the “Registered Proprietary Rights”). 
The Registered Proprietary Rights have been properly maintained and
renewed in accordance with all applicable provisions of law and administrative
regulations in the United States, as applicable.  The Credit Parties have taken commercially
reasonable steps to protect their Registered Proprietary Rights and to maintain
the confidentiality of all Proprietary Rights that are not generally in the
public domain.

 

(d)   As of the date hereof, Schedule 5.5
annexed hereto contains a true, accurate and complete list of (i) all Real
Property Assets, whether owned or leased, and (ii) all leases, subleases or
assignments of leases (together with all amendments, modifications,
supplements, renewals or extensions of any thereof) affecting each Leasehold
Property, regardless of whether such Credit Party is the landlord or tenant
(whether directly or as an assignee or successor in interest) under such lease,
sublease or assignment.  Except as
specified in Schedule 5.5, each agreement listed in clause (ii) of
the immediately preceding sentence is in full force and effect and the
Borrowers have no knowledge of any default that has occurred and is continuing
thereunder, and each such agreement constitutes the

 

46

 

legal, valid and
binding obligation of each applicable Credit Party, enforceable against such
Credit Party in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or limiting creditors’ rights generally or by equitable principles.

 

5.6           Litigation
and Environmental Matters.

 

(a)   There are no actions, suits or proceedings by
or before any arbitrator or Governmental Authority pending against or, to the
knowledge of the Credit Parties, threatened against or affecting any Credit
Party as to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, could reasonably be expected, individually
or in the aggregate, to result in a Material Adverse Effect (other than the
Disclosed Matters set forth in part (a) of Schedule 5.6).

 

(b)   Except for the Disclosed Matters set forth in
Schedule 5.6 and except with respect to any other matters that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, the Credit Parties (i) have not failed to comply
with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required in connection with the operation of the
Credit Parties’ business to be in compliance with all applicable Environmental
Laws, (ii) have not become subject to any Environmental Liability; (iii) have
not received notice of any claim with respect to any Environmental Liability or
any inquiry, allegation, notice or other communication from any Governmental
Authority which is currently outstanding or pending concerning its compliance
with any Environmental Law or (iv) do not know of any basis for any
Environmental Liability.

 

(c)   Since the date of this Agreement, there has
been no change in the status of the Disclosed Matters that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.

 

5.7           Compliance
with Laws and Agreements. 
Except as set forth on Schedule 5.7, each Credit Party is in
compliance with all laws, regulations, policies and orders of any Governmental
Authority applicable to it or its property and all indentures, agreements and
other instruments binding upon it or its property, except where the failure to
do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.

 

5.8           Investment
and Holding Company Status. 
No Credit Party is (a) an “investment company” as defined in, or
subject to regulation under, the Investment Company Act of 1940, as amended or (b) a
“bank holding company” as defined in, or subject to regulation under, the Bank
Holding Company Act of 1956, as amended.

 

5.9           Taxes.  Except as set forth on Schedule 5.9,
each Credit Party has timely filed or caused to be filed all Tax returns and
reports required to have been filed and has paid or caused to be paid all Taxes
required to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which such Credit
Party has set aside on its books adequate reserves with respect thereto in
accordance with GAAP, which reserves shall be acceptable to Lender, or (b) to
the extent that the failure to do so could not reasonably be expected to result
in a Material Adverse Effect.

 

5.10         ERISA.  Except as set forth on Schedule 5.10, no
Credit Party has any Pension Plans.  No
ERISA Event has occurred or is reasonably expected to occur that, when taken
together with all other such ERISA Events for which liability is reasonably
expected to occur, could reasonably be expected to result in a Material Adverse
Effect.  No Credit Party has a present
intention to terminate any Pension Plan

 

47

 

with respect to which any Credit Party would incur a cost of more than
$100,000 to terminate such Plan, including amounts required to be contributed
to fund such Plan on Plan termination and all costs and expenses associated
therewith, including without limitation attorneys’ and actuaries’ fees and
expenses in connection with such termination and a reasonable estimate of
expenses and settlement or judgment costs and attorneys’ fees and expenses in
connection with litigation related to such termination.

 

5.11         Disclosure.  As of the Effective Time, the Credit Parties
have disclosed to the Lender all material agreements, instruments and corporate
or other restrictions to which any Credit Party is subject after the Effective
Time, and all other matters known to the Credit Parties, that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Effect.  The organizational structure of
the Credit Parties is as set forth on Schedule 5.12 annexed hereto.  The information, reports, financial
statements, exhibits and schedules furnished at or prior to the Effective Time
in writing by or on behalf of the Credit Parties to the Lender in connection
with the negotiation, preparation or delivery of this Agreement and the other
Loan Documents or included herein or therein or delivered pursuant hereto or
thereto, at the Effective Time, when taken as a whole do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements herein or therein, in light of the circumstances under which
they were made, not materially misleading. 
All written information furnished after the Effective Time by the Credit
Parties to the Lender in connection with this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of pro-forma
information and projections) prepared in good faith based on reasonable
assumptions, on the date as of which such information is stated or
certified.  There is no fact known to the
Credit Parties that could reasonably be expected to have a Material Adverse
Effect that has not been disclosed herein, in the other Loan Documents or in a
report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Lender for use in connection with the transactions
contemplated hereby or thereby.

 

5.12         Capitalization.  As of the Effective Time, the capital
structure and ownership of the Credit Parties are correctly described on Schedule 5.12.  As of the Effective Time, the authorized,
issued and outstanding capital stock of the Credit Parties consists of the
capital stock described on Schedule 5.12, all of which is duly and
validly issued and outstanding, fully paid and nonassessable.  Except as set forth on Schedule 5.12,
as of the date hereof, (x) there are no outstanding Equity Rights with
respect to any Credit Party and, (y) there are no outstanding obligations
of any Credit Party to repurchase, redeem, or otherwise acquire any shares of
capital stock of or other interest in any Credit Party, nor are there any
outstanding obligations of any Credit Party to make payments to any Person,
such as “phantom stock” payments, where the amount thereof is calculated with
reference to the fair market value or equity value of any Credit Party.

 

5.13         Subsidiaries.

 

(a)   Set forth on Schedule 5.13 is a
complete and correct list of all Subsidiaries of the Credit Parties as of the
date hereof, together with, for each such Subsidiary, (i) the jurisdiction
of organization of such Subsidiary, (ii) each Person holding ownership interests
in such Subsidiary and (iii) the nature of the ownership interests held by
each such Person and the percentage of ownership of such Subsidiary represented
by such ownership interests.  Except as
disclosed in Schedule 5.13, (x) each Credit Party and its
respective Subsidiaries owns, free and clear of Liens (other than Liens
permitted hereunder), and has the unencumbered right to vote, all outstanding
ownership interests in each Person shown to be held by it in Schedule 5.13,
(y) all of the issued and outstanding capital stock of each such Person
organized as a corporation is validly issued, fully paid and nonassessable and (z) there
are no outstanding Equity Rights with respect to such Person.

 

48

 

(b)   Except as set forth on Schedule 8.8,
as of the date of this Agreement none of the Credit Parties is subject to any
indenture, agreement, instrument or other arrangement containing any provision
of the type described in Section 8.8 (“Restrictive Agreements”),
other than any such provision the effect of which has been unconditionally,
irrevocably and permanently waived.

 

5.14         Material
Indebtedness, Liens and Agreements.

 

(a)   Schedule 5.14 hereto contains a
complete and correct list, as of the date of this Agreement, of all Material
Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guarantee by, any Credit Party the aggregate principal or face
amount of which equals or exceeds (or may equal or exceed) $50,000 and the
aggregate principal or face amount outstanding or that may become outstanding
with respect thereto is correctly described on Schedule 5.14.

 

(b)   Schedule 5.14 hereto is a
complete and correct list, as of the date of this Agreement, of each Lien
(other than the Liens in favor of the Lender) securing Indebtedness of any
Person and covering any property of the Credit Parties, and the aggregate
Indebtedness secured (or which may be secured) by each such Lien and the
Property covered by each such Lien is correctly described in the appropriate
part of Schedule 5.14.

 

(c)   Schedule 5.14 hereto is a
complete and correct list, as of the date of this Agreement, of each contract
and arrangement to which any Credit Party is a party for which breach,
nonperformance, cancellation or failure to renew would have a Material Adverse
Effect other than purchase orders made in the ordinary course of business and
subject to customary terms.

 

(d)   To the extent requested by Lender, true and
complete copies of each agreement listed on the appropriate part of Schedule 5.14
have been delivered to the Lender, together with all amendments, waivers and
other modifications thereto.  All such
agreements are valid, subsisting, in full force and effect, are currently
binding and will continue to be binding upon each Credit Party that is a party
thereto and, to the best knowledge of the Credit Parties, binding upon the
other parties thereto in accordance with their terms.  The Credit Parties are not in default under
any such agreements, which default could have a Material Adverse Effect.

 

5.15         Federal
Reserve Regulations.  No
Credit Party is engaged principally or as one of its important activities in
the business of extending credit for the purpose of purchasing or carrying
margin stock (as defined in Regulation U of the Board).  The making of the Loans hereunder, the use of
the proceeds thereof (including Letters of Credit and Acceptances) as
contemplated hereby, and the security arrangements contemplated by the Loan
Documents, will not violate or be inconsistent with any of the provisions of
Regulations T, U, or X of the Board of the Federal Reserve System.

 

5.16         Solvency.  As of the Effective Time and after giving
effect to the initial Loans hereunder and the other transactions contemplated
hereby:

 

(a)   the aggregate value of all properties of the
Credit Parties at their present fair saleable value on a going concern basis (i.e., the amount that may be realized within a reasonable
time, considered to be six months to one year, either through collection or
sale at the regular market value, conceiving the latter as the amount that
could be obtained for such properties within such period by a capable and
diligent businessperson from an interested buyer who is willing to purchase
under ordinary selling conditions), exceed the amount of all the debts and
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) of the Credit Parties;

 

49

 

(b)   the Credit Parties will not, on a
consolidated basis, have an unreasonably small capital with which to conduct
their business operations as heretofore conducted; and

 

(c)   the Credit Parties will have, on a
consolidated basis, sufficient cash flow to enable them to pay their debts as
they mature.

 

5.17         Force
Majeure.  Since December 31,
2007, the business, properties and other assets of the Credit Parties have not
been materially and adversely affected in any way as the result of any fire or
other casualty, strike, lockout or other labor trouble, embargo, sabotage,
confiscation, contamination, riot, civil disturbance, activity of armed forces
or act of God.

 

5.18         Accounts
Receivable.  The Lender may
rely, in determining which accounts receivable are Eligible Accounts, on all
statements and representations made by the Credit Parties with respect to such
accounts receivable.  Unless otherwise
indicated to the Lender in writing:

 

(a)   Each account receivable is genuine and in all
respects what it purports to be, and it is not evidenced by a judgment;

 

(b)   Each account receivable arises out of a
completed, bona fide sale and delivery of goods or rendition of services by a
Credit Party in the ordinary course of its business and in accordance with the
terms and conditions of all purchase orders, contracts or other documents
relating thereto and forming a part of the contract between such Credit Party
and the account debtor, and, in the case of goods, title to the goods has
passed from the Credit Party to the account debtor;

 

(c)   Each account receivable is for a liquidated
amount maturing as stated in the duplicate invoice covering such sale or
rendition of services, a copy of which has been furnished or is available to
the Lender;

 

(d)   Each account receivable, and the Lender’s
security interest therein, is not, and will not (by voluntary act or omission
of the Credit Parties) be in the future, subject to any offset, Lien,
deduction, defense, dispute, counterclaim or any other adverse condition except
for disputes resulting in returned goods where the amount in controversy is
deemed by the Lender to be immaterial, and each such account receivable is
absolutely owing to one of the Credit Parties and is not contingent in any
respect or for any reason;

 

(e)   No Credit Party has made any agreement with any
account debtor for any extension, compromise, settlement or modification of any
account receivable or any deduction therefrom, except discounts or allowances
which are granted by the Credit Parties in the ordinary course of their
businesses for prompt payment and which are reflected in the calculation of the
net amount of each respective invoice related thereto and are reflected in the
Borrowing Base Certificates and Collateral Update Certificates furnished to the
Lender hereunder;

 

(f)    To the best knowledge of the Credit Parties,
the account debtor under each account receivable had the capacity to contract
at the time any contract or other document giving rise to an account receivable
was executed and such account debtor is not insolvent; and

 

(g)   To the best knowledge of the Credit Parties,
there are no proceedings or actions which are threatened or pending against any
account debtor which might result in any material adverse change in such
account debtor’s financial condition or the collectability of any account
receivable.

