SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SECOND
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of June 30, 2004

among

GREEN MOUNTAIN
COFFEE ROASTERS, INC.

and

THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,

as Lenders,

and

FLEET NATIONAL BANK

as Agent and Lender

 

 

TABLE OF CONTENTS

RECITALS       *

1. AMOUNT AND TERMS OF CREDIT *

1.1 CREDIT FACILITIES        *

1.2 PREPAYMENTS   *

1.3 USE OF PROCEEDS         *

1.4 INTEREST AND APPLICABLE MARGINS        *

1.5 INTENTIONALLY LEFT BLANK           *

1.6 INTENTIONALLY LEFT BLANK           *

1.7 CASH MANAGEMENT SYSTEMS         *

1.8 FEES          *

1.9 RECEIPT OF PAYMENTS           *

1.10 APPLICATION AND ALLOCATION OF PAYMENTS           *

1.11 LOAN ACCOUNT AND ACCOUNTING         *

1.12 INDEMNITY       *

1.13 ACCESS *

1.14 TAXES     *

1.15 CAPITAL ADEQUACY; INCREASED COSTS: ILLEGALLY *

1.16 SINGLE LOAN   *

1.17 LETTERS OF CREDIT    *

1.17.1 LETTERS OF CREDIT             *

1.17.2 ISSUING A LETTER OF CREDIT       *

1.17.3 LETTER OF CREDIT PARTICIPATIONS       *

1.17.4 REIMBURSEMENT AND OTHER PAYMENTS        *

1.17.5 OBLIGATIONS ABSOLUTE   *

1.17.6 THE UNIFORM CUSTOMS AND PRACTICE           *

1.17.7 MODIFICATION, CONSENT, ETC. *

1.17.8 LIABILITY OF THE AGENT AND THE LENDERS   *

2. CONDITIONS PRECEDENT; CONDITIONS SUBSEQUENT *

2.1 CONDITIONS TO THE INITIAL LOANS           *

2.2 FURTHER CONDITIONS TO EACH LOAN       *

3. REPRESENTATIONS AND WARRANTIES *

3.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW         *

3.2 EXECUTIVE OFFICES; FEIN      *

3.3 CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS          *

3.4 FINANCIAL STATEMENTS AND PROJECTIONS       *

3.5 MATERIAL ADVERSE EFFECT *

3.6 OWNERSHIP OF PROPERTY: LIENS    *

3.7 LABOR MATTERS           *

3.8 VENTURES, SUBSIDIARIES AND AFFILIATES: OUTSTANDING STOCK AND INDEBTEDNESS             *

3.9 GOVERNMENTAL REGULATION         *

3.10 MARGIN REGULATIONS         *

3.11 TAXES     *

3.12 ERISA      *

3.13 NO LITIGATION            *

3.14 BROKERS           *

3.15 INTELLECTUAL PROPERTY    *

3.16 FIRST PRIORITY            *

3.17 ENVIRONMENTAL MATTERS             *

3.18 INSURANCE       *

3.19 DEPOSIT AND DISBURSEMENT ACCOUNTS           *

3.20 GOVERNMENT CONTRACTS             *

3.21 CUSTOMER AND TRADE RELATIONS          *

3.22 AGREEMENTS AND OTHER DOCUMENTS   *

3.23 SOLVENCY        *

4. FINANCIAL SATEMENTS AND INFORMATION *

4.1 REPORTS AND NOTICES           *

4.2 COMMUNICATION WITH ACCOUNTANTS   *

5. AFFIRMATIVE COVENANTS *

5.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS   *

5.2 PAYMENT OF OBLIGATIONS   *

5.3 BOOKS AND RECORDS             *

5.4 INSURANCE: DAMAGE TO OR DESTRUCTION OF COLLATERAL             *

5.5 COMPLIANCE WITH LAWS      *

5.6 SUPPLEMENTAL DISCLOSURE            *

5.7 INTELLECTUAL PROPERTY      *

5.8 ENVIRONMENTAL MATTERS   *

5.9 LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND BAILEE LETTERS       *

5.10 OPERATING ACCOUNTS         *

5.11 FURTHER ASSURANCES         *

6. NEGATIVE COVENANTS *

6.1 MERGERS, SUBSIDIARIES, ETC.           *

6.2 INVESTMENTS: LOANS AND ADVANCES     *

6.3 INDEBTEDNESS *

6.4 EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS        *

6.5 CAPITAL STRUCTURE AND BUSINESS           *

6.6 GUARANTEED INDEBTEDNESS           *

6.7 LIENS        *

6.8 SALE OF STOCK AND ASSETS             *

6.9 ERISA        *

6.10 FINANCIAL COVENANTS       *

6.11 HAZARDOUS MATERIALS       *

6.12 SALE-LEASEBACKS     *

6.13 CANCELLATION OF INDEBTEDNESS           *

6.14 RESTRICTED PAYMENTS        *

6.15 CHANGE OF CORPORATE NAME OR LOCATION; CHANGE OF FISCAL YEAR            *

6.16 NO IMPAIRMENT OF INTERCOMPANY TRANSFERS        *

6.17 NO SPECULATIVE TRANSACTIONS             *

6.18 LEASES   *

7 TERM *

7.1 TERMINATION    *

7.2 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING ARRANGEMENTS        *

8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES *

8.1 EVENTS OF DEFAULT    *

8.2 REMEDIES            *

8.3 WAIVERS BY BORROWER        *

9 ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT *

9.1 ASSIGNMENT AND PARTICIPATIONS            *

9.2 APPOINTMENT OF AGENT       *

9.3 AGENT'S RELANCE, ETC.          *

9.4 FLEET NATIONAL BANK AND AFFILIATES *

9.5 LENDER CREDIT DECISION      *

9.6 INDEMNIFICATION        *

9.7 SUCCESSOR AGENT      *

9.8 SETOFF AND SHARING OF PAYMENTS         *

9.9 ADVANCES; PAYMENTS; NON-FUNDING LENDERS; INFORMATION; ACTIONS IN CONCERT             *

10 SUCCESSORS AND ASSIGNS *

10.1 SUCCESSORS AND ASSIGNS             *

11 MISCELLANEOUS *

11.1 COMPLETE AGREEMENT: MODIFICATION OF AGREEMENT       *

11.2 AMENDMENTS AND WAIVERS          *

11.3 FEES AND EXPENSES *

11.4 NO WAIVER       *

11.5 REMEDIES          *

11.6 SEVERABILITY *

11.7 CONFLICT OF TERMS *

11.8 CONFIDENTIALITY      *

11.9 GOVERNING LAW        *

11.10 NOTICES          *

11.11 SECTION TITLES         *

11.12 COUNTERPARTS         *

11.13 WAIVER OF JURY TRIAL       *

11.14 REINSTATEMENT       *

11.15 ADVICE OF COUNSEL           *

11.16 NO STRICT CONSTRUCTION           *

12. INTEREST RATE HEDGING *

 

THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT made as of the 30th day of June, 2004, is by and between GREEN MOUNTAIN COFFEE ROASTERS, INC., a Delaware corporation having its chief executive office at 33 Coffee Lane, Waterbury, Vermont 05676 (the "Borrower"), and FLEET NATIONAL BANK, a national banking association organized under the laws of the United States of America with an address of Mail Stop MA5-100-09-08, 100 Federal Street, Boston, Massachusetts 02110, for itself, as Lender, and as Agent for Lenders, and the other Lenders signatory hereto from time to time.

RECITALS

WHEREAS, the Borrower and Agent are parties to a certain Amended and Restated Credit Agreement dated as of August 30, 2002, as amended by Amendment to Credit Agreement and Loan Documents dated as of December 31, 2002 and Second Amendment to Credit Agreement and Loan Documents dated as of April 8, 2004 (collectively, as amended, the "Existing Credit Agreement") pursuant to which the Lenders have extended to the Borrower (i) a revolving credit facility of up to $12,500,000 to provide working capital financing to the Borrower, (ii) a term loan in the amount of $15,000,000 to refinance certain prior financings, and (iii) an equipment line of credit loan in the amount of up $5,000,000 to fund the acquisition of new equipment (collectively, the "Existing Credit Facilities");

WHEREAS, Borrower has secured all of its obligations under the Existing Credit Agreement by (a) granting to Agent, for the benefit of Agent and Lenders, a security interest in and mortgage or other lien upon all of their existing and after-acquired assets (including real estate), and (b) pledging to the Agent, for the benefit of the Agent and Lenders, all of the capital stock of Keurig, Incorporated. now or hereafter owned by the Borrower;

WHEREAS, the original borrowing entities under the Existing Credit Agreement were Green Mountain Coffee Roasters, Inc., a Vermont corporation, and Green Mountain Coffee Roasters Franchising Corporation, a Delaware corporation, both of which were subsidiaries of Borrower which was a guarantor of the obligations of the original borrowing entities under the Existing Credit Agreement;

WHEREAS, the original borrowing entities referenced above have merged into Borrower, which previously was a guarantor of the obligations of the borrowing entities under the Existing Credit Agreement, and as as a result of the mergers Borrower has become the sole Borrower under the Existing Credit Agreement;

WHEREAS, the Borrower, the Agent, and the Lenders desire to amend and restate the Credit Agreement in its entirety for purposes of reflecting the merger of the original borrowing entities into the Borrower and amending various provisions of the Existing Credit Agreement, including, without limitation, providing for a re-advance and increase in the amount of the Term Loan, a reduction in the aggregate Revolving Loan Commitment, and a reduction in the performance based interest rate margins; and

WHEREAS, capitalized terms used in this Agreement shall have the meanings ascribed to them in Annex A . All Annexes, Disclosure Schedules, Exhibits and other attachments (collectively, "Appendices") hereto, or expressly identified to this Agreement, are incorporated herein by reference, and taken together, shall constitute but a single agreement. These Recitals shall be construed as part of the Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the parties hereto agree that the Credit Agreement shall be and hereby is restated in its entirety as follows:

1.          AMOUNT AND TERMS OF CREDIT

1.1. Credit Facilities .

(a) Revolving Credit Facility . (i) Subject to the terms and conditions hereof, each Revolving Lender agrees to make available from time to time until the Commitment Termination Date its Pro Rata Share of advances (each, a "Revolving Credit Advance"). Revolving Credit Advances hereunder shall include advances made by Agent under the Revolving Loan to fund Banker's Acceptances issued by Agent in favor of the Borrower provided that that aggregate face amount of all such outstanding Banker's Acceptances shall not at any time exceed $9,000,000. The Pro Rata Share of the Revolving Loan of any Revolving Lender shall not at any time exceed its separate Revolving Loan Commitment. The obligations of each Revolving Lender hereunder shall be several and not joint. The aggregate amount of Revolving Credit Advances (including funded Banker's Acceptances issued in favor of the Borrower) outstanding shall not exceed at any time the Maximum Amount less the principal amount of the Swing Line Loan and the aggregate stated amounts of Letters of Credit outstanding at such time ("Borrowing Availability"). Borrower shall make payments of principal from time to time under the Revolving Loan so that the aggregate amount of Revolving Advances does not at any time exceed the then Borrowing Availability. Until the Commitment Termination Date, Borrower may from time to time borrow, repay and reborrow under this Section 1.1 (a) . Each Revolving Credit Advance shall be made either pursuant (a) to the Agent's Cash Management System (Prime Rate Loans only) or (b) on notice by Borrower to the representative of Agent identified on Annex G at the address specified thereon. Notices by Borrower must be given no later than (1) 12:00 p.m. (Boston, Massachusetts time) on the Business Day of the proposed Revolving Credit Advance, in the case of a Prime Rate Loan, or (2) 11:00 a.m. (Boston, Massachusetts time) on the date which is two (2) Business Days prior to the proposed Revolving Credit Advance, in the case of a LIBOR Loan or a BAR Loan. Each such notice (a " Notice of Revolving Credit Advance ") must be given in writing (by telecopy or overnight courier) and shall be in such form and shall include such information as may be required by Agent. If Borrower desires to have the Revolving Credit Advances bear interest by reference to a LIBOR Rate, Borrower must comply with Section 1.4(e) . If Borrower desires to have a Revolving Credit Advance made for purposes of issuance of a Banker's Acceptance and to bear interest by reference to a Banker's Acceptance Rate, Borrower must comply with Section 1.4(f) .

                        (ii) The Borrower shall execute and deliver to each Revolving Lender a note to evidence the Revolving Loan Commitment of that Revolving Lender. Each note shall be in the principal amount of the Revolving Loan Commitment of the applicable Revolving Lender, dated as of the Closing Date and substantially in the form of Exhibit l.l(a)(ii) (each a "Revolving Note" and, collectively, the "Revolving Notes"). Each Revolving Note shall represent the obligation of Borrower to pay the amount of each Revolving Lender's Revolving Loan Commitment or, if less, the applicable Revolving Lender's Pro Rata Share of the aggregate unpaid principal amount of all Revolving Credit Advances to such Borrower together with interest thereon as prescribed in Section 1.4 . The entire unpaid balance of the aggregate Revolving Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date. The current aggregate principal balance of Revolving Credit Advances under the Existing Credit Facilities shall remain outstanding and be evidenced by the Revolving Notes.

(b) Equipment Line Facility . (i) Subject to the terms and conditions hereof, each Equipment Line Lender agrees to make available from time to time its Pro Rata Share of advances (each, an "Equipment Line Advance") until the Equipment Line Commitment is terminated by the Agent in its sole discretion on behalf of all Lenders or by reason of the occurrence of an Event of Default pursuant to Section 8.2(b). . The Pro Rata Share of the Equipment Line of any Equipment Line Lender shall not at any time exceed its separate Equipment Line Commitment. The obligations of each Equipment Line Lender hereunder shall be several and not joint. Through and until such time as the Agent on behalf of the Lenders terminates the Equipment Line Commitment, Borrower may request advances and re-advances under the Equipment Line to pay up to 80% of the cost (as evidenced by invoices but excluding any so-called "soft" costs) of new Equipment purchased by Borrower in the ordinary course of business and in amounts such that the aggregate principal amount advanced and outstanding thereunder at any time does not exceed $5,000,000. Each Equipment Line Advance shall be evidenced by the Equipment Line Notes of each Equipment Lender. Each Equipment Line Advance shall be in a minimum amount of $500,000 and shall be repaid commencing on the date the next Term Loan quarterly payment is due, or at such other time as may be mutually agreeable, in equal quarterly installments of principal in an amount sufficient to fully amortize such Equipment Line Advance over a term agreed to by Agent (the initial installment may by prorated as agreed upon by Borrower and Agent if due within less than three (3) months from date of advance) and Borrower not to exceed five (5) years form the date of the Equipment Line Advance. Each payment of principal with respect to an Equipment Line Advance shall be paid to Agent for the ratable benefit of each Equipment Line Lender making or holding the Equipment Line Advance, ratably in proportion to each such Equipment Line Lender's respective Equipment Line Commitment. Borrower shall pay Agent an administrative fee of $500.00 with respect to each Equipment Line Advance, said fee due and payable at the time of each such Advance. The aggregate amount of all Equipment Line Advances outstanding shall not exceed at any time $5,000,000. Each request for an Equipment Line Advance must be given no later than (1) 12:00 p.m. (Boston, Massachusetts time) on the Business Day of the proposed Equipment Line Advance, in the case of a Prime Rate Loan, or (2) 11:00 a.m. (Boston, Massachusetts time) on the date which is two (2) Business Days prior to the proposed Equipment Line Advance, in the case of a LIBOR Loan. Each such notice (a " Notice of Equipment Line Advance ") must be given in writing (by telecopy or overnight courier) and shall be in such form and shall include such information as may be required by Agent. If Borrower desires to have the Equipment Line Advance bear interest by reference to a LIBOR Rate, Borrower must comply with Section 1.4(e) .

                        (ii) Equipment Line Notes . The Borrower shall execute and deliver to each Equipment Line Lender a note to evidence the Equipment Line Commitment of that Equipment Line Lender. Each note shall be in the principal amount of the Equipment Line Commitment of the applicable Equipment Line Lender, dated the Closing Date and substantially in the form of Exhibit l.l(b)(ii) (each an "Equipment Line Note" and, collectively, the "Equipment Line Notes"). Each Equipment Line Note shall represent the obligation of the Borrower to pay the amount of each Equipment Line Lender's Revolving Loan Commitment or, if less, the applicable Equipment Line Lender's Pro Rata Share of the aggregate unpaid principal amount of all Equipment Line Advances to the Borrower together with interest thereon as prescribed in Section 1.4 .