 

50

 

5.19         Labor and
Employment Matters.

 

(a)   Except as set forth on Schedule 5.19
as of the Effective Time, and thereafter with respect to which such would have
a Material Adverse Effect, (A) no employee of the Credit Parties is
represented by a labor union, no labor union has been certified or recognized
as a representative of any such employee, and the Credit Parties do not have
any obligation under any collective bargaining agreement or other agreement
with any labor union or any obligation to recognize or deal with any labor
union, and there are no such contracts or other agreements pertaining to or
which determine the terms or conditions of employment of any employee of the
Credit Parties; (B) there are no pending or threatened representation
campaigns, elections or proceedings; (C) the Credit Parties do not have
knowledge of any strikes, slowdowns or work stoppages of any kind, or
threats thereof, and no such activities occurred during the 24-month period
preceding the date hereof; (D) no Credit Party has engaged in, admitted
committing or been held to have committed any unfair labor practice; and (E) there
are no controversies or grievances between any Credit Party and any of its employees
or representatives thereof.

 

(b)   Except as set forth on Schedule 5.19,
the Credit Parties have at all times complied in all material respects, and are
in material compliance with, all applicable laws, rules and regulations
respecting employment, wages, hours, compensation, benefits, and payment and
withholding of taxes in connection with employment.

 

(c)   Except as set forth on Schedule 5.19,
except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, the Credit Parties have at all times
complied with, and are in compliance with, all applicable laws, rules and
regulations respecting occupational health and safety, whether now existing or
subsequently amended or enacted, including, without limitation, the
Occupational Safety & Health Act of 1970, 29 U.S.C. Section 651
et seq. and the state analogies thereto, all as amended or superseded from time
to time, and any common law doctrine relating to worker health and safety.

 

5.20         Bank
Accounts.  Schedule 5.20
lists all banks and other financial institutions at which any Credit Party
maintains deposits and/or other accounts as of the Closing Date, and such
Schedule correctly identifies the name and address of each depository, the name
in which the account is held, a description of the purpose of the account, and
the complete account number.

 

5.21         Certain
Obligations Respecting Subsidiaries.

 

(a)   Each Borrower shall, and shall cause each of
its Subsidiaries to, take such action from time to time as shall be necessary
to ensure that the percentage of the issued and outstanding shares of capital
stock of any class or character owned by it in any Subsidiary on the date
hereof is not at any time decreased, other than by reason of transfers to the
Borrowers.

 

(b)   While the Borrowers and the Subsidiaries are
not permitted to form or acquire any Subsidiary without the prior written
consent of the Lender pursuant to subsection 8.4(a), in the event that the
Lender consents to any formation or acquisition of any Subsidiary and such
Subsidiary is formed or acquired, this subsection 5.21(b) shall be
applicable and the Borrower forming or acquiring such Subsidiary will (or if
such Subsidiary is formed or acquired by a Credit Party which is not a
Borrower, the Borrowers will cause such Credit Party to) take or cause to be
taken the following actions:  as soon as
possible but in any case not later than 10 days after the date on which such
Subsidiary is created (or, in the case of a Subsidiary formed or acquired in
connection with a Permitted Acquisition, concurrently with the consummation of
such Permitted Acquisition) (x) cause

 

51

 

such Subsidiary to (A) execute
and deliver to the Lender, a counterpart to this Agreement and thereby become a
party thereto as an additional “Credit Party” and “Subsidiary Guarantor”
thereunder and grant to the Lender a First Priority Lien on all “Collateral” of
such Subsidiary Guarantor thereunder, (B) take such other action as shall
be necessary to create and perfect valid and enforceable First Priority Liens
in favor of the Lender on all or substantially all of the assets of such
Subsidiary consistent with the provisions of this Agreement and the applicable
other Loan Documents and (C) deliver proof of corporate action, incumbency
of officers and other documents and opinions as is consistent with those
delivered by each Borrower pursuant to Section 6.1 as of the Effective
Time and (y) execute and deliver to the Lender such pledge agreements or
such addenda or amendments to this Agreement and take such other actions
(including delivering the certificates representing such shares of stock or
other equity interests to the Lender) as shall be necessary to create and
perfect valid and enforceable First Priority Liens in favor of the Lender on
all of the issued and outstanding stock or other equity interests of such
Subsidiary, all of the foregoing to be in form and substance reasonably
satisfactory to the Lender.

 

ARTICLE 6

 

Conditions

 

6.1           Effective
Time.  The obligations of the
Lender to make Revolving Loans and Term Loans (other than the Michigan
Real Estate Term Loan), and of the Issuing Lender to issue Letters of Credit
hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 10.2):

 

(a)   Counterparts of Agreement.  The Lender shall have received from each
party hereto either (i) a counterpart of this Agreement signed on behalf
of such party or (ii) written evidence satisfactory to the Lender (which
may include telecopy transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this Agreement.

 

(b)   Notes. 
The Lender shall have received a duly completed and executed (i) Revolving
Credit Note, (ii) Existing Equipment Term Note, and (iii) Massachusetts
Real Estate Term Note.

 

(c)   Organizational Structure.  The corporate organizational structure,
capitalization and ownership of the Credit Parties, shall be as set forth on Schedules
5.12 and 5.13 annexed hereto. 
The Lender shall have had the opportunity to review, and shall be
satisfied with, the Credit Parties’ state and federal tax assumptions, and the
ownership, capital, organization and structure of the Credit Parties.

 

(d)   Existence and Good Standing.  The Lender shall have received such documents
and certificates as the Lender or Special Counsel may reasonably request
relating to the organization, existence and good standing of each Credit Party,
the authorization of the transactions contemplated hereby and any other legal
matters relating to the Credit Parties, this Agreement or the other Loan
Documents, all in form and substance reasonably satisfactory to the Lender and
Special Counsel.

 

(e)   Security Interests in Personal and Mixed
Property.  The Lender shall have
received evidence satisfactory to it that the Credit Parties shall have taken
or caused to be taken all such actions, executed and delivered or caused to be
executed and delivered all such agreements, documents and instruments and made
or caused to be made all such filings and recordings (other than filings or
recordings to be made by the Lender on or after the Closing Date) that may be
necessary or, in the opinion of the Lender, desirable in order to create in
favor of the Lender, valid and (upon such

 

52

 

filing and recording)
perfected First Priority security interests in the entire personal and mixed
property Collateral.

 

(f)    Mortgage Amendment; Etc.  The Lender shall have received from the
Credit Parties a fully executed and notarized amendment to the Mortgage on the
Massachusetts Real Property, in form and substance satisfactory to the Lender,
in proper form for recording in all appropriate places in all applicable jurisdictions,
encumbering the Massachusetts Real Property, together with mortgagee title
insurance policies or commitments therefor, and copies of all surveys, deeds,
title exception documents, flood hazard certificates and other documents as the
Lender may reasonably require.

 

(g)   Leases; Landlord Waivers and Consents.  In the case of each Material Leasehold
Property existing as of the Closing Date, copies of the lease, and all
amendments thereto, between the Credit Party and the landlord or tenant party
thereto, together with a Landlord Waiver and Consent with respect thereto and
where required by the terms of any lease, the consent of the mortgagee, ground
lessor or other party.

 

(h)   Hazardous Materials Environmental
Indemnity.  A joinder and amendment
to the Hazardous Materials Indemnity Agreement executed and delivered by the
Credit Parties, making Stephenson & Lawyer, Inc. and Patterson
Properties Corporation parties to the Hazardous Materials Indemnity Agreement
and amending the terms thereof.

 

(i)    Environmental Reports.  The Lender shall have received reports and
other information, in form, scope and substance satisfactory to the Lender,
regarding environmental matters relating to such Real Property Assets as the
Lender shall require (other than the Michigan Real Property), which reports
shall include Phase I and/or Phase II environmental assessments as
specified by the Lender for each such Real Property Asset, which conform to the
ASTM Standard Practice for Environmental Site Assessments, and the Lender shall
be satisfied with the results of such reports and other information.  Such reports shall be conducted by one or
more environmental consulting firms reasonably satisfactory to the Lender.  The Credit Parties shall deliver a similar
satisfactory environmental assessment prior to the acquisition of any future
Real Property Asset.

 

(j)    Evidence of Insurance.  The Lender shall have received certificates
from the Credit Parties’ insurance brokers that all insurance required to be
maintained pursuant to Section 7.5 is in full force and effect and that
the Lender has been named as additional insured or loss payee thereunder to the
extent required under Section 7.5, in form and substance satisfactory to
the Lender.

 

(k)   Necessary Governmental Permits, Licenses and
Authorizations and Consents; Etc. 
The Credit Parties shall have obtained all other permits, licenses,
authorizations and consents from all other Governmental Authorities and all
consents of other Persons with respect to Material Indebtedness, Liens and
material agreements listed on Schedule 5.14 (and so identified
thereon) annexed hereto, in each case that are necessary or advisable in
connection with the transactions contemplated by the Loan Documents, and each
of the foregoing shall be in full force and effect, in each case other than
those the failure to obtain or maintain which, either individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect.  No action, request for stay,
petition for review or rehearing, reconsideration or appeal with respect to any
of the foregoing shall be pending, and the time for any applicable Governmental
Authority to take action to set aside its consent on its own motion shall have
expired.

 

(l)    Existing Debt; Liens.  The Lender shall have received evidence that
all principal, interest, and other amounts owing in respect of all Existing
Debt of the Credit Parties (other than

 

53

 

Indebtedness permitted to
remain outstanding in accordance with Section 8.1 hereof) will be repaid
in full as of the Effective Time, and that with respect to all Indebtedness
permitted to remain outstanding in accordance with Section 8.1 hereof, any
defaults or events of default existing as of the Closing Date with respect to
such Indebtedness will be cured or waived immediately following the funding of
the initial Loans.  The Lender shall have
received evidence that as of the Effective Time, the Property of the Credit
Parties is not subject to any Liens (other than Liens permitted to remain
outstanding in accordance with Section 8.2 hereof).

 

(m)  Financial Statements; Projections.  The Lender shall have received the certified
financial statements and projections referred to in Section 5.4 hereof and
the same shall not be inconsistent with the information previously provided to
the Lender.

 

(n)   Financial Officer Certificate.  The Lender shall have received a certificate,
dated the Closing Date and signed by a Designated Financial Officer, confirming
compliance with the conditions set forth in paragraphs (a) and (b) of
Section 6.2 at the Effective Time.

 

(o)   Solvency Certificate.  The Lender shall have received the Solvency
Certificate, dated the Closing Date and signed by the Chief Financial Officer
of the Borrowers, confirming the truth and accuracy of the representations and
warranties made by the Borrowers in Section 5.16.

 

(p)   No Material Adverse Change.  There shall have occurred no material adverse
change since September 30, 2008 (in the reasonable opinion of the Lender)
in the businesses, assets, liabilities (actual or contingent), operations,
condition (financial or otherwise), or prospects of the Credit Parties.