(c) Term Loan . (i) Subject to the terms and conditions hereof, each Term Lender agrees to make a term loan on the Closing Date to the Borrower in the original principal amount of its Term Loan Commitment (the "Term Loan"). The obligations of each Term Lender hereunder shall be several and not joint. The Term Loan shall be evidenced by promissory notes substantially in the form of Exhibit 1.1 (c)(i) (each a "Term Note" and collectively the "Term Notes"), and the Borrower shall execute and deliver a separate Term Note to each Term Lender in the original amount of each Lender's Term Loan Commitment. Each Term Note shall represent the obligation of the Borrower to pay the applicable Term Lender's Term Loan Commitment, together with interest thereon as prescribed in Section 1.4 . Notwithstanding the foregoing, the Term Loan shall constitute a re-finance and increase of the existing term loan to the Borrower under the Existing Credit Facilities, and the Term Lenders shall only be required to advance additional funds in respect of the Term Loan Commitment to bring the aggregate outstanding principal balance of the Term Loan up to $17,000,000.

(ii) The Borrower shall repay the principal amount of the Term Loan in twenty-one (21) consecutive quarterly installments due on the last business day of March, June, September and December of each year, commencing June 30, 2004 (each such date a "Quarterly Payment Date"), such installments to be in the following amounts:

 

Payment Date Amount

June 30, 2004                           $500,000

September 30, 2004                  $500,000

Each of Next 18                       $850,000

Quarterly Payment Dates

Last Quarterly Payment            $700,000

Date

            (iii) Notwithstanding the foregoing clause (ii) , the aggregate outstanding principal balance of the Term Loan shall be due and payable in full in immediately available funds on the Commitment Termination Date, if not sooner paid in full.

(iv) Each payment of principal with respect to the Term Loan shall be paid to Agent for the ratable benefit of each Term Lender making or holding the Term Loan, ratably in proportion to each such Term Lender's respective Term Loan Commitment.

(d) Swing Line Facility . (i) Agent shall notify the Swing Line Lender upon Agent's receipt of any Notice of Revolving Credit Advance. Subject to the terms and conditions hereof, the Swing Line Lender may, in its discretion, make available from time to time until the Commitment Termination Date advances (each, a "Swing Line Advance") in accordance with any such notice or pursuant to Agent's Cash Management System. The aggregate amount of Swing Line Advances outstanding shall not exceed the Swing Line Commitment ("Swing Line Availability"). Until the Commitment Termination Date, Borrower may from time to time borrow, repay and reborrow under this Section 1.1 (d) . Each Swing Line Advance shall be made either pursuant (a) to the Agent's Cash Management System or (b) to a Notice of Revolving Credit Advance delivered to Agent by Borrower in accordance with Section 1.1 (a) . A Notice of Revolving Credit Advance must be given no later than 12:00 p.m. (Boston, Massachusetts time) on the Business Day of the proposed Swing Line Advance. Notwithstanding any other provision of this Agreement or the other Loan Documents, the Swing Line Loan shall constitute a Prime Rate Loan. Borrower shall repay the aggregate outstanding principal amount of the Swing Line Loan upon demand therefor by Agent.

(ii) Swing Line Note. The Borrower shall execute and deliver to the Swing Line Lender a promissory note to evidence the Swing Line Commitment. Such note shall be in the principal amount of the Swing Line Commitment of the Swing Line Lender, dated the Closing Date and substantially in the form of Exhibit 1.1 (d)(ii) (the "Swing Line Note"). The Swing Line Note shall represent the obligation of the Borrower to pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid principal amount of all Swing Line Advances together with interest thereon as prescribed in Section 1.4 . The entire unpaid balance of the Swing Line Loan and all other non-contingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date if not sooner paid in full.

(iii) Refunding of Swing Line Loans . The Swing Line Lender, at any time and from time to time in its sole and absolute discretion, shall on behalf of the Borrower (and Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its behalf) request each Revolving Lender (including the Swing Line Lender) to make a Revolving Credit Advance to the Borrower (which shall be a Prime Rate Loan) in an amount equal to such Revolving Lender's Pro Rata Share of the principal amount of the Swing Line Loan (the "Refunded Swing Line Loan") outstanding on the date such notice is given. Unless any of the events described in Sections 8.1 (h) or 8.1 (i) shall have occurred (in which event the procedures of Section 1.1 (d)(iv) shall apply), and regardless of whether the conditions precedent set forth in this Agreement to the making of a Revolving Credit Advance are then satisfied, each Revolving Lender shall disburse directly to Agent, such Revolving Lender's Pro Rata Share of a Revolving Credit Advance on behalf of the Swing Line Lender, prior to 4:00 p.m. (Boston, Massachusetts time), in immediately available funds on the same Business Day on which such notice is given. The proceeds of such Revolving Credit Advances shall be immediately paid to the Swing Line Lender and applied to repay the Refunded Swing Line Loan.

(iv) Participation in Swing Line Loans . If, prior to refunding a Swing Line Loan with a Revolving Credit Advance pursuant to Section l.l(d)(iii) , one of the events described in Sections 8.1(h) or 8.1(i) shall have occurred, then, subject to the provisions of Section 1.1 (d)(v) below, each Revolving Lender will, on the date such Revolving Credit Advance was to have been made, purchase from the Swing Line Lender an undivided participation interest in the Swing Line Loan in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon request, each Revolving Lender will promptly transfer to the Swing Line Lender, in immediately available funds, the amount of its participation and upon receipt thereof the Swing Line Lender will deliver to such Revolving Lender a certificate evidencing such participation, dated the date of receipt of such funds and in such amount.

(v) Revolving Lenders' Obligations Unconditional . Each Revolving Lender's obligation to make Revolving Credit Advances in accordance with Section 1.1 (d)(iii) and to purchase participating interests in accordance with Section 1.1 (d)(iv) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Revolving Lender may have against the Swing Line Lender, Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of any Default or Event of Default; (C) any inability of Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement on the date upon which such participating interest is to be purchased, or (D) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If any Revolving Lender does not make available to Agent or the Swing Line Lender, as applicable, the amount required pursuant to Section 1.1 (d)(iii) or 1.1 (d)(iv) , as the case may be, the Swing Line Lender shall be entitled to recover such amount on demand from such Revolving Lender, together with interest thereon for each day from the date of nonpayment until such amount is paid in full at the Federal Funds Rate for the first two (2) Business Days and at the Prime Rate thereafter.

(e) Reliance on Notices . Agent shall be entitled to rely upon, and shall be fully protected in relying upon, any Notice of Revolving Credit Advance, Notice of Equipment Line Advance, Notice of Conversion/Continuation or similar notice believed by Agent to be genuine. Agent may assume that each Person executing and delivering such a notice was duly authorized, unless the responsible individual acting thereon for Agent has actual knowledge to the contrary.

 

1.2. Prepayments .

(a) Voluntary Prepayments . Borrower may at any time on at least five (5) days' prior written notice by Borrower to Agent voluntarily prepay all or part of any Equipment Line Advance or the Term Loan; provided that any such prepayments or reductions shall be in a minimum amount of $50,000. In addition, Borrower may at any time on at least ten (10) days' prior written notice by Borrower to Agent terminate the Revolving Loan Commitment; provided that upon such termination, all Loans and other Obligations shall be immediately due and payable in full. Any such voluntary prepayment of either an Equipment Line Advance or the Term Loan, and any such termination of the Revolving Loan Commitment, must be accompanied by the payment of any LIBOR Loan funding breakage costs in accordance with Section 1.12(b) . Upon any such prepayment and termination of the Revolving Loan Commitment, Borrower's right to request Revolving Credit Advances and Equipment Line Advances, or request Swing Line Advances, shall simultaneously be terminated. Any partial prepayments of an Equipment Line Advance or the Term Loan shall be applied to prepay the scheduled installments of the Equipment Line Advance or the Term Loan, as the case may be, ratably, in inverse order of maturity.

(b) Mandatory Prepayments . (i) If at any time the outstanding balance of the aggregate Revolving Loan exceeds the Borrowing Availability, Borrower shall immediately repay the aggregate outstanding Revolving Credit Advances to the extent required to eliminate such excess.

(ii) Immediately upon receipt by Borrower of proceeds of any asset disposition (including condemnation proceeds, but excluding proceeds of asset dispositions permitted by Section 6.8 (a), (b), and (c)) , Borrower shall prepay the Loans within three (3) Business Days of receipt of such proceeds in an amount equal to such proceeds, net of (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrower in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for income taxes in accordance with GAAP in connection therewith. Any such prepayment shall be applied in accordance with clause (c) below.

(iii) If Borrower issues Stock, no later than the Business Day following the date of receipt of proceeds thereof, Borrower shall apply an amount equal to the proceeds thereof to the payment of the Loans, net of underwriting discounts and commissions and other reasonable costs, fees and expenses paid to Non-Affiliates in connection therewith, but only to the extent such net proceeds, together with the proceeds from any other issuances of Stock during the then current Fiscal Year, exceed $1,000,000.