 

(q)   Opinion of Counsel to Credit Parties.  The Lender shall have received favorable
written opinions (addressed to the Lender and dated the Closing Date) of Lynch,
Brewer, Hoffman & Fink, LLP, special counsel to the Credit Parties,
substantially in the form of Exhibit I annexed hereto and covering
such matters relating to the Credit Parties, this Agreement, the other Loan
Documents or the transactions contemplated hereby as the Lender shall
reasonably request.

 

(r)    Borrowing Base and Collateral Update
Certificates.  A Designated Financial
Officer shall have executed and delivered to the Lender a Borrowing Base
Certificate substantially in the form of Exhibit B-1 annexed
hereto, which Borrowing Base Certificate shall show Excess Availability under
the Revolving Credit Commitment of not less than $1 (after giving effect to the
payment of all sums and expenses, the issuance of all Letters of Credit and the
funding of all Loans to be paid, issued or funded at the Effective Time), and a
Collateral Update Certificate substantially in the form of Exhibit B-2
annexed hereto.

 

(s)   Inspection, Audit and Appraisal.  The Lender shall have (i) discussed the
business and operations of the Credit Parties with the senior management of the
Credit Parties, (ii) inspected the facilities of the Credit Parties, (iii) conducted
an audit of the books and records of the Credit Parties and (iv) received
appraisal reports and other information regarding the assets of the Credit
Parties (including, without limitation, the equipment to be financed pursuant
to the Existing Equipment Term Loan) as the Lender may require conducted by auditors
satisfactory to the Lender, and the results of such meeting, inspection, audit
and appraisals shall be in form, scope and substance satisfactory to the Lender
in its sole discretion.

 

(t)    Fees and Expenses.  The Lender and the Issuing Lender shall have
received all fees and other amounts due and payable to such Person and Special
Counsel at or prior to the

 

54

 

Effective Time, including,
to the extent invoiced, reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by the Borrowers hereunder.

 

(u)   Other Documents.  The Lender shall have received all material
contracts, instruments, opinions, certificates, assurances and other documents
as the Lender or Special Counsel shall have reasonably requested (including,
without limitation, the Lender’s standard for direct debit agreement executed
by the Borrowers) and the same shall be reasonably satisfactory to each of
them.

 

6.2           Each
Extension of Credit.  The
obligation of the Lender to make a Loan on the occasion of any Borrowing, and
of the Issuing Lender to issue, amend, renew or extend any Letter of Credit, is
subject to the satisfaction of the following conditions:

 

(a)   Representations and Warranties.  The representations and warranties of each
Credit Party set forth in this Agreement and the other Loan Documents shall be
true and correct in all material respects on and as of the date of such
Borrowing, or (as applicable) the date of issuance, amendment, renewal or
extension of such Letter of Credit, both before and after giving effect thereto
and to the use of the proceeds thereof (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, such
representation or warranty shall be or have been true and correct as of such
specific date and provided that, to the extent any change in circumstances
expressly permitted by this Agreement causes any representation and warranty
set forth herein to no longer be true, such representation and warranty shall
be deemed modified to reflect such change in circumstances).

 

(b)   No Defaults.  At the time of, and immediately after giving
effect to, such Borrowing, or (as applicable) the date of issuance, amendment,
renewal or extension of such Letter of Credit, no Default shall have occurred
and be continuing.

 

(c)   Borrowing Base Certificate.  A Designated Financial Officer shall have
executed and delivered to the Lender a Borrowing Base Certificate substantially
in the form of Exhibit B-1 annexed hereto, which Borrowing Base
Certificate shall show Excess Availability as of the close of business on the
immediately preceding Business Day of not less than $1 (after giving effect to
the funding of such requested Loan or the issuance of such requested Letter of
Credit).

 

6.3           Michigan
Real Estate Term Loan Effective Time.  The obligations of the Lender to make the
Michigan Real Estate Term Loan hereunder shall not become effective until the
date on which each of the following conditions is satisfied (or waived in
accordance with Section 10.2):

 

(a)   Note. 
The Lender shall have received a duly completed and executed Michigan
Real Estate Term Note.

 

(b)   Mortgage; Etc.  The Lender shall have received from the
Credit Parties (i) a fully executed and notarized Mortgage on the Michigan
Real Property, in form and substance satisfactory to the Lender, in proper form
for recording in all appropriate places in all applicable jurisdictions,
encumbering the Michigan Real Property, together with mortgagee title insurance
policies or commitments therefor, and copies of all surveys, deeds, title
exception documents, flood hazard certificates and other documents as the
Lender may reasonably require.

 

(c)   Environmental Reports.  The Lender shall have received reports and
other information, in form, scope and substance satisfactory to the Lender,
regarding environmental matters relating to the Michigan Real Property as the
Lender shall require, which reports shall include Phase I and/or Phase II
environmental assessments as specified by the Lender for the Michigan Real Property,

 

55

 

which conform to the ASTM
Standard Practice for Environmental Site Assessments, and the Lender shall be
satisfied with the results of such reports and other information.  Such reports shall be conducted by one or
more environmental consulting firms reasonably satisfactory to the Lender.

 

(d)   Appraisal. The Lender shall have
received an appraisal report regarding the Michigan Real Property satisfactory
to the Lender, and the results of such appraisal shall be in form, scope and
substance satisfactory to the Lender in its sole discretion.

 

(e)   Financial Officer Certificate.  The Lender shall have received a certificate,
dated the Michigan Real Estate Term Loan Closing Date and signed by a
Designated Financial Officer, confirming compliance with the conditions set
forth in paragraphs (a) and (b) of Section 6.2 at the Effective
Time.

 

(f)    No Material Adverse Change.  There shall have occurred no material adverse
change (in the reasonable opinion of the Lender) in the businesses, assets,
liabilities (actual or contingent), operations, condition (financial or
otherwise), or prospects of the Credit Parties.

 

(g)   Opinion of Local Michigan Counsel to
Credit Parties.  The Lender shall
have received favorable written opinions (addressed to the Lender and dated the
Michigan Real Estate Term Loan  Closing Date)
of local Michigan counsel reasonably acceptable to the Lender covering such
matters relating to the Credit Parties and the Mortgage on the Michigan Real
Property and the transactions contemplated thereby as the Lender shall
reasonably request.

 

(h)   Solvency Certificate.  The Lender shall have received the Solvency
Certificate, dated the Michigan Real Estate Term Loan  Closing
Date and signed by the Chief Financial Officer of the Borrowers, confirming the
truth and accuracy of the representations and warranties made by the Borrowers
in Section 5.16.

 

(i)    Fees and Expenses.  The Lender and the Issuing Lender shall have
received all fees and other amounts due and payable to such Person and Special
Counsel at or prior to the Michigan Real Estate Term Loan  Effective
Time, including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrowers
hereunder.

 

(j)    Other Documents.  The Lender shall have received all such other
instruments, certificates, assurances and documents as the Lender or Special
Counsel shall have reasonably requested and the same shall be reasonably
satisfactory to each of them.

 

ARTICLE 7

 

Affirmative Covenants

 

Until
the Revolving Credit Commitment has expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall
have been paid in full and all Letters of Credit shall have expired or
terminated and all LC/Acceptance Disbursements shall have been reimbursed, each
Credit Party covenants and agrees with the Lender that:

 

7.1           Financial
Statements and Other Information. 
The Credit Parties will furnish to the Lender:

 

(a)   as soon as available and in any event within
120 days after the end of each fiscal year of the Credit Parties:

 

56

 

(i)            consolidated statements of
operations, shareholders’ equity and cash flows of the Credit Parties for such
fiscal year and the related consolidated balance sheets of the Credit Parties
as at the end of such fiscal year, setting forth in each case in comparative
form the corresponding consolidated figures for the preceding fiscal year, and

 

(ii)           an opinion of independent certified
public accountants of recognized national standing (without a “going concern”
or like qualification or exception and without any qualification or exception
as to the scope of such audit) stating that the financial statements referred
to in the preceding clause (i) fairly present in all material respects the
consolidated financial condition and results of operations of the Credit
Parties as at the end of, and for, such fiscal year in accordance with GAAP.

 

(b)   as soon as available and in any event within
45 days after each December 31st, March 31st, June 30th and September 30th:

 

(i)            consolidated statements of
operations, shareholders’ equity and cash flows of the Credit Parties for such
quarter and for the period from the beginning of the respective fiscal year to
the end of such quarter, and the related consolidated balance sheets of the
Credit Parties as at the end of such period, setting forth in each case in
comparative form the corresponding consolidated figures for the corresponding
period in the preceding fiscal year, and the corresponding figures for the
forecasts most recently delivered to the Lender for such period, and

 

(ii)           a certificate of a Designated
Financial Officer, which certificate shall state that said financial statements
referred to in the preceding clause (i) fairly present in all material
respects the consolidated financial condition and results of operations of the
Credit Parties, in each case in accordance with GAAP, consistently applied, as
at the end of, and for, such period (subject to normal year-end audit
adjustments and the omission of footnotes);

 

(c)   as soon as available and in any event (i) simultaneously
with the delivery of the quarterly financial statements delivered pursuant to
subsection 7.1(b) above, a Compliance Certificate duly executed by a
Designated Financial Officer with respect to such quarterly financial
statements, and (ii) within 120 days after the end of each fiscal year, a
Compliance Certificate duly executed by a Designated Financial Officer with
respect to the annual financial statements delivered pursuant to subsection 7.1(a) above;

 

(d)   promptly following the request of the Lender,
a management summary of operations of the
Credit Parties for such quarter, certified
by a Designated Financial Officer that such summary of operations fairly
presents the financial condition of the Credit Parties for the fiscal quarter
of the Credit Parties most recently ended;

 

(e)   within five days after the same are sent or
filed, copies of all financial statements and reports which the Credit Parties
send to the holders of any public equity securities and all periodic financial
statements, final registration statements (excluding exhibits) and reports
which the Borrower may make to, or file with, the Securities and Exchange
Commission;

 

(f)    as soon as available and in any event within
twenty (20) days after the end of each month with respect to such month (or, if
the Borrowing Base falls below $4,000,000, no later than 1:00 p.m. (Boston
time) of each Business Day), a Borrowing Base Certificate in the form attached
hereto as Exhibit B-1, with respect to the Collateral of the
Borrowers as of the close of 

 

57

 

business on the last
Business Day of such month, together with such other information relating to
the Collateral as the Lender shall reasonably request, and accompanied by such
supporting detail and documentation as the Lender shall reasonably request
(which may include, at the discretion of the Lender, accounts receivable and
accounts payable aging reports, and inventory reports);

 

(g)   as soon as available and in any event within
twenty (20) days after the end of each month with respect to such month, (i) a
Collateral Update Certificate in the form attached hereto as Exhibit B-2,
(ii) a summary of inventory by type and location, (iii) an accounts
receivable aging report, and (iv) such other information relating to the
Collateral as the Lender shall reasonably request, in each case, accompanied by
such supporting detail and documentation as the Lender shall reasonably
request;

 

(h)   as soon as available and in any event within
sixty (60) days after the end of each fiscal year of the Credit Parties,
statements of forecasted consolidated income and cash flows for the Credit
Parties for each fiscal quarter in the immediately succeeding fiscal year and a
forecasted consolidated balance sheet of the Credit Parties as of the last day
of each fiscal quarter in such succeeding fiscal year, and a comparison of the
projected Excess Availability as of the last day of each fiscal quarter in such
succeeding fiscal year with the Excess Availability as of the last day of each
fiscal quarter in the current fiscal year, together with supporting assumptions
which were reasonable when made, all prepared in good faith in reasonable
detail and consistent with the Credit Parties’ past practices in preparing
projections and otherwise reasonably satisfactory in scope to the Lender;

 

(i)    as soon as available and in any event no
later than 1:00 p.m. (Boston time) on each day that the Borrowers make any
request for any Borrowing hereunder, an Advance Request in the form attached
hereto as Exhibit B-4.