(c) Application of Certain Mandatory Prepayments . Any prepayments made by Borrower pursuant to clauses (b)(ii) or (b)(iii) , above shall be applied as follows: first , to Fees and reimbursable expenses of Agent then due and payable pursuant to any of the Loan Documents; second , to interest then due and payable on Equipment Advances and the Term Loan; third , to prepay the scheduled installments of the Borrower's Equipment Advances and Term Loan, ratably in inverse order of maturity, until such Equipment Advances and Term Loan shall have been prepaid in full; fourth , to interest then due and payable on Borrower's Swing Line Loan; fifth , to the principal balance of the Swing Line Loan outstanding to Borrower until the same shall have been repaid in full; sixth , to interest then due and payable on Revolving Credit Advances made to Borrower; and seventh , to the principal balance of Revolving Credit Advances outstanding to Borrower until the same shall have been paid in full. Neither the Revolving Loan Commitment nor the Swing Line Commitment shall be permanently reduced by the amount of any such prepayment.

(d) Application of Prepayments from Insurance Proceeds . Prepayments from insurance proceeds in accordance with Section 5.4(c) shall be applied as follows: insurance proceeds from casualties or losses to cash or Inventory shall be applied first to the Swing Line Loans and second to the Revolving Credit Advances; insurance proceeds from casualties or losses to Equipment, Fixtures and Real Estate shall be applied ratably to scheduled installments of the Equipment Advances and the Term Loan in inverse order of maturity. Neither the Revolving Loan Commitment nor the Swing Line Loan Commitment shall be permanently reduced by the amount of any such prepayments. If the precise amount of insurance proceeds allocable to Inventory as compared to Equipment, Fixtures and Real Estate are not otherwise determined, the allocation and application of those proceeds shall be determined by Agent, subject to the approval of Requisite Lenders.

(e) No Consent . Nothing in this Section 1.2 shall be construed to constitute Agent's or any Lender's consent to any transaction referred to in clauses (b)(ii) and (b)(iii) above which is not permitted by other provisions of this Agreement or the other Loan Documents.

1.3. Use of Proceeds .

Borrower shall utilize the proceeds of Equipment Advances and the Term Loan, the Revolving Loan and the Swing Line Advances solely to refinance the Existing Credit Facilities, for equipment purchases as specifically permitted under Section 1.1(b)(i) and for the financing of Borrower's ordinary working capital needs and future acquisitions permitted under this Agreement (but excluding in any event the making of any Restricted Payment not specifically permitted by Section 6. 14) .

1.4. Interest and Applicable Margins .

(a) Borrower shall pay interest to Agent, for the ratable benefit of Lenders in accordance with the various Loans being made by each Lender, in arrears on each applicable Interest Payment Date, at the following rates per annum: (i) with respect to the Revolving Credit Advances, the Prime Rate plus the Applicable Revolver Prime Margin or, at the election of Borrower, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin, or with respect to any BAR Loan the applicable Banker's Acceptance Rate plus the Applicable Revolver BAR Margin, based on the aggregate Revolving Credit Advances outstanding from time to time; (ii) with respect to the Term Loan, the Prime Rate plus the Applicable Term Loan Prime Margin or, at the election of Borrower, the applicable LIBOR Rate plus the Applicable Term Loan LIBOR Margin based on the aggregate principal amount of the Term Loan outstanding from time to time; (iii) with respect to the Equipment Line Advances, the Prime Rate plus the Applicable Equipment Line Prime Margin or, at the election of Borrower, the applicable LIBOR Rate plus the Applicable Equipment Line LIBOR Margin based on the aggregate Equipment Line Advances outstanding from time to time; and (iv) with respect to the Swing Line Loan, the Prime Rate, based on the aggregate principal amount of the Swing Line Loan outstanding from time to time.

As of the Closing Date, the Applicable Margins shall be as follows:

Applicable Revolver Prime Margin                     0.00%

Applicable Revolver LIBOR Margin                  1.00%

Applicable Revolver BAR Margin                      0.95%

Applicable Term Loan Prime Margin                  0.25%

Applicable Term Loan LIBOR Margin               1.25%

Applicable Equipment Line Prime Margin           0.25%

Applicable Equipment Line LIBOR Margin        1.25%

Applicable Unused Line Fee Margin                  0.20%

The Applicable Margins will be adjusted (up or down) prospectively on a Fiscal Quarterly basis as determined by Borrower's Ratio of Funded Debt to EBITDA for the previous four Fiscal Quarters then ending. The initial adjustment of the Applicable Margins shall be effective, commencing with the first day of the first calendar month that occurs more than five (5) days after delivery of Borrower's unaudited Financial Statements to Lenders for the Fiscal Quarter ending April 10, 2004. Adjustments in Applicable Margins will be determined by reference to the following grids:

 

 

 

All adjustments in the Applicable Margins for the Fiscal Quarters ending after April 10, 2004, will be implemented with respect to each Fiscal Quarter on a prospective basis, for each calendar month commencing at least five (5) days after the date of delivery to Lenders of the quarterly unaudited or annual audited (as applicable) Financial Statements of Borrower evidencing the need for an adjustment. Concurrently with the delivery of those Financial Statements, Borrower shall deliver to Agent and Lenders a certificate, signed by its chief financial officer, setting forth in reasonable detail the basis for the continuance of, or any change in, the Applicable Margins. Failure to timely deliver such Financial Statements shall, in addition to any other remedy provided for in this Agreement, result in an increase in the Applicable Margins to the highest level set forth in the foregoing grid, until the first day of the first calendar month following the delivery of those Financial Statements demonstrating that such an increase is not required. If a Default or Event of Default shall have occurred or be continuing at the time any reduction in the Applicable Margins is to be implemented, that reduction shall be deferred until the first day of the first calendar month following the date on which such Default or Event of Default is waived or cured.

(b) If any payment on any Loan becomes due and payable on a day other than a Business Day, the maturity thereof will be extended to the next succeeding Business Day (except as set forth in the definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

(c) All computations of Fees calculated on a per annum basis and interest shall be made by Agent on the basis of a three hundred sixty (360) day year for the actual number of days occurring in the period for which such interest and Fees are payable. The Prime Rate shall be determined each day based upon the Prime Rate as in effect each day. Each determination by Agent of an interest rate hereunder shall be conclusive, absent manifest error.

(d) So long as any Event of Default shall have occurred and be continuing, and at the election of Agent (or upon the written request of Requisite Lenders) confirmed by written notice from Agent to Borrower, the interest rates applicable to the Loans shall be increased by four percentage points (4%) per annum above the rates of interest or the rate of such Fees otherwise applicable hereunder ("Default Rate"), and all outstanding Obligations shall bear interest at the Default Rate applicable to such Obligations. Interest at the Default Rate shall accrue from the initial date of such Event of Default until that Event of Default is cured or waived and shall be payable upon demand. Borrower shall pay, upon billing therefor, a "Late Charge" equal to five percent (5%) of the amount of any payment of principal, other than principal due at the Commitment Termination Date, interest, or both, which is not paid within ten (10) days of the due date thereof. Late charges are: (i) payable in addition to, and not in limitation of, the Default Rate, (ii) intended to compensate Lenders for administrative and processing costs incident to late payments, (iii) are not interest, and (iv) shall not be subject to refund or rebate or credited against any other amount due.

(e) So long as no Default or Event of Default shall have occurred and be continuing, and subject to the additional conditions precedent set forth in Section 2.2 , Borrower shall have the option to (i) request that any Revolving Credit Advances or Equipment Line Advance be made as a LIBOR Loan, (ii) convert at any time all of the Term Loan or any Equipment Advance, or all or any part of outstanding Revolving Credit Advances from Prime Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to a Prime Rate Loan, subject to payment of LIBOR breakage costs in accordance with Section 1.12(b) if such conversion is made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue all of the Term Loan or any Equipment Advance or all or any portion of any Revolving Credit Advance as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan shall commence on the last day of the LIBOR Period of the Loan to be continued. Any Loan to be made or continued as, or converted into, a LIBOR Loan must be in a minimum amount of $500,000 and, with respect to Revolving Credit Advances, integral multiples of $50,000 in excess of such amount. Any such election must be made by 11:00 a.m. (Boston, Massachusetts time) on the second (2nd) Business Day prior to (1) the date of any proposed Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be continued as such, or (3) the date on which Borrower wishes to convert any Prime Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower in such election. If no election is received with respect to a LIBOR Loan by 11:00 a.m. (Boston, Massachusetts time) on the second (2nd) Business Day prior to the end of the LIBOR Period with respect thereto (or if a Default or an Event of Default shall have occurred and be continuing or if the additional conditions precedent set forth in Section 2.2 shall not have been satisfied), that LIBOR Loan shall be converted to a Prime Rate Loan at the end of its LIBOR Period. Borrower must make such election by notice to Agent in writing, by telecopy or overnight courier. In the case of any conversion or continuation, such election must be made pursuant to a written notice (a " Notice of Conversion/Continuation ") in the form of Exhibit 1.4(e) .