 

(j)    promptly upon receipt thereof, copies of all
management letters and accountants’ letters received by the Credit Parties; and

 

(k)   promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of the Credit Parties, or compliance with the terms of this
Agreement, as the Lender may reasonably request.

 

7.2           Notices of
Material Events.  The Credit
Parties will furnish to the Lender prompt written notice of the following:

 

(a)   the occurrence of any Default;

 

(b)   the filing or commencement of any action,
suit or proceeding by or before any arbitrator or Governmental Authority
against or affecting any Credit Party or Affiliate that could reasonably be
expected to result in a Material Adverse Effect;

 

(c)   the occurrence of any ERISA Event related to
the Plan of any Credit Party or knowledge after due inquiry of any ERISA Event
related to a Plan of any other ERISA Affiliate that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result
in liability of the Credit Parties; and

 

(d)   any other development that results in, or
could reasonably be expected to result in, a Material Adverse Effect.

 

58

 

Each
notice delivered under this Section 7.2 shall be accompanied by a
statement of a Designated Financial Officer setting forth the details of the
event or development requiring such notice and any action taken or proposed to
be taken with respect thereto.

 

7.3                                 Existence; Conduct of Business.  Each
Credit Party shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its legal existence and the rights,
licenses, permits, privileges and franchises material to the conduct of its
business; provided that the foregoing shall not
prohibit any merger, consolidation, liquidation, dissolution or any
discontinuance or sale of such business permitted under Section 8.4.

 

7.4                                 Payment of Obligations.  Each
Credit Party shall pay its obligations, including Tax liabilities, that, if not
paid, could result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof
is being contested in good faith by appropriate proceedings, (b) such
Credit Party has set aside on its books adequate reserves with respect thereto
in accordance with GAAP, which reserves shall be acceptable to Lender, and (c) the
failure to make payment pending such contest could not reasonably be expected
to result in a Material Adverse Effect.

 

7.5                                 Maintenance of Properties;
Insurance.  Each Credit Party shall (a) keep and
maintain all property material to the conduct of its business in good working
order and condition, ordinary wear and tear excepted, and (b) maintain
insurance, with financially sound and reputable insurance companies, as may be
required by law and such other insurance in such amounts and against such risks
as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations, including, without
limitation, business interruption and product liability insurance.  Without limiting the generality of the
foregoing, the Credit Parties will maintain or cause to be maintained replacement
value casualty insurance on the Collateral under such policies of insurance, in
each case with such insurance companies, in such amounts, with such
deductibles, and covering such terms and risks as are at all times satisfactory
to the Lender in its commercially reasonable judgment.  All general liability and other liability
policies with respect to the Credit Parties shall name the Lender as an
additional insured thereunder as its interests may appear, and all business
interruption and casualty insurance policy shall contain a loss payable clause
or endorsement, satisfactory in form and substance to the Lender that names the
Lender as the loss payee thereunder.  All
policies of insurance shall provide for at least 30 days prior written notice
to the Lender of any modifications or cancellation of such policy.

 

7.6                                 Books and Records; Inspection
Rights.

 

(a)          Each Credit Party shall keep
proper books of record and account in which entries are made of all dealings
and transactions in relation to its business and activities which fairly record
such transactions and activities.  Each
Credit Party shall permit any representatives designated by the Lender to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants as frequently as the Lender deems appropriate provided that, so long as no Default has occurred and is
continuing, all such visits shall be on reasonable prior notice, at reasonable
times during regular business hours of such Credit Party, and provided further that after the occurrence and during the
continuance of any Default, the Lender may visit at any reasonable times.  The Borrowers shall reimburse the Lender for
all examination and inspections costs, internal costs as reasonably determined
by the Lender from time to time (currently, at the rate of $850  per man-day), plus all out-of-pocket expenses incurred in
connection with such inspections.  The
Credit Parties will permit independent appraisers and environmental consultants
selected by the Lender to visit the properties of the Credit Parties and
perform appraisals and examinations of the inventory, equipment and Real
Property Assets of the Credit Parties at such times and with such frequencies
as the Lender shall 

 

59

 

reasonably request. The
Borrowers shall reimburse the Lender for all fees, costs and expenses charged
by such independent appraisers and environmental consultants for each such
appraisal and examination.

 

(b)         In addition to and not in
limitation of any other inspection rights set forth in this Section 7.6,
each Borrower shall, and shall cause each Subsidiary to, permit the Lender or
any representatives designated by the Lender (including any third party
consultants, accountants, lawyers and appraisers) to conduct, at the Borrowers’
sole cost and expense, so long as the Fixed Charge Coverage Ration is greater
than 1.50 to 1.00, one commercial field examination of the business, operations
and assets of the Borrowers, including without limitation, the assets included
in the Borrowing Base, in each twelve month period following the Closing Date, provided, however, that
the Lender may conduct, at the Borrowers’ sole cost and expense, field
examinations with greater frequency and at such additional time or times as the
Lender, in its sole discretion, may determine in the event the Fixed Charge
Coverage Ration is equal to or less than 1.50 to 1.00.

 

7.7                                 Fiscal Year.  To
enable the ready and consistent determination of compliance with the covenants
set forth in Section 8.10 hereof, the Credit Parties shall not change
their current fiscal year or current method of determining the last day of the
first three fiscal quarters in each fiscal year without the prior written
consent of the Lender.

 

7.8                                 Compliance with Laws.  Each
Credit Party shall comply with (i) all permits, licenses and
authorizations, including, without limitation, environmental permits, licenses
and authorizations, issued by a Governmental Authority, (ii) all laws,
rules, regulations and orders including, without limitation, Environmental
Laws, of any Governmental Authority and (iii) all contractual obligations,
in each case applicable to it or its property, except where the failure to do
so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.

 

7.9                                 Use of Proceeds.  The
proceeds of the Loans will be used only for (i) the refinancing of
existing indebtedness, (ii) fees and expenses incurred in connection with
the transactions contemplated by this Agreement, (iii) for general
corporate and working capital purposes (including the issuance of letters of
credit, banker’s acceptances, and financing Capital Expenditures) of the Credit
Parties, and (iv) financing Permitted Acquisitions.  No part of the proceeds of any Loan will be
used, whether directly or indirectly, for any purpose that entails a violation
of any of the Regulations of the Board, including Regulations T, U and X.

 

7.10                           Certain Obligations Respecting
Subsidiaries.  Each Credit Party will, and will cause each
of its Subsidiaries to, take such action from time to time as shall be
necessary to ensure that the percentage of the issued and outstanding shares of
capital stock of any class or character owned by it in any Subsidiary on the
date hereof is not at any time decreased, other than by reason of transfers to
another Credit Party.

 

7.11                           ERISA. 
Except where a failure to comply with any of the following, individually
or in the aggregate, would not or could not reasonably be expected to result in
a Material Adverse Effect, (i) the Credit Parties will maintain, and cause
each ERISA Affiliate to maintain, each Plan in compliance with all applicable
requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and of the Code and (ii) the
Credit Parties will not and, to the extent authorized, will not permit any of
the ERISA Affiliates to (a) engage in any transaction with respect to any
Plan which would subject any Credit Party to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975
of the Code, (b) fail to make full payment when due of all amounts which,
under the provisions of any Plan, any Credit Party or any ERISA Affiliate is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency 

 

60

 

(as
such term is defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, with respect to any Pension Plan or (c) fail
to make any payments to any Multiemployer Plan that any Credit Party or any of
the ERISA Affiliates may be required to make under any agreement relating to
such Multiemployer Plan or any law pertaining thereto.

 

7.12                           Environmental Matters; Reporting.  The
Credit Parties will observe and comply with, and cause each Subsidiary to
observe and comply with all Environmental Laws to the extent non-compliance
could reasonably be expected to have a Material Adverse Effect.  The Credit Parties will give the Lender
prompt written notice of any violation as to any Environmental Law by any
Credit Party and of the commencement of any judicial or administrative
proceeding relating to Environmental Laws (a) in which an adverse result
would have a material adverse effect on any operating permits, air emission
permits, water discharge permits, hazardous waste permits or other
environmental permits held by any Credit Party, or (b) which will, or is
likely to, have a Material Adverse Effect on such Credit Party or which will
require a material expenditure by such Credit Party to cure any alleged problem
or violation.

 

7.13                           Matters Relating to Additional
Real Property Collateral.

 

(a)          From and after the Effective
Time, in the event that any Credit Party acquires any Material Owned Property
that the Lender determines is an Additional Mortgaged Property or in the event
that the Lender determines that any Real Property Asset has become an
Additional Mortgaged Property, the Borrowers shall deliver, to the Lender, as
soon as practicable after the Lender has notified the Borrowers that a Real
Property Asset is an Additional Mortgaged Property, fully executed and
notarized Mortgages (“Additional Mortgages”), in proper form for
recording in all appropriate places in all applicable jurisdictions,
encumbering the interest of the applicable Credit Party in such Additional
Mortgaged Property, together with mortgagee title insurance policies or
commitments therefor, and copies of all surveys, deeds, title exception
documents, flood hazard certificates and other documents as the Lender may
reasonably require copies of all deeds with respect to such Additional
Mortgaged Property.

 

(b)         From and after the Effective
Time, in the event that any Credit Party enters into any lease with respect to
any Material Leasehold Property, the Borrowers shall deliver to the Lender
copies of the lease, and all amendments thereto, between the Credit Party and
the landlord or tenant, together with a Landlord Waiver and Consent with
respect thereto and where required by the terms of any lease, the consent of
the mortgagee, ground lessor or other party.

 

(c)          If requested by the Lender,
the Credit Parties shall permit an independent real estate appraiser
satisfactory to the Lender, upon reasonable notice, to visit and inspect any
Additional Mortgaged Property for the purpose of preparing an appraisal of such
Additional Mortgaged Property satisfying the requirements of all applicable
laws and regulations (in each case to the extent required under such laws and
regulations as determined by the Lender in its sole discretion).

 

7.14                           Cash Deposits/Bank Accounts.  At
the Lender’s request following the exercise of its rights pursuant to Section 4.3,
the Credit Parties shall take all actions necessary to maintain, preserve and
protect the rights and interests of the Lender with respect to all cash
deposits of the Credit Parties and all other proceeds of Collateral and shall
not, without the Lender’s prior written consent, open any deposit or other bank
account, or instruct any account debtor to make payment to any account other
than to an established dominion account, Lock Box Account or other Controlled
Account under the Lender’s control; provided that
so long as no Default or Event of Default shall have occurred and be
continuing, the Credit Parties shall be permitted to maintain payroll and
accounts not subject to the Lender’s control so long as the aggregate amount of
funds on deposit in all such payroll accounts does not materially exceed
estimated payroll for the next payroll period.

 

61

 

ARTICLE 8

Negative Covenants

 

Until
the Revolving Credit Commitment has expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit shall have expired or terminated and all
LC/Acceptance Disbursements shall have been reimbursed, each Credit Party
covenants and agrees with the Lender that:

 

8.1                                 Indebtedness.  The
Credit Parties will not, and will not permit any Subsidiary to, create, incur,
assume or permit to exist any Indebtedness, except:

 

(a)          Indebtedness created
hereunder;

 

(b)         Existing Debt on the Closing
Date which is set forth in Schedule 8.1 and has been designated on
such schedule as Indebtedness that will remain outstanding following the
funding of the initial Loans, and any extension, renewal, refunding or
replacement of any such Indebtedness that does not increase the principal
amount thereof;

 

(c)          Intercompany loans among the
Credit Parties;

 

(d)         other Indebtedness incurred
after the Closing Date (determined on a consolidated basis without duplication
in accordance with GAAP) consisting of Capital Lease Obligations and/or secured
by Liens permitted under Section 8.2(h), in an aggregate principal amount
at any time outstanding not in excess of (i) $5,000,000, or, (ii) if
the Credit Parties finance a new molded fiber machine, $8,000,000; and

 

(e)          Guarantees permitted under Section 8.3.