(f) So long as no Default or Event of Default shall have occurred and be continuing, and subject to the additional conditions precedent set forth in Section 2.2 , Borrower shall have the option to request that any Revolving Credit Advance be made as a BAR Loan to fund the issuance of a Banker's Acceptance. Any Revolving Credit Advance to be made as a BAR Loan must be in a minimum amount of $1,000,000 and integral multiples of $100,000 in excess of such amount. Any such election must be made by 11:00 a.m. (Boston, Massachusetts time) on the second (2nd) Business Day prior to the date of any proposed BAR Loan. If no election is received with respect to a BAR Loan by 11:00 a.m. (Boston, Massachusetts time) on the second (2nd) Business Day prior to the end of the BAR Period with respect thereto (or if a Default or an Event of Default shall have occurred and be continuing or if the additional conditions precedent set forth in Section 2.2 shall not have been satisfied), that BAR Loan shall be converted to a Prime Rate Loan at the end of its BAR Period. Borrower must make such election by notice to Agent in writing, by telecopy or overnight courier.

(g) Notwithstanding anything to the contrary set forth in this Section 1.4 , if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the " Maximum Lawful Rate "), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, however , that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of Lenders, is equal to the total interest which would have been received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of interest and in the manner provided in Sections 1.4(a) through (f) above, unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time this paragraph shall again apply. In no event shall the total interest received by any Lender pursuant to the terms hereof exceed the amount which such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. If, notwithstanding the provisions of this Section 1.4(g) , a court of competent jurisdiction shall finally determine that a Lender has received interest hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent permitted by applicable law, promptly apply such excess in the order specified in Section 1.10 and thereafter shall refund any excess to Borrower or as a court of competent jurisdiction may otherwise order.

1.5. [INTENTIONALLY LEFT BLANK] .

1.6. [INTENTIONALLY LEFT BLANK]

1.7. Cash Management Systems .

Borrower confirms its election to continue to use the cash management systems currently in place with Agent (the " Cash Management Systems ").

1.8. Fees .

(a) As additional compensation for the Revolving Lenders, Borrower agrees to pay to Agent, for the ratable benefit of such Lenders, in arrears, on the first Business Day of each calendar quarter prior to the Commitment Termination Date and on the Commitment Termination Date, a fee for Borrower's non-use of available funds in an amount equal to the Applicable Unused Line Fee Margin per annum (calculated on the basis of a 360 day year for actual days elapsed) of the difference between (x) the Maximum Amount (as it may be reduced from time to time) and (y) the average for the period of the daily closing balances of the aggregate Revolving Loan and the Swing Line Loan outstanding during the period for which such fee is due.

(b) As additional compensation for the Revolving Lenders, Borrower agrees to pay to Agent, for the ratable benefit of the Revolving Lenders, on the Closing Date an extension fee equal to 0.10% of the Revolving Loan Commitment.

(c) As additional compensation for the Term Lenders, Borrower agrees to pay to Agent, for the ratable benefit of the Term Lenders, on the Closing Date a commitment fee equal to 0.40% of the Term Loan Commitment.

(d) As additional compensation for the Equipment Line Lenders, Borrower agrees to pay to Agent, for the ratable benefit of the Equipment Line Lenders, on the Closing Date an extension fee in the amount of $2,500.00.

1.9. Receipt of Payments .

Borrower shall make each payment under this Agreement not later than 2:00 p.m. (Boston, Massachusetts time) on the day when due in immediately available funds in Dollars to the Agent unless Agent has automatically debited such payments against Borrower's account(s) with Agent. For purposes of computing interest and Fees and determining Borrowing Availability as of any date, all payments shall be deemed received on the day of receipt of immediately available funds therefore in the Collection Account prior to 2:00 p.m. Boston, Massachusetts time. Payments received after 2:00 p.m. Boston, Massachusetts time on any Business Day shall be deemed to have been received on the following Business Day.

1.10. Application and Allocation of Payments .

(a) So long as no Default or Event of Default shall have occurred and be continuing, (i) payments consisting of proceeds of Accounts received in the ordinary course of business shall be applied to the Swing Line Loan and the Revolving Loan; (ii) payments matching specific scheduled payments then due shall be applied to those scheduled payments; (iii) voluntary prepayments shall be applied as determined by Borrower, subject to the provisions of Section 1.2(a) ; and (iv) mandatory prepayments shall be applied as set forth in Section 1.2(c) . As to each other payment, and as to all payments made when a Default or Event of Default shall have occurred and be continuing or following the Commitment Termination Date, Borrower hereby irrevocably waives the right to direct the application of any and all payments received from or on behalf of Borrower, and Borrower hereby irrevocably agrees that Agent shall have the continuing exclusive right to apply any and all such payments against the Obligations of Borrower as Agent may deem advisable notwithstanding any previous entry by Agent in the Loan Account or any other books and records. In the absence of a specific determination by Agent with respect thereto, payments shall be applied to amounts then due and payable in the following order: (1) to Fees and Agent's expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to principal payments on the Swing Line Loan; (4) to interest on the other Loans, ratably in proportion to the interest accrued as to each Loan; (5) to principal payments on the other Loans ratably to the aggregate, combined principal balance of the other Loans; and (6) to all other Obligations including expenses of Lenders to the extent reimbursable under Section 11.3 .

(b) Agent is authorized to, and at its sole election may, charge to the Revolving Loan balance on behalf of Borrower and cause to be paid all Fees, expenses, Charges, costs (including insurance premiums in accordance with Section 5.4(a)) and interest and principal, other than principal of the Revolving Loan, owing by Borrower under this Agreement or any of the other Loan Documents if and to the extent Borrower fails to promptly pay any such amounts as and when due, even if such charges would cause the balance of the aggregate Revolving Loan and the Swing Line Loan to exceed Borrowing Availability. At Agent's option and to the extent permitted by law, any charges so made shall constitute part of the Revolving Loan hereunder.

1.11. Loan Account and Accounting .

Agent shall maintain a loan account (the " Loan Account ") on its books to record: all Advances and the Term Loans, all payments made by Borrower, and all other debits and credits as provided in this Agreement with respect to the Loans or any other Obligations. All entries in the Loan Account shall be made in accordance with Agent's customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded on Agent's most recent printout or other written statement, shall, absent manifest error, be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrower; provided that any failure to so record or any error in so recording shall not limit or otherwise affect Borrower's duty to pay the Obligations. Agent shall render to Borrower a monthly accounting of transactions with respect to the Loans setting forth the balance of the Loan Account. Unless Borrower notifies Agent in writing of any objection to any such accounting (specifically describing the basis for such objection), within thirty (30) days after the date thereof, each and every such accounting shall (absent manifest error) be deemed final, binding and conclusive upon Borrower in all respects as to all matters reflected therein. Only those items expressly objected to in such notice shall be deemed to be disputed by Borrower.