 

8.2                                 Liens.  The
Credit Parties will not, and will not permit any Subsidiary to, create, incur,
assume or permit to exist any Lien on any Property or asset now owned or
hereafter acquired by it, or assign or sell any income or revenues (including
accounts receivable) or rights in respect of any thereof, except (the following
being called “Permitted Liens”):

 

(a)          Liens created hereunder or
under the other Loan Documents;

 

(b)         any Lien on any property or
asset of any Credit Party existing on the date hereof and set forth in Schedule 8.1
(excluding, however, following the making of the initial Loans hereunder, the
Liens in favor of any Person other than the Lender securing Indebtedness not
designated on said schedule as Indebtedness to remain outstanding following the
funding of the initial Loans), provided that (i) such
Lien shall not apply to any other property or asset of any Credit Party and (ii) such
Lien shall secure only those obligations which it secures on the date hereof
and extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;

 

(c)          Liens imposed by any
Governmental Authority for taxes, assessments or charges not yet delinquent or
(in the case of property taxes and assessments not exceeding $250,000 in the
aggregate more than 90 days overdue) which are being contested in good faith
and by appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the applicable Credit Party in accordance with GAAP
and which reserves shall be acceptable to the Lender;

 

62

 

(d)         landlords’, carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens, and
vendors’ Liens imposed by statute or common law not securing the repayment of
Indebtedness, arising in the ordinary course of business which are not overdue
for a period of more than 60 days or which are being contested in good faith
and by appropriate proceedings and Liens securing judgments (including, without
limitation, pre-judgment attachments) but only to the extent for an amount and
for a period not resulting in an Event of Default under Section 9.1(j) hereof;

 

(e)          pledges or deposits under
worker’s compensation, unemployment insurance and other social security
legislation and pledges or deposits to secure the performance of bids, tenders,
trade contracts (other than for borrowed money), leases (other than capital
leases), utility purchase obligations, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;

 

(f)            easements, rights-of-way,
restrictions and other similar encumbrances incurred in the ordinary course of
business and encumbrances consisting of zoning restrictions, easements,
licenses, restrictions on the use of Property or minor imperfections in title
thereto which, in the aggregate, are not material in amount, and which do not,
in the aggregate, materially detract from the value of the Property of any
Credit Party or materially interfere with the ordinary conduct of the business
of any Credit Party;

 

(g)         Liens consisting of bankers’
liens and rights of setoff, in each case, arising by operation of law, and
Liens on documents presented in letter of credit drawings; and

 

(h)         Liens on fixed or capital
assets, including real or personal property, acquired, constructed or improved
by any Credit Party, provided that (A) such
Liens secure Indebtedness (including Capital Lease Obligations) permitted by Section 8.1(d),
(B) such Liens and the Indebtedness secured thereby are incurred prior to
or within 90 days after such acquisition or the completion of such construction
or improvement or were in effect at the time the Credit Parties acquired the
assets or stock, (C) the Indebtedness secured thereby does not exceed the
cost of acquiring, constructing or improving such fixed or capital assets, and (D) such
security interests shall not apply to any other property or assets of the
Credit Parties.

 

8.3                                 Contingent Liabilities.  The
Credit Parties will not Guarantee the Indebtedness or other obligations of any
Person, or Guarantee the payment of dividends or other distributions upon the
stock of, or the earnings of, any Person, except:

 

(a)          endorsements of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business;

 

(b)         Guarantees and letters of
credit in effect on the date hereof which are disclosed in Schedule 8.1,
and any replacements thereof in amounts not exceeding such Guarantees;

 

(c)          obligations in respect of
Letters of Credit.

 

8.4                                 Fundamental Changes; Asset Sales.

 

(a)          The Credit Parties will not
enter into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution) without the prior written consent of the Lender.  The Credit Parties will not acquire any
business or property from, or capital stock of, or other equity interests in, or
be a party to any acquisition of, any 

 

63

 

Person without the prior
written consent of the Lender, except for purchases of property to be used in
the ordinary course of business, Investments permitted under Section 8.5
and Capital Expenditures.  The Credit
Parties will not form or acquire any Subsidiary without the prior written
consent of the Lender; provided that a Credit Party may form or acquire a
Subsidiary to effect a Permitted Acquisition permitted by subsection 8.4(c)(iii) so
long as the Credit Parties comply with the requirements of Section 5.21
with respect to such Subsidiary.  The
Credit Parties will not issue or sell any of their capital stock or other
equity interests without the prior consent of the Lender (other than in
connection with Equity Rights issued or granted to members of the Credit
Parties’ boards of directors or employees consistent with the Credit Parties’
past business practices).

 

(b)         The Credit Parties will not
convey, sell, lease, transfer or otherwise dispose (including any Disposition)
of, in one transaction or a series of transactions, any part of their business
or property, whether now owned or hereafter acquired (including, without
limitation, receivables and leasehold interests, but excluding (x) obsolete
or worn-out property (including leasehold interests), or tools, equipment or
other property no longer used or useful in their business and (y) any
inventory or other property sold or disposed of in the ordinary course of business
and on ordinary business terms) without the prior written consent of the
Lender, provided that the Credit Parties may
sublease real property to the extent such sublease would not interfere with the
operation of the business of the Credit Parties.

 

(c)          Notwithstanding the
foregoing provisions of this Section 8.4:

 

(i)                                     any Credit
Party may be merged or combined with or into any other Credit Party (provided
that if such merger involves any Borrower, (x) such Borrower shall be the
surviving entity and (y) no Change of Control shall occur); and

 

(ii)                                  any Credit
Party may sell, lease, transfer or otherwise dispose of any or all of its
property (upon voluntary liquidation or otherwise) to any other Credit Party.

 

(iii)                               subject to
Sections 8.1, 8.2 and 8.5 and the proviso in Section 8.4(a), any of the
Credit Parties may acquire all or substantially all of the business and assets
of any corporation, partnership, limited liability company, or other entity
located in and organized under the laws of the United States or any state
thereof (“Permitted Acquisitions”), subject to satisfaction of the
following conditions:

 

(A)                              the aggregate
consideration paid by the Credit Parties (I) for any single acquisition
shall not exceed $8,000,000, and (II) for all acquisitions shall not
exceed $16,000,000 in the aggregate;

 

(B)                                the Lender must
be given at least thirty (30) days’ advance notice of each such Permitted
Acquisition;

 

(C)                                the business or
assets so acquired shall be located in the United States and in the same or a substantially
similar line of business as that of the Credit Parties;

 

(D)                               if such
acquisition is structured as a stock or other equity acquisition, then the
entity whose equity interests are being acquired shall be organized under the
laws of the United States and either (i) the Person so acquired shall
become (x) a direct Subsidiary of a Credit Party and (y) a Subsidiary
Guarantor or (ii) such Person shall be merged with and into a Credit Party
(provided that such Credit Party shall be
the 

 

64

 

surviving corporation of such merger and no
Change of Control shall occur) and, in any event, all of the assets of such
Person shall become Collateral and all of the requirements of Section 5.21
shall be satisfied concurrently with the consummation of such acquisition;

 

(E)                                 after giving
effect to the Permitted Acquisition and the financing thereof, the Credit
Parties must be in pro forma compliance with all financial covenants;

 

(F)                                 the assets so
acquired shall be transferred free and clear of any Liens (other than Liens
permitted by Section 8.2) and no debt or liabilities shall be incurred,
guaranteed, assumed or combined except to the extent otherwise permitted by Section 8.1;

 

(G)                                the Lender
shall have received Lien searches reasonably satisfactory to the Lender with
respect to the assets being acquired;

 

(H)                               the Lender
shall have received perfected First Priority Liens (subject only to Liens
permitted by Section 8.2) on substantially all of the assets being
acquired in such Permitted Acquisition;

 

(I)                                    to the extent
requested by the Lender, the Lender shall have received an opinion of counsel
in each applicable jurisdiction reasonably satisfactory to it to the effect
that the Liens granted pursuant to this Agreement are perfected security
interests in such assets and as to such other matters as the Lender may
reasonably require;

 

(J)                                   in connection
with such Permitted Acquisition, the Borrowers shall deliver to the Lender (I) a
copy of the purchase agreement pursuant to which such Permitted Acquisition
will be consummated; (II) a copy of each existing material agreement
relating to the assets to be acquired in such Permitted Acquisition and which
is to be in effect after the consummation of such Permitted Acquisition; (III) a
Compliance Certificate calculating compliance (as of the last day of the then
most recently ended fiscal quarter) with the covenants set forth in Section 8.10
on a pro forma basis, assuming such Permitted
Acquisition had occurred prior to the first day of the earliest fiscal quarter
included in the applicable test period for calculating such compliance; (IV) such
other information or reports as the Lender may reasonably request with respect
to such Permitted Acquisition; (V) to the extent available to the Credit
Parties, historical financial statements for the prior three fiscal years (provided that if such statements are not available for the
prior three fiscal years, historical financial statements for not less than the
prior four fiscal quarters) of the entity whose assets are being acquired; and (VI) if
the Credit Parties are acquiring any interest in real property, and if required
by the Lender, reports and other information in form, scope and substance
reasonably satisfactory to the Lender and prepared by environmental consultants
reasonably satisfactory to the Lender, concerning any environmental hazards or
liabilities to which any Credit Party is likely to be subject with respect to
such acquired real property;

 

(K)                               the acquisition
shall have been approved by the boards of directors of the target Person and
the applicable Credit Party;

 

(L)                                 immediately
prior to such Permitted Acquisition no Default shall have occurred and be
continuing and after giving effect to such Permitted Acquisition, no Default
shall have occurred and be continuing and, in the reasonable judgment of the 

 

65

 

Lender, no Material Adverse Effect could
reasonably be expected to result from such Permitted Acquisition;

 

(M)                            the Lender shall
have completed (i) its business, legal and collateral due diligence,
including a collateral audit and review of the target Person’s books and
records and (ii) its field examination of the accounts receivable,
inventory and related matters of the target Person, which results shall be
satisfactory to the Lender; and

 

(N)                               the Lender
shall have received a certificate, dated the closing date of such Permitted
Acquisition and signed by a Designated Financial Officer, certifying that
Excess Availability under the Revolving Credit Commitment shall not be less
than $4,000,000 both before and at any time during the period of 60 days after
giving effect to such Permitted Acquisition.

 

8.5                                 Investments; Hedging Agreements.

 

(a)          The Credit Parties will not
make or permit to remain outstanding any Investment, except:

 

(i)                                     Investments
consisting of Guarantees permitted by Section 8.3(c) and Indebtedness
permitted by Section 8.1; Intercompany Indebtedness; and capital
contributions by any Credit Party to any other Credit Party;

 

(ii)                                  Permitted
Investments; and

 

(iii)                               Checking and
deposit accounts with banks used in the ordinary course of business.

 

(b)         The Credit Parties will not
enter into any Hedging Agreement without the prior written consent of the
Lender.

 

8.6                                 Restricted Junior Payments.  The
Credit Parties will not declare or make any Restricted Junior Payment at any
time; provided, however,
that any Credit Party that is a Subsidiary of another Credit Party may pay
dividends to such Credit Party.