1.12. Indemnity .

(a) Borrower shall indemnify and hold harmless each of Agent, Lenders and their respective Affiliates, and each such Person's respective officers, directors, employees, attorneys, agents and representatives (each, an "Indemnified Person"), from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses (including reasonable attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) which may be instituted or asserted against or incurred by any such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents and the administration of such credit, and in connection with or arising out of the transactions contemplated hereunder and thereunder and any actions or failures to act in connection therewith, including any and all Environmental Liabilities and legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Loan Documents (collectively, " Indemnified Liabilities "); provided , that Borrower shall not be liable for any indemnification to an Indemnified Person to the extent that any such suit, action, proceeding, claim, damage, loss, liability or expense results from that Indemnified Person's gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

(b) To induce Lenders to provide the LIBOR Rate option on the terms provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to the last day of any applicable LIBOR Period (whether that repayment is made pursuant to any provision of this Agreement or any other Loan Document or is the result of acceleration, by operation of law or otherwise); (ii) Borrower shall default in payment when due of the principal amount of or interest on any LIBOR Loan; (iii) Borrower shall default in making any borrowing of, conversion into or continuation of LIBOR Loans after Borrower has given notice requesting the same in accordance herewith; or (iv) Borrower shall fail to make any prepayment of a LIBOR Loan after Borrower has given a notice thereof in accordance herewith, Borrower shall pay each Lender a Yield Maintenance Fee with respect to such prepayment and, but without duplication of the Yield Maintenance Fee, indemnify and hold harmless each Lender from and against all losses, costs and expenses resulting from or arising from any of the foregoing. Such indemnification shall include any loss (including loss of margin) or expense arising from the reemployment of funds obtained by it or from fees payable to terminate deposits from which such funds were obtained. For the purpose of calculating amounts payable to a Lender under this subsection, each Lender shall be deemed to have actually funded its relevant LIBOR Loan through the purchase of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount of that LIBOR Loan and having a maturity comparable to the relevant Interest Period; provided, however , that each Lender may fund each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be utilized only for the calculation of amounts payable under this subsection. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. As promptly as practicable under the circumstances, each Lender shall provide Borrower with its written calculation of all amounts payable pursuant to this Section 1.12(b) , and such calculation shall be binding on the parties hereto unless Borrower shall object in writing within ten (10) Business Days of receipt thereof, specifying the basis for such objection in detail.

1.13. Access .

Borrower shall, during normal business hours, from time to time upon three (3) Business Days' prior notice as frequently as Agent determines to be appropriate: (a) provide Agent and any of its officers, employees and agents access to its properties, facilities, advisors and employees (including officers) of Borrower and to the Collateral, (b) permit Agent, and any of its officers, employees and agents, to inspect, audit and make extracts from Borrower's books and records, and (c) permit Agent, and its officers, employees and agents, to inspect, review, evaluate and make test verifications and counts of the Accounts, Inventory and other Collateral of Borrower. If a Default or Event of Default shall have occurred and be continuing, each such Borrower shall provide such access to Agent and to each Lender at all times and without advance notice. Furthermore, so long as any Event of Default shall have occurred and be continuing, Borrower shall provide Agent and each Lender with access to their suppliers and customers. Borrower shall make available to Agent and its counsel, as quickly as is possible under the circumstances, originals or copies of all books and records which Agent may request. Borrower shall deliver any document or instrument necessary for Agent, as it may from time to time request, to obtain records from any service bureau or other Person which maintains records for Borrower, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by such Borrower consistent with past practices. Agent will give Lenders at least ten (10) days' prior written notice of regularly scheduled audits. Representatives of other Lenders may accompany Agent's representatives on regularly scheduled audits at no charge to Borrower.

1.14. Taxes .

(a) Any and all payments by Borrower hereunder or under the Notes shall be made, in accordance with this Section 1. 14 , free and clear of and without deduction for any and all present or future Taxes. If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under the Notes, (i) the sum payable shall be increased as much as shall be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 1. 14 ) Agent or Lenders, as applicable, receive an amount equal to the sum they would have received had no such deductions been made, (ii) Borrower shall make such deductions, and (iii) Borrower shall pay the full amount deducted to the relevant taxing or other authority in accordance with applicable law. Within thirty (30) days after the date of any payment of Taxes, Borrower shall furnish to Agent the original or a certified copy of a receipt evidencing payment thereof.

(b) Borrower shall indemnify and, within ten (10) days of demand therefor, pay Agent and each Lender for the full amount of Taxes (including any Taxes imposed by any jurisdiction on amounts payable under this Section 1. 14 ) paid by Agent or such Lender, as appropriate, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted.

1.15. Capital Adequacy: Increased Costs: Illegality .

(a) If any Lender shall have determined that the adoption after the date hereof of any law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or order regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law) from any central bank or other Governmental Authority increases or would have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender and thereby reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder, then Borrower shall from time to time upon demand by such Lender (with a copy of such demand to Agent) pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction. A certificate as to the amount of that reduction and showing the basis of the computation thereof submitted by such Lender to Borrower and to Agent shall, absent manifest error, be final, conclusive and binding for all purposes.

(b) If, due to the introduction of or any change in any law or regulation (or any change in the interpretation thereof), there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Loan, then Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to Agent), pay to Agent for the account of such Lender additional amounts sufficient to compensate such Lender for such increased cost. A certificate as to the amount of such increased cost, submitted to Borrower and to Agent by such Lender, shall be conclusive and binding on Borrower for all purposes, absent manifest error. Each Lender agrees that, as promptly as practicable after it becomes aware of any circumstances referred to above which would result in any such increased cost, the affected Lender shall, to the extent not inconsistent with such Lender's internal policies of general application, use reasonable commercial efforts to minimize costs and expenses incurred by it and payable to it by Borrower pursuant to this Section 1.15(b) .

(c) Notwithstanding anything to the contrary contained herein, if the introduction of or any change in any law or regulation (or any change in the interpretation thereof) shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain any LIBOR Loan or BAR Loan, then, unless that Lender is able to make or to continue to fund or to maintain such LIBOR Loan or BAR Loan at another branch or office of that Lender without, in that Lender's opinion, adversely affecting it or its Loans or the income obtained therefrom, on notice thereof and demand therefor by such Lender to Borrower through Agent, (i) the obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR Loans or BAR Loans shall terminate and (ii) Borrower shall forthwith prepay in full all outstanding LIBOR Loans or BAR Loans owing by Borrower to such Lender, together with interest accrued thereon, unless Borrower on behalf-of Borrower, within five (5) Business Days after the delivery of such notice and demand, converts all such affected Loans into a Loan bearing interest based on the Prime Rate.

(d) Within fifteen (15) days after receipt by Borrower of written notice and demand from any Lender (an " Affected Lender ") for payment of additional amounts or increased costs as provided in Sections 1.15(a) or 1.15(b) , Borrower may, at its option, notify Agent and such Affected Lender of its intention to replace the Affected Lender. So long as no Default or Event of Default shall have occurred and be continuing, Borrower, with the consent of Agent (which may not be unreasonably withheld or delayed), may obtain, at Borrower's expense, a replacement Lender (" Replacement Lender ") for the Affected Lender, which Replacement Lender must be satisfactory to Agent. If Borrower obtains a Replacement Lender within ninety (90) days following notice of their intention to do so, the Affected Lender must sell and assign its Loans and Commitments to such Replacement Lender for an amount equal to the principal balance of all Loans held by the Affected Lender and all accrued interest and Fees with respect thereto through the date of such sale, provided that Borrower shall have reimbursed such Affected Lender for the additional amounts or increased costs that it is entitled to receive under this Agreement through the date of such sale and assignment.

Notwithstanding the foregoing, Borrower shall not have the right to obtain a Replacement Lender if the Affected Lender rescinds its demand for increased costs or additional amounts within fifteen (15) days following its receipt of Borrower's notice of intention to replace such Affected Lender. Furthermore, if Borrower give a notice of intention to replace and do not so replace such Affected Lender within ninety (90) days thereafter, Borrower's rights under this Section 1.15(d) shall terminate and Borrower shall promptly pay all increased costs or additional amounts demanded by such Affected Lender pursuant to Sections 1.15(a) and 1.15(b) .

1.16. Single Loan .

All Loans to the Borrower and all of the other Obligations of Borrower arising under this Agreement and the other Loan Documents shall constitute one general obligation of the Borrower secured, until the Termination Date, by all of the Collateral.

1.17. Letters of Credit .

1.17.1. Letters of Credit . Subject to the terms and conditions hereof, including satisfaction of the conditions set forth in Section 2.2 hereof, and provided no Default has occurred and that the Agent is generally issuing letters of credit for the account of customers in its ordinary banking business, the Agent agrees upon the request of the Borrower pursuant to Section 1.17.2 hereof, to issue Letters of Credit, provided that: (a) the outstanding stated amount of the Letters of Credit shall not exceed $2,000,000; (b) the sum of (i) the outstanding stated amount of all Letters of Credit and (ii) the aggregate principal amount of all outstanding Revolving Line Advances shall not exceed the Maximum Amount; and (c) each Letter of Credit shall expire on or before ten (10) days prior to the Revolving Loan Commitment Termination Date.

1.17.2. Issuing a Letter of Credit . The Borrower may request that the Agent issue a Letter of Credit by written notice (the "L/C Notice") given to the Agent not less than two (2) Business Days prior to the proposed date of issuance of such Letter of Credit. The L/C Notice shall specify the proposed date of issuance and the beneficiary and amount of such Letter of Credit, and shall be accompanied by a letter of credit application completed to the satisfaction of, and with such amendments and modifications as may be deemed necessary by, the Agent.