 

8.7                                 Transactions with Affiliates. 
Except as expressly permitted by this Agreement, the Credit Parties will
not directly or indirectly (a) make any Investment in an Affiliate; (b) transfer,
sell, lease, assign or otherwise dispose of any property to an Affiliate; (c) merge
into or consolidate with an Affiliate, or purchase or acquire property from an
Affiliate; or (d) enter into any other transaction directly or indirectly
with or for the benefit of an Affiliate (including, without limitation,
guarantees and assumptions of obligations of an Affiliate); provided that:

 

(i)                                     any Affiliate
who is an individual may serve as a director, officer, employee or consultant
of any Credit Party, receive reasonable compensation for his or her services in
such capacity and benefit from Permitted Investments to the extent specified in
clause (e) of the definition thereof;

 

(ii)                                  the Credit
Parties may engage in and continue the transactions with or for the benefit of
Affiliates which are described in Schedule 8.7 or are referred to
in Section 8.6 (but only to the extent specified in such section); and

 

66

 

(iii)                               the Credit
Parties may engage in transactions with Affiliates in the ordinary course of
business on terms which are no less favorable to the Credit Parties than those
likely to be obtained in an arms’ length transaction between a Credit Party and
a non-affiliated third party.

 

8.8                                 Restrictive Agreements.  The
Credit Parties will not directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement (other than this Agreement) that
prohibits, restricts or imposes any condition upon (a) the ability of any
Credit Party to create, incur or permit to exist any Lien upon any of its
property or assets, or (b) the ability of any Credit Party that is a
Subsidiary of another Credit Party to pay dividends or other distributions with
respect to any shares of its capital stock or other equity interests or to make
or repay loans or advances to any other Credit Party or to Guarantee
Indebtedness of any other Credit Party; provided that (i) the
foregoing shall not apply to restrictions and conditions imposed by law or by
this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 8.8
(but shall apply to any extension or renewal of, or any amendment or
modification expanding the scope of, any such restriction or condition), (iii) the
foregoing shall not apply to customary restrictions and conditions contained in
agreements relating to the sale of stock or assets of a Subsidiary of a Credit
Party pending such sale, provided such
restrictions and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) clause (a) of the foregoing
shall not apply to restrictions or conditions imposed by any agreement relating
to secured Indebtedness permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Indebtedness, and
(v) clause (a) of the foregoing shall not apply to customary
provisions in leases and other contracts (excluding license agreements)
restricting the assignment thereof.

 

8.9                                 Sale-Leaseback Transactions.  No
Credit Party will directly or indirectly, enter into any arrangements with any
Person whereby such Credit Party shall sell or transfer (or request another
Person to purchase) any property, real, personal or mixed, used or useful in
its business, whether now owned or hereafter acquired, and thereafter rent or
lease such property from any Person.

 

8.10                           Fixed Charge Coverage Ratio.  The
Credit Parties shall not permit the Fixed Charge Coverage Ratio to be less than
1.25 to 1.00 at any time.

 

8.11                           Lines of Business.  The
Credit Parties will not engage to any substantial extent in any line or lines
of business activity other than (i) the types of businesses engaged in by
the Credit Parties as of the Effective Time and businesses substantially
related thereto, and (ii) such other lines of business as may be consented
to by the Lender.

 

8.12                           Other Indebtedness.  The
Credit Parties will not purchase, redeem, retire or otherwise acquire for
value, or set apart any money for a sinking, defeasance or other analogous fund
for the purchase, redemption, retirement or other acquisition of, or make any
voluntary payment or prepayment of the principal of or interest on, or any
other amount owing in respect of any Subordinated Indebtedness, except as may
be consented to by the Lender.

 

8.13                           Modifications of Certain
Documents.  The Credit Parties will not consent to any
modification, supplement or waiver of any of the provisions of any documents or
agreements evidencing or governing any Existing Debt.

 

67

 

ARTICLE 9

 

Events of Default

 

9.1                                 Events of Default.  The
occurrence of any of the following events shall be deemed to constitute an “Event
of Default” hereunder:

 

(a)          the Credit Parties shall
fail to pay to the Lender, the Issuing Lender, the Cash Management Bank or any
other Affiliate of the Lender, any principal of or interest on any Loan or any
Reimbursement Obligation in respect of any LC/Acceptance Disbursement or any
other Obligation of the Credit Parties to the Lender, the Issuing Lender, the
Cash Management Bank or any other Affiliate of the Lender when the same shall
become due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof, by acceleration of such due or prepayment date, or
otherwise;

 

(b)         (i) any representation
or warranty made or deemed made by or on behalf of any Credit Party or any
Subsidiary in or in connection with this Agreement, any of the other Loan
Documents or any amendment or modification hereof or thereof, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement, any of the other Loan Documents or any
amendment or modification hereof or thereof, shall prove to have been incorrect
in any material respect when made or deemed made, or (ii) the occurrence
of an “Event of Default” under the Mortgage on the Massachusetts Real Property
or Michigan Real Property;

 

(c)          the Credit Parties (i) shall
fail to observe or perform any covenant, condition or agreement contained in
Sections 7.1, 7.2, 7.5, 7.6, 7.9, 7.10, 7.12, 7.14 or in Article 8
(it being expressly acknowledged and agreed that any Event of Default resulting
from the failure of the Credit Parties at any measurement date to satisfy any
financial covenant set forth in Section 8.10 shall not be deemed to be “cured”
or remedied by the Credit Parties’ satisfaction of such financial covenant at
any subsequent measurement date) or (ii) shall fail to observe or perform
any other covenant, condition or agreement contained in Sections 7.3, 7.4, 7.7,
7.8, 7.11, or 7.13 and such failure described in this clause (ii) shall
continue unremedied for a period of 30 days after the earlier of (x) actual
knowledge by an officer of any Credit Party or (y) notice thereof from the
Lender to the Credit Parties;

 

(d)         the Credit Parties shall
fail to observe or perform any covenant, condition or agreement contained in
this Agreement (other than those specified in clauses (a), (b) or (c) of
this Section 9.1) or any other Loan Document (other than the Mortgages on
the Massachusetts Real Property and Michigan Real Property), and such failure
shall continue unremedied for a period of 30 days after notice thereof from the
Lender to the Credit Parties;

 

(e)          the Credit Parties shall
fail to make any payment (whether of principal, interest or otherwise and
regardless of amount) in respect of (x) any Material Indebtedness when and
as the same shall become due and payable, after giving effect to any grace
period with respect thereto, or (y) any Material Rental Obligation when
and as the same shall become due and payable, after giving effect to any grace
period with respect thereto, except with respect to Material Rental Obligations
where (i) the payment thereof is being contested in good faith by
appropriate proceedings, (ii) such Credit Party has set aside on its books
adequate reserves with respect thereto in accordance with GAAP, which reserves
shall be acceptable to Lender, and (iii) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect;

 

(f)            any event or condition
occurs that results in (i) any Material Indebtedness of any Credit Party
becoming due prior to its scheduled maturity or that enables or permits (with
or without the giving of notice, the lapse of time or both) the holder or
holders of any Material Indebtedness or any trustee or agent on its or their
behalf to cause such Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its
scheduled maturity, or (ii) the lease with respect to any Material Rental
Obligation of any Credit Party being terminated 

 

68

 

prior to its scheduled
expiration date or that enables or permits (with or without the giving of
notice, the lapse of time or both) the counterparty to such lease to cause such
lease to be terminated prior to its scheduled expiration date;

 

(g)         an involuntary proceeding
shall be commenced or an involuntary petition shall be filed seeking (i) liquidation,
reorganization or other relief in respect of any Credit Party or its debts, or
of a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any Credit Party or for a substantial part
of its assets, and, in any such case, such proceeding or petition shall
continue undismissed for 60 days or an order or decree approving or ordering
any of the foregoing shall be entered;

 

(h)         any Credit Party shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, (ii) consent
to the institution of, or fail to contest in a timely and appropriate manner,
any proceeding or petition described in clause (g) of this Article, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for any Credit Party or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make
a general assignment for the benefit of creditors or (vi) take any action
for the purpose of effecting any of the foregoing;

 

(i)             any Credit Party shall
become unable, admit in writing or fail generally to pay its debts as they
become due;

 

(j)             a final judgment or
judgments for the payment of money (x) in excess of $100,000 in the
aggregate (exclusive of judgment amounts fully covered by insurance where the
insurer has admitted liability in respect of such judgment) or (y) in
excess of $250,000 in the aggregate (regardless of insurance coverage), shall
be rendered by one or more courts, administrative tribunals or other bodies
having jurisdiction against any Credit Party and the same shall not be
discharged (or provision shall not be made for such discharge), bonded, or a
stay of execution thereof shall not be procured, within 60 days from the date
of entry thereof and the relevant Credit Party shall not, within said period of
60 days, or such longer period during which execution of the same shall have
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal;

 

(k)          an ERISA Event shall have
occurred that, in the reasonable opinion of the Lender, when taken together
with all other ERISA Events that have occurred, could reasonably be expected to
result in a Material Adverse Effect;

 

(l)             there shall occur any Change
of Control;

 

(m)       any of the following shall
occur: (i) the Liens created hereunder or under the other Loan Documents
shall at any time (other than by reason of the Lender relinquishing such Lien)
cease in any material respect to constitute valid and perfected Liens on the
Collateral intended to be covered thereby; (ii) except for expiration in
accordance with its respective terms, any Loan Document shall for whatever
reason be terminated, or shall cease to be in full force and effect; or (iii) the
enforceability of any Loan Document shall be contested by any Credit Party;

 

(n)         there shall occur any
material loss theft, damage or destruction of any Collateral not fully covered
(subject to such reasonable deductibles as the Lender shall have approved) by
insurance;

 

69

 

(o)         any Guarantor shall assert
that its obligations under any Loan Document shall be invalid or unenforceable;
or

 

(p)         there shall occur any
material adverse change (in the opinion of the Lender) on the businesses,
operations, properties, conditions (financial or otherwise), assets,
liabilities, income or prospects of the Credit Parties;

 

then,
and in every such event (other than an event described in clause (g) or (h) of
this Section 9.1), and at any time thereafter during the continuance of
such event, the Lender may, by notice to the Borrowers, take any or all of the
following actions, at the same or different times: (i) terminate the
Revolving Credit Commitment, and thereupon the Revolving Credit Commitment
shall terminate immediately, (ii) notify the Borrowers that the
outstanding principal of the Loans shall bear interest at the Post-Default
Rate, and thereupon the outstanding principal of the Loans shall bear interest
at the Post-Default Rate, (iii) declare the Loans then outstanding to be
due and payable in whole (or in part, in which case any principal not so declared
to be due and payable may thereafter be declared to be due and payable), and
thereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and all fees and other Obligations,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Credit
Parties, and (iv) the Lender, the Issuing Lender, the Cash Management Bank
and any other Affiliate of the Lender may exercise all of the rights as secured
party and mortgagee hereunder or under the other Loan Documents; and in case of
any event with respect to the Credit Parties or any Subsidiary described in
clause (g) or (h) of this Section 9.1, the Revolving Credit
Commitment shall automatically terminate, the principal of the Loans then
outstanding shall automatically bear interest at the Post-Default Rate, the
principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other Obligations shall automatically become due and payable,
and the Borrowers shall provide cash collateral in accordance with Section 2.4(g) without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Credit Parties, and the Lender, the Issuing Lender, the
Cash Management Bank and all other Affiliates of the Lender shall be permitted
to exercise such rights as secured party and mortgagee hereunder or under the
other Loan Documents to the extent permitted by applicable law.