1.17.3. Letter of Credit Participations .

(a) The Agent shall notify the Lenders on a monthly basis and report the issuance or any amendment or extension of any Letter of Credit. Immediately upon the issuance by the Agent of any Letter of Credit, the Agent shall be deemed to have sold to each Lender (each such Lender, in its capacity under this Section 1.17.3, an "L/C Participant"), and each such L/C Participant shall be deemed irrevocably and unconditionally to have purchased and received from the Agent, without recourse or warranty, an undivided interest and participation (each an "L/C Participation") equal to such L/C Participant's L/C Commitment in such Letter of Credit, any substitute Letter of Credit, each draw made thereunder and the obligations of the Borrower under the Loan Documents with respect thereto, and any security therefor or any pertaining thereto.

(b) In determining whether to pay under any Letter of Credit, the Agent shall have no obligation relative to the L/C Participants other than to confirm that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Agent under or in connection with any Letter of Credit, if taken or omitted to be taken in the absence of gross negligence or willful misconduct, shall not create for the Agent any resulting liability.

1.17.4. Reimbursement and Other Payments .

(a) The Borrower hereby agrees to pay to the Agent, for the ratable accounts of the Lenders, on the date on which the Agent shall be required to pay any draft presented under any Letter of Credit, a sum (the "Reimbursement Amount") equal to: (i) the amount so paid under such Letter of Credit, plus (ii) interest on any amount remaining unpaid by the Borrower to the Lenders under clause (i) from and including the date on which such amount becomes payable pursuant to clause (i) until payment in full, payable on demand, at a per annum rate of interest equal to the rate applicable to Revolving Credit Advances. If the Borrower shall fail to pay to the Agent the Reimbursement Amount on the date on which the Agent shall be required to pay any draft presented under any Letter of Credit, the Agent shall, to the extent the Borrower has availability to request a Revolving Credit Advance, consider such failure to be a request for a Revolving Credit Advance in the amount of the Reimbursement Amount. In the event any such Loan is made pursuant to this Section 1.17.4(a), the Agent shall notify each Lender of such Lender's Revolving Loan Commitment of such Loan, and such Lender shall make available promptly to the Agent the corresponding amount of such Loan, all in accordance with Section 1.1(a) hereof. The Borrower agrees that the Agent may make any such Loan, and each Lender agrees to deliver such Lender's Revolving Loan Commitment of such Loan, even if the making of such Loan causes the outstanding balance of all Loans to exceed the limits set forth in Section 1.1(a) hereof, and the Borrower further agree that the making of such Loan by the Agent in excess of the limits set forth in Section 1.1(a) hereof shall constitute an automatic Default hereunder, entitling the Agent and the Lenders to exercise all rights and remedies available to them under the Lender Documents and applicable law.

            (b)         The Borrower shall quarterly in arrears on the last day of each calendar quarter for the calendar quarter ending on such date, pay a fee (in each case, a "Letter of Credit Commission Fee") to the Agent in respect of each Letter of Credit issued, extended or renewed at the request of the Borrower equal to the face amount determined daily of each Letter of Credit multiplied by the Letter of Credit Commission Fee Rate per annum. The Agent shall, in turn, remit to each Lender its pro rata portion of such Letter of Credit Commission Fee. In addition, the Borrower shall pay to the Agent, for its own account, on the date of issuance, or any extension or renewal of any Letter of Credit and at such other time or times as such charges are customarily made by the Agent, the Agent's standard issuance, processing, negotiation, amendment and administrative fees, determined in accordance with customary fees and charges for similar facilities.

            (c)         If prior to the time a Loan would have otherwise been made pursuant to Section 1.17.4(a), one of the events described in Section 8.1(h) or (i) below shall have occurred and be continuing, each Lender shall, on the date such Loan was to have been made pursuant to the provisions of paragraph (a) above (the "Reimbursement Date"), purchase an undivided participating interest in an amount equal to (i) such Lender's Pro Rata Share of the Revolving Loan Commitment times (ii) the aggregate principal amount of the Reimbursement Amount then outstanding which was to have been repaid with such Loan (the "Letter of Credit Participation Amount"). On the Reimbursement Date, each Lender shall transfer to the Agent, in immediately available funds, such Lender's Letter of Credit Participation Amount and upon receipt thereof the Agent shall deliver to such Lender a Letter of Credit Loan Participation Certificate dated the date of the Lender's receipt of such funds and in such Letter of Credit Participation Amount.

            1.17.5. Obligations Absolute . The obligations of the Borrower with respect to the Letters of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances:

            (a)         any lack of validity or enforceability of the Letters of Credit or this Agreement;

            (b)         any amendment or waiver of or any consent to or actual departure from this Agreement;

            (c)         the existence of any claim, set-off, defense or other right which the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any persons or entities for which any such beneficiary or any such transferee may be acting), the Agent, the Lenders or any other person or entity, whether in connection with this Agreement, the transactions contemplated herein or in any other agents or any unrelated transaction;

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

            (e)         payment by the Agent under a Letter of Credit against presentation by the beneficiary thereof of a draft or certificate which does not comply with terms of such Letter of Credit; or

            (f)          any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

            1.17.6. The Uniform Customs and Practice . The Uniform Customs and Practice for Documentary Credits (ICC Publication No. 500) shall be binding on the Borrower and the Agent. The Borrower assume all risks of the acts or omissions of the beneficiary of each Letter of Credit with respect to such Letter of Credit. In furtherance of, and not in limitation of the Agent's rights and powers under the Uniform Customs and Practice, but subject to all other provisions of this Section 1.17.5, it is understood and agreed that the Agent shall not have any liability for, and that the Borrower assume all responsibility for: (a) the genuineness of any signature; (b) the form, correctness, validity, sufficiency, genuineness, falsification and legal effect of any draft, certification or other document required by a Letter of Credit or the authority of the person signing the same; (c) the failure of any instrument to bear any reference or adequate reference to a Letter of Credit or the failure of any persons to note the amount of any instrument on the reverse of a Letter of Credit or to surrender a Letter of Credit or otherwise to comply with the terms and conditions of a Letter of Credit; (d) the good faith or acts of any person other than the Agent and its agents and employees; (e) the existence, form, sufficiency or breach of or default under any agreement or instrument of any nature whatsoever; (f) any delay in giving or failure to give any notice, demand or protest; and (g) any error, omission, delay in or nondelivery of any notice or other communication, however sent. The determination as to whether the required documents are presented prior to the expiration of a Letter of Credit and whether such other documents are in proper and sufficient form for compliance with a Letter of Credit shall be made by the Agent in its sole discretion, which determination shall be conclusive and binding upon the Borrower. It is agreed that the Agent may honor, as complying with the terms of the Letters of Credit and this Agreement, any documents otherwise in order and signed or issued by the beneficiary thereof. Any action, inaction or omission on the part of the Agent under or in connection with the Letters of Credit or any related instruments or documents, if in good faith and in conformity with such laws, regulations or commercial or banking customs as the Agent may reasonably deem to be applicable, shall be binding upon the Borrower, shall not place the Agent or the Lenders under any liability to the Borrower, and shall not affect, impair or prevent the vesting of any of the Agent's or the Lenders' rights or powers hereunder or the Borrower' obligation to make full reimbursement.

            1.17.7. Modification, Consent, etc . If the Borrower, either in writing or orally, requests or consents to any modification or extension of a Letter of Credit or waives failure of any draft, certificate or other documents to comply with the terms of a Letter of Credit, the Agent shall be entitled to rely and shall be deemed to have relied on such request, consent or waiver with respect to any action taken or omitted by the Agent pursuant to any such request, consent or waiver, and such extension, modification or waiver binding upon the Borrower.

            1.17.8. Liability of the Agent and the Lenders . Neither the Agent, the Lenders nor any of their officers or directors shall be liable or responsible for: (a) the use which may be made of the Letters of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the Agent against presentation of documents which do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to a Letter of Credit; or (d) any other circumstances whatsoever in making or failure to make payment under a Letter of Credit, except that notwithstanding anything in this Section 1.17.7 to the contrary, the Borrower shall have a claim against the Agent, and the Agent shall be liable to the Borrower, to the extent but only to the extent, of any direct, as opposed to consequential, damages suffered by the Borrower which were caused by the Agent's failure to conform to the standards of the Uniform Customs and Practice. In furtherance and not in limitation of the foregoing, the Agent may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary. Nothing contained in this Section 1.17.8 shall affect the Agent's responsibilities under Section 1.17.8.