 

9.2                                 Receivership. 
Without limiting the generality of the foregoing or limiting in any way
the rights of the Lender hereunder or under the other Loan Documents or
otherwise under applicable law, at any time after (i) the entire principal
balance of any Loan shall have become due and payable (whether at maturity, by
acceleration or otherwise) and (ii) the Lender shall have provided to the
Borrowers not less than ten (10) days’ prior written notice of its
intention to apply for a receiver, the Lender shall be entitled to apply for
and have a receiver appointed under state or federal law by a court of
competent jurisdiction in any action taken by the Lender to enforce its rights
and remedies hereunder and under the other Loan Documents in order to manage,
protect, preserve, sell and otherwise dispose of all or any portion of the
Collateral and continue the operation of the business of the Credit Parties,
and to collect all revenues and profits thereof and apply the same to the
payment of all expenses and other charges of such receivership, including the
compensation of the receiver, and to the payment of the Loans and other fees
and expenses due hereunder and under the Loan Documents as aforesaid until a
sale or other disposition of such Collateral shall be finally made and
consummated.  TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH CREDIT PARTY HEREBY IRREVOCABLY CONSENTS TO AND WAIVES ANY
RIGHT TO OBJECT TO OR OTHERWISE CONTEST THE APPOINTMENT OF A RECEIVER AS
PROVIDED ABOVE.  EACH CREDIT PARTY (I) GRANTS
SUCH WAIVER AND CONSENT KNOWINGLY AFTER HAVING DISCUSSED THE IMPLICATIONS
THEREOF WITH COUNSEL, (II) ACKNOWLEDGES THAT (A) THE UNCONTESTED
RIGHT TO HAVE A RECEIVER APPOINTED FOR THE FOREGOING PURPOSES IS CONSIDERED
ESSENTIAL BY THE LENDER IN CONNECTION WITH THE ENFORCEMENT OF ITS RIGHTS AND
REMEDIES HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS, AND (B) THE
AVAILABILITY OF SUCH 

 

70

 

APPOINTMENT
AS A REMEDY UNDER THE FOREGOING CIRCUMSTANCES WAS A MATERIAL FACTOR IN INDUCING
THE LENDER TO MAKE THE LOANS TO THE BORROWERS; AND (III) AGREES TO ENTER
INTO ANY AND ALL STIPULATIONS IN ANY LEGAL ACTIONS, OR AGREEMENTS OR OTHER
INSTRUMENTS IN CONNECTION WITH THE FOREGOING AND TO COOPERATE FULLY WITH THE
LENDER IN CONNECTION WITH THE ASSUMPTION AND EXERCISE OF CONTROL BY THE
RECEIVER OVER ALL OR ANY PORTION OF THE COLLATERAL.  THE LENDER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS SECTION 9.2 SHALL BE DEEMED TO CONSTITUTE A WAIVER OF THE
RIGHT OF CREDIT PARTIES TO FILE FOR PROTECTION UNDER TITLE 11 OF THE UNITED
STATES CODE AT ANY TIME.

 

ARTICLE 10

Miscellaneous

 

10.1                           Notices. 
Except in the case of notices and other communications expressly
permitted to be given by telephone, all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telephonic facsimile (fax), as follows:

 

(a)          if to any Credit Party, to
UFP Technologies, Inc., 172 East Main Street, Georgetown, MA  01833, Attention: Ronald J. Lataille, Chief
Financial Officer (Fax no. (978) 352-5616) with a copy to Lynch, Brewer,
Hoffman & Fink, LLP, 101 Federal Street, Boston, MA  02110, Attention Patrick J. Kinney, Jr.
(Fax no. (617) 951-0811); and

 

(b)         if to the Lender, to Bank of
America, N.A., 100 Federal Street, Mail Stop MA5-100-08-08, Boston, MA  02110, Attention:  Peter G. McCarthy, Senior Vice President (Fax
no. (617) 434-1226), with a copy to Edwards Angell Palmer & Dodge LLP,
111 Huntington Avenue, Boston, MA 02199-7613, Attention:  David L. Ruediger (Fax no. (617) 227-4420).

 

Any
party hereto may change its address or fax number for notices and other
communications hereunder by notice to the other parties hereto.  All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.

 

10.2                           Waivers; Amendments.

 

(a)          No failure or delay by the
Lender, the Issuing Lender, the Cash Management Bank or any Affiliate of the
Lender in exercising any right or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  The rights and remedies
of the Lender, the Issuing Lender, the Cash Management Bank and all Affiliates
of the Lender hereunder and under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise
have.  No waiver of any provision of this
Agreement or consent to any departure by any Credit Party or Subsidiary
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section 10.2, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.  Without limiting the generality
of the foregoing, the making of a Loan or issuance of a Letter of Credit shall
not be construed as a waiver of any Default, regardless of whether the Lender
or the Issuing Lender may have had notice or knowledge of such Default at the
time.

 

71

 

(b)         Neither this Agreement nor
any other Loan Document nor any provision hereof or thereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrowers and the Lender.

 

10.3                           Expenses; Indemnity; Damage
Waiver.

 

(a)          The Credit Parties jointly
and severally agree to pay, or reimburse the Lender for paying, (i) all
reasonable out-of-pocket expenses incurred by the Lender and its Affiliates,
including the reasonable fees, charges and disbursements of Special Counsel, in
connection with the preparation of this Agreement and the other Loan Documents
or any amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by the
Issuing Lender in connection with the issuance, amendment, renewal or extension
of any Letter of Credit or any demand for payment thereunder, (iii) all
out-of-pocket expenses incurred by the Lender, the Issuing Lender, the Cash
Management Bank or any Affiliate of the Lender, including the fees, charges and
disbursements of any counsel for the Lender, the Issuing Lender, the Cash
Management Bank or any Affiliate of the Lender, in connection with the
enforcement or protection of their rights in connection with this Agreement and
the other Loan Documents, including their rights under this Section 10.3,
or in connection with the Loans made or Letters of Credit issued hereunder,
including in connection with any workout, restructuring or negotiations in
respect thereof, and (iv) all Other Taxes levied by any Governmental
Authority in respect of this Agreement or any of the other Loan Documents or
any other document referred to herein or therein and all costs, expenses,
taxes, assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Loan Document or any other document referred to therein.

 

(b)         The Credit Parties jointly
and severally agree to indemnify the Lender, the Issuing Lender, the Cash
Management Bank, each Affiliate of the Lender and each Related Party of any of
the foregoing Persons (each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee and settlement costs, incurred
by or asserted against any Indemnitee arising out of, in connection with, or as
a result of (i) the execution or delivery of this Agreement, the other
Loan Documents or any agreement or instrument contemplated hereby, the
performance by the parties hereto and thereto of their respective obligations
hereunder or thereunder or the consummation of the transactions contemplated
hereby or any other transactions contemplated hereby or thereby, (ii) any
Loan or Letter of Credit or the use of the proceeds therefrom (including any
refusal by the Issuing Lender to honor a demand for payment under a Letter of
Credit if the documents presented in connection with such demand do not
strictly comply with the terms of such Letter of Credit), (iii) any actual
or alleged presence or release of Hazardous Materials on or from any property
owned, leased or operated by any Credit Party or any Subsidiary, or any
Environmental Liability related in any way to any Credit Party or any
Subsidiary, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is
a party thereto; provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee.

 

(c)          To the extent permitted by
applicable law, none of the Credit Parties shall assert, and each Credit Party
hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement, the other Loan Documents or any 

 

72

 

agreement or instrument
contemplated hereby or thereby, the transactions contemplated hereby, any Loan
or Letter of Credit or the use of the proceeds thereof.

 

(d)         All amounts due under this Section 10.3
shall be payable promptly after written demand therefor.

 

10.4                           Successors and Assigns.

 

(a)          The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that no
Credit Party may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of the Lender (and any attempted
assignment or transfer without such consent shall be null and void).  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby and, to the
extent expressly contemplated hereby, the Related Parties of the Lender, the
Issuing Lender and the Cash Management Bank) any legal or equitable right,
remedy or claim under or by reason of this Agreement.

 

(b)         The Lender may at any time and
from time to time assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of the
Revolving Credit Commitment and the Loans at the time owing to it).

 

(c)          The Lender may at any time and
from time to time, sell participations to one or more banks or other entities
(a “Participant”) in all or a portion of the Lender’s rights and
obligations under this Agreement (including all or a portion of the Revolving
Credit Commitment and the Loans owing to it); provided
that (i) the Lender’s obligations under this Agreement shall remain
unchanged, (ii) the Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (iii) the
Borrowers shall continue to deal solely and directly with the Lender in
connection with the Lender’s rights and obligations under this Agreement.  The Borrowers agree that each Participant
shall be entitled to the benefits of this Agreement to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to paragraph
(b) of this Section 10.4; provided that a
Participant shall not be entitled to receive any greater payment under this
Agreement than the Lender would have been entitled to receive with respect to
the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrowers’ prior written
consent.

 

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

 

(e)          The Lender may furnish any
information concerning any Credit Party, any Subsidiary in the possession of
the Lender from time to time to assignees and participants (including
prospective assignees and participants) subject, however, to and so long as the
recipient agrees in writing to be bound by, the provisions of Section 10.14.  In addition, the Lender may furnish any
information concerning any Credit Party, any Subsidiary, any Affiliate in the
Lender’s possession to any Affiliate of the Lender, subject, however, to the
provisions of Section 10.14.  The
Credit Parties shall assist the Lender in effectuating any assignment or
participation pursuant to this Section 10.4 in 

 

73

 

whatever manner the Lender
reasonably deems necessary, including participation in meetings with
prospective transferees.

 

10.5                           Survival.  All
covenants, agreements, representations and warranties made by the Credit
Parties and Subsidiaries herein and in the other Loan Documents, and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement and the other Loan Documents, shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the other Loan Documents and the making of any
Loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Lender or the Issuing Lender may have had notice or knowledge of any Default or
incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect so long as the principal
of or any accrued interest on any Loan or any fee or any other Obligation
payable under this Agreement or the other Loan Documents is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Revolving
Credit Commitment has not expired or terminated.  The provisions of Sections 2.9, 2.10 and 10.3
shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the Revolving
Credit Commitment or the termination of this Agreement or any other Loan
Document or any provision hereof or thereof.

 

10.6                           Counterparts; Integration;
References to Agreement; Effectiveness.  This Agreement may be executed
in counterparts (and by different parties hereto on different counterparts),
each of which shall constitute an original, but all of which when taken
together shall constitute a single contract. 
This Agreement and any separate letter agreements with respect to fees
payable to the Lender or its counsel constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the
subject matter hereof.  Whenever there is
a reference in any Loan Document or UCC Financing Statement to the “Credit
Agreement” to which the Lender and the Credit Parties are parties, such
reference shall be deemed to be made to this Agreement among the parties
hereto.  Except as provided in Section 6.1,
this Agreement shall become effective when it shall have been executed by the
Lender and when the Lender shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. 
Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.

 

10.7                           Severability.  Any
provision of this Agreement held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.

 

10.8                           Right of Setoff.  Each
Credit Party hereby grants to the Lender, the Cash Management Bank and each
Affiliate of the Lender that from time to time maintains any deposit accounts,
holds any funds or otherwise becomes indebted to the Credit Parties a security
interest in all deposits (general or special, time or demand, provisional or
final) and funds at any time held and other indebtedness at any time owing by the
Lender, the Cash Management Bank or any such Affiliate of the Lender to or for
the credit or the account of any Credit Party as security for the Obligations,
and the Credit Parties hereby agree that if an Event of Default shall have
occurred and be continuing, the Lender, the Cash Management Bank and each
Affiliate of the Lender are hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) or other
funds at any time held and other indebtedness at any time 

 

74

 

owing
by the Lender, the Cash Management Bank or any Affiliate of the Lender to or
for the credit or the account of any Credit Party against any and all of the
Obligations, irrespective of whether or not the Lender shall have made any
demand under this Agreement and although any of the Obligations may be
unmatured.  The rights of the Lender, the
Cash Management Bank and each Affiliate of the Lender under this Section 10.8
are in addition to any other rights and remedies (including other rights of
setoff) which the Lender, the Cash Management Bank or any Affiliate of the
Lender may have.

 

10.9                           Subordination by Credit Parties.  The
Credit Parties hereby agree that all present and future Indebtedness of any
Credit Party to another Credit Party (“Intercompany Indebtedness”) shall
be subordinate and junior in right of payment and priority to the Obligations,
and each Credit Party agrees not to make, demand, accept or receive any payment
in respect of any present or future Intercompany Indebtedness, including,
without limitation, any payment received through the exercise of any right of
setoff, counterclaim or cross claim, or any collateral therefor, unless and
until such time as the Obligations shall have been indefeasibly paid in full; provided that, so long as no Default shall have occurred and
be continuing and no Default shall be caused thereby, the Credit Parties may
make and receive such payments as shall be customary in the ordinary course of
the Credit Parties’ business.  Without in
any way limiting the foregoing, in the event of any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization, dissolution or
other similar proceedings relative to any Credit Party or to its businesses,
properties or assets, the Lender shall be entitled to receive payment in full
of all of the Obligations before any Credit Party shall be entitled to receive
any payment in respect of any present or future Intercompany Indebtedness.

 

10.10                     Governing Law; Jurisdiction;
Consent to Service of Process.

 

(a)          This Agreement shall be
construed in accordance with and governed by the law of The Commonwealth of
Massachusetts.

 

(b)         Each party hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the courts of The Commonwealth of Massachusetts
and of the United States District Court for the District of Massachusetts, and
any appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such Massachusetts
court (or, to the extent permitted by law, in such Federal court).  Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this
Agreement shall affect any right that the Lender, the Issuing Lender or the
Cash Management Bank may otherwise have to bring any action or proceeding
relating to this Agreement against any Credit Party, any Subsidiary or its
properties in the courts of any jurisdiction.

 

(c)          Each party hereto hereby
irrevocably and unconditionally waives, to the fullest extent it may legally
and effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement or the other Loan Documents in any court referred to in
paragraph (b) of this Section 10.10. 
Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

 

(d)         Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices
in Section 10.1.  Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

 

75

 

10.11                     WAIVER OF JURY TRIAL.  EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.11.

 

10.12                     Arbitration. 
Notwithstanding any other provision of this Agreement to the contrary,
any controversy or claim among the parties relating in any way to any
Obligations or Loan Documents, including any alleged tort, shall at the request
of any party hereto be determined by binding arbitration conducted in
accordance with the United States Arbitration Act (Title 9 U.S. Code).  Arbitration proceedings will be determined in
accordance with the Act, the then-current rules and procedures for the
arbitration of financial services disputes of the American Arbitration
Association (“AAA”), and the terms of this Section.  In the event of any inconsistency, the terms
of this Section shall control.  If
AAA is unwilling or unable to serve as the provider of arbitration or to
enforce any provision of this Section, the Lender may designate another
arbitration organization with similar procedures to serve as the provider of
arbitration.  The arbitration proceedings
shall be conducted in Boston, Massachusetts. 
The arbitration hearing shall commence within 90 days of the arbitration
demand and close within 90 days thereafter. 
The arbitration award must be issued within 30 days after close of the
hearing (subject to extension by the arbitrator for up to 60 days upon a
showing of good cause), and shall include a concise written statement of
reasons for the award.  The arbitrator
shall give effect to applicable statutes of limitation in determining any
controversy or claim, and for these purposes, service on AAA under applicable
AAA rules of a notice of claim is the equivalent of the filing of a
lawsuit.  Any dispute concerning this Section or
whether a controversy or claim is arbitrable shall be determined by the
arbitrator.  The arbitrator shall have
the power to award legal fees to the extent provided by this Agreement.  Judgment upon an arbitration award may be
entered in any court having jurisdiction. 
The arbitrator shall not have the power to commit errors of law or legal
reasoning, and any award may be reviewed and vacated or corrected on appeal to
a court of competent jurisdiction for any such error.  The institution and maintenance of an action
for judicial relief or pursuant to a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.  No
controversy or claim shall be submitted to arbitration without the consent of
all parties if, at the time of the proposed submission, such controversy or
claim relates to an obligation secured by Real Property Asset, but if all
parties do not consent to submission of such a controversy or claim to
arbitration, it shall be determined as provided in the next sentence.  At the request of any party, a controversy or
claim that is not submitted to arbitration as provided above shall be
determined by judicial reference; and if such an election is made, the parties
shall designate to the court a referee or referees selected under the auspices
of the AAA in the same manner as arbitrators are selected in AAA sponsored
proceedings and the presiding referee of the panel (or the referee if there is
a single referee) shall be an active attorney or retired judge; and judgment
upon the award rendered by such referee or referees shall be entered in the
court in which proceeding was commenced. 
None of the foregoing provisions of this Section shall limit the
right of the Lender to exercise self-help remedies, such as setoff, foreclosure
or sale of any Collateral or to obtain provisional or ancillary remedies from a
court of competent jurisdiction before, after or during any arbitration
proceeding.  The exercise of a remedy
does not waive the right of any party to resort to arbitration or
reference.  At the Lender’s option,
foreclosure under a Mortgage may be accomplished either by exercise of power of
sale thereunder or by judicial foreclosure.]

 

76

 

10.13                     Headings.  Article and
Section headings and the Table of Contents used herein are for convenience
of reference only, are not part of this Agreement and shall not affect the
construction of, or be taken into consideration in interpreting, this
Agreement.

 

10.14                     Confidentiality.  The
Lender agrees to keep confidential information obtained by it pursuant hereto
and the other Loan Documents confidential in accordance with the Lender’s
customary practices and agrees that it will only use such information in
connection with the transactions contemplated by this Agreement and not
disclose any of such information other than (a) to the Lender’s employees,
representatives, directors, attorneys, auditors, agents, professional advisors,
trustees or Affiliates who are advised of the confidential nature of such
information or to any direct or indirect contractual counterparty in swap
agreements or such contractual counterparty’s professional advisor (so long as
such contractual counterparty or professional advisor to such contractual
counterparty agrees to be bound by the provisions of this Section 10.14), (b) to
the extent such information presently is or hereafter becomes available to the
Lender on a non-confidential basis from any source of such information that is
in the public domain at the time of disclosure, (c) to the extent
disclosure is required by law (including applicable securities law),
regulation, subpoena or judicial order or process (provided
that notice of such requirement or order shall be promptly furnished to the
Borrowers unless such notice is legally prohibited) or requested or required by
bank, securities, insurance or investment company regulators or auditors or any
administrative body or commission to whose jurisdiction the Lender may be
subject, (d) to any rating agency to the extent required in connection
with any rating to be assigned to the Lender, (e) to assignees or
participants or prospective assignees or participants who agree to be bound by
the provisions of this Section 10.14, (f) to the extent required in
connection with any litigation between any Credit Party and the Lender with
respect to the Loans or this Agreement and the other Loan Documents or (g) with
the Borrowers’ prior written consent.

 

77

 

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

 

	
   

  	
  BORROWERS

  
	
   

  	
   

  
	
   

  	
  UFP
  TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Ronald J. Lataille

  
	
   

  	
  Name:
  Ronald J. Lataille

  
	
   

  	
  Title:
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MOULDED
  FIBRE TECHNOLOGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Ronald J. Lataille

  
	
   

  	
  Name:
  Ronald J. Lataille

  
	
   

  	
  Title:
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SIMCO
  INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Ronald J. Lataille

  
	
   

  	
  Name:
  Ronald J. Lataille

  
	
   

  	
  Title:
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SIMCO
  AUTOMOTIVE TRIM, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Ronald J. Lataille

  
	
   

  	
  Name:
  Ronald J. Lataille

  
	
   

  	
  Title:
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  STEPHENSON &
  LAWYER, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Ronald J. Lataille

  
	
   

  	
  Name:
  Ronald J. Lataille

  
	
   

  	
  Title:
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PATTERSON
  PROPERTIES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Ronald J. Lataille

  
	
   

  	
  Name:
  Ronald J. Lataille

  
	
   

  	
  Title:
  Treasurer

  
				

 

78

 

	
   

  	
  LENDER

  
	
   

  	
   

  
	
   

  	
  BANK
  OF AMERICA, N.A. (assignee of

  
	
   

  	
  Banc
  of America Leasing & Capital LLC,

  
	
   

  	
  successor
  to Fleet Capital Corporation), as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Peter G. McCarthy

  
	
   

  	
  Name:
  Peter G. McCarthy

  
	
   

  	
  Title:
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  ISSUING
  LENDER

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK
  OF AMERICA, N.A., as Issuing Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Peter G. McCarthy

  
	
   

  	
  Name:
  Peter G. McCarthy

  
	
   

  	
  Title:
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  CASH
  MANAGEMENT BANK

  
	
   

  	
   

  	
   

  
	
   

  	
  BANK
  OF AMERICA, N.A., as Cash Management Bank

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Peter G. McCarthy

  
	
   

  	
  Name:
  Peter G. McCarthy

  
	
   

  	
  Title:
  Senior Vice President

  
				

 

79

 

SCHEDULES & EXHIBITS

 

	
  Schedule
  1.1

  	
  Material
  Owned Properties

  
	
  Schedule 1.4

  	
  Designated
  Financial Officers

  
	
  Schedule
  4.2

  	
  Websites
  and Domain Names

  
	
  Schedule 5.3

  	
  Governmental
  Approvals; No Conflicts

  
	
  Schedule 5.4

  	
  Financial
  Condition; No Material Adverse Changes

  
	
  Schedule 5.5

  	
  Properties;
  Proprietary Rights; Real Property Assets

  
	
  Schedule 5.6

  	
  Litigation
  and Environmental Matters

  
	
  Schedule 5.7

  	
  Compliance
  with Laws and Agreements

  
	
  Schedule 5.9

  	
  Taxes

  
	
  Schedule 5.10

  	
  Pension
  Plans

  
	
  Schedule 5.12

  	
  Organizational
  Structure; Capitalization

  
	
  Schedule 5.13

  	
  Subsidiaries

  
	
  Schedule 5.14

  	
  Material
  Indebtedness, Liens and Agreements

  
	
  Schedule 5.19

  	
  Labor
  and Employment Matters

  
	
  Schedule 5.20

  	
  Bank
  Accounts

  
	
  Schedule 8.1

  	
  Existing
  Indebtedness

  
	
  Schedule 8.7

  	
  Transactions
  with Affiliates

  
	
  Schedule 8.8

  	
  Restrictive
  Agreements

  
	
   

  	
   

  
	
  Exhibit A-1

  	
  Form of
  Second Amended and Restated Revolving Credit Note

  
	
  Exhibit A-2

  	
  Form of
  Second Amended and Restated Existing Equipment Term Note

  
	
  Exhibit A-3

  	
  Form of
  Second Amended and Restated Massachusetts Real Estate Term Note

  
	
  Exhibit A-4

  	
  Form of
  Michigan Real Estate Term Note

  
	
  Exhibit B-1

  	
  Form of
  Borrowing Base Certificate

  
	
  Exhibit B-2

  	
  Form of
  Collateral Update Certificate

  
	
  Exhibit B-3

  	
  Form of
  LIBOR Request

  
	
  Exhibit B-4

  	
  Form of
  Advance Request

  
	
  Exhibit C

  	
  Form of
  Perfection Certificate

  
	
  Exhibit D

  	
  Form of
  Compliance Certificate

  
	
  Exhibit E

  	
  Form of
  Solvency Certificate

  
	
  Exhibit F

  	
  Form of
  Acceptance Agreement

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