2.          CONDITIONS PRECEDENT; CONDITIONS SUBSEQUENT

2.1. Conditions to the Initial Loans .

No Lender shall be obligated to make any Loan on the Closing Date, or to take, fulfill, or perform any other action hereunder, until the following conditions have been satisfied or provided for in a manner satisfactory to Agent, or waived in writing by Agent on behalf of the Lenders:

(a) Credit Agreement: Loan Documents . This Agreement or counterparts hereof shall have been duly executed by, and delivered to, Borrower, Agent and Lenders; and Agent shall have received such documents, instruments, agreements and legal opinions as Agent shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, including all those listed in the Closing Checklist attached hereto as Annex B , each in form and substance satisfactory to Agent.

(b) Approvals . Agent shall have received (i) satisfactory evidence that the Borrower has obtained all required consents and approvals of all Persons including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Loan Documents or (ii) an officer's certificate in form and substance satisfactory to Agent affirming that no such consents or approvals are required.

(c) Payment of Fees . Borrower shall have paid the Fees required to be paid on the Closing Date, and shall have reimbursed Agent for all fees, costs and expenses of closing presented as of the Closing Date.

2.2. Further Conditions to Each Loan .

            Except as otherwise expressly provided herein, no Lender shall be obligated to fund any Loan, or convert or continue any Loan as a LIBOR Loan or BAR Loan, if, as of the date thereof:

(a) Any representation or warranty by Borrower contained herein or in any of the other Loan Documents shall be untrue or incorrect in any material respect as of such date, except to the extent that such representation or warranty expressly relates to an earlier date and except for changes therein expressly permitted or expressly contemplated by this Agreement; or

(b) Any event or circumstance having a Material Adverse Effect shall have occurred since the date hereof; or

(c) (i) Any Event of Default shall have occurred and be continuing or would result after giving effect to any Loan, or (ii) a Default shall have occurred and be continuing or would result after giving effect to any Loan, and Agent or Requisite Revolving Lenders shall have determined not to make any Loan so long as that Default is continuing; or

(d) After giving effect to any Advance, the outstanding principal amount of the aggregate Revolving Loan would exceed the Borrowing Availability; or

(e) After giving effect to any Swing Line Advance, the outstanding principal amount of the Swing Line Loan would exceed Swing Line Availability.

The request and acceptance by the Borrower of the proceeds of any Loan, or the conversion or continuation of any Loan into, or as, a LIBOR Loan or a BAR Loan, as the case may be, shall be deemed to constitute, as of the date of such request or acceptance, (i) a representation and warranty by Borrower that the conditions in this Section 2.2 have been satisfied and (ii) a reaffirmation by Borrower of the granting and continuance of Agent's Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.

 

3. REPRESENTATIONS AND WARRANTIES

To induce Lenders to make the Loans, the Borrower makes the following representations and warranties to Agent and each Lender, each and all of which shall survive the execution and delivery of this Agreement.

3.1. Corporate Existence; Compliance with Law .

Borrower (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) is duly qualified to conduct business and is in good standing in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification except where the failure to be so qualified would not have a Material Adverse Effect; (c) has the requisite corporate power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease and to conduct its business as now, heretofore and proposed to be conducted; (d) subject to specific representations set forth herein regarding Environmental Laws, has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct; (e) is in compliance with its charter and by-laws; and (f) subject to specific representations set forth herein regarding ERISA, Environmental Laws, tax and other laws, is in compliance with all applicable provisions of law, except where the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

3.2. Executive Offices; FEIN .

As of the Closing Date, the current location of Borrower's chief executive office and principal place of business is set forth in Disclosure Schedule (3.2) , and such location has not changed within the twelve (12) months preceding the Closing Date. In addition, Disclosure Schedule (3.2) lists the federal employer identification number of Borrower.

3.3. Corporate Power; Authorization; Enforceable Obligations .

The execution, delivery and performance by Borrower of the Loan Documents and the creation of all Liens provided for therein: (a) are within its corporate power; (b) have been duly authorized by all necessary or proper corporate, shareholder and other action; (c) do not contravene any provision of Borrower's charter, bylaws or partnership agreement; (d) do not violate any law or regulation, or any order or decree of any court or Governmental Authority; (e) do not conflict with or result in the breach or termination of, constitute a default under or accelerate or permit the acceleration of any performance required by, any indenture, instrument, mortgage, deed of trust, or any material lease or other agreement to which Borrower is a party or by which Borrower or any of its property is bound; (f) do not result in the creation or imposition of any Lien upon any of the property of Borrower other than those in favor of Agent, on behalf of itself and Lenders, pursuant to the Loan Documents; and (g) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in Section 2.1 (b) , all of which will have been duly obtained, made or complied with prior to the Closing Date. On or prior to the Closing Date, each of the Loan Documents shall have been duly executed and delivered by Borrower and each such Loan Document shall then constitute a legal, valid and binding obligation enforceable in accordance with its terms.

3.4. Financial Statements .

All Financial Statements concerning Borrower which are referenced below have been prepared in accordance with GAAP consistently applied throughout the periods covered (except as disclosed therein and except, with respect to unaudited Financial Statements, for the absence of footnotes and normal year-end audit adjustments) and present fairly in all material respects the financial position of Borrower as at the dates thereof and the results of its operations and cash flows for the periods then ended. The following Financial Statements attached hereto as Disclosure Schedule (3.4(A)) have been delivered on the date hereof:

(i) The audited consolidated balance sheet of Borrower as of September 27, 2003 and the related statements of income and cash flows of the Borrower for its Fiscal Year then ended.

(ii) The unaudited balance sheet at April 10, 2004 of the Borrower and the related statement(s) of income and cash flows of the Borrower for the period then ended.

3.5. Material Adverse Effect .

Between the date of the most recent financial statements of the Borrower delivered to the Agent (the "Financial Statement Date") and the Closing Date, (a) Borrower has not incurred any obligations, contingent or non-contingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term commitments which are not reflected in such financial statements and which, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (b) no contract, lease or other agreement or instrument has been entered into by Borrower or has become binding upon Borrower's assets and no law or regulation applicable to Borrower has been adopted which has had or could reasonably be expected to have a Material Adverse Effect, and (c) Borrower is not in default and to the best of Borrower' knowledge no third party is in default under any material contract, lease or other agreement or instrument, which alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Between the Financial Statement Date and the Closing Date no event has occurred, which alone or together with other events, could reasonably be expected to have a Material Adverse Effect.

3.6. Ownership of Property: Liens .

As of the Closing Date, the real estate ("Real Estate") listed on Disclosure Schedule (3.6) constitutes all of the real property owned, leased, subleased, or used by Borrower. Borrower has good and marketable fee simple title to all of its owned real estate (subject to recorded easements and other matters of record), and valid and marketable leasehold interests in all of its leased Real Estate, all as described on Disclosure Schedule (3.6) , and copies of all such leases or a summary of terms thereof satisfactory to Agent have been delivered to Agent. Disclosure Schedule (3.6) further describes any Real Estate with respect to which Borrower is a lessor, sublessor or assignor as of the Closing Date. Borrower also has good and marketable title to, or valid leasehold interests in, all of its personal properties and assets. As of the Closing Date, none of the properties and assets of Borrower are subject to any Liens other than Permitted Encumbrances, and there are no facts, circumstances or conditions known to Borrower that may result in any Liens (including Liens arising under Environmental Laws) other than Permitted Encumbrances. Borrower has received all deeds, assignments, waivers, consents, non-disturbance and recognition or similar agreements, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect Borrower's right, title and interest in and to all such Real Estate and other properties and assets. Disclosure Schedule (3.6) also describes any purchase options, rights of first refusal or other similar contractual rights pertaining to any Real Estate. As of the Closing Date, no portion of Borrower's Real Estate has suffered any material damage by fire or other casualty loss which has not heretofore been repaired and restored in all material respects to its original condition or otherwise remedied. As of the Closing Date, all material permits required to have been issued to enable the Real Estate to be lawfully occupied and used for all of the purposes for which they are currently occupied and used have been lawfully issued and are in full force and effect.

3.7. Labor Matters .

As of the Closing Date (a) no strikes or other material labor disputes against Borrower are pending or, to Borrower's knowledge, threatened; (b) hours worked by and payment made to employees of Borrower comply with the Fair Labor Standards Act and each other federal, state, local or foreign law applicable to such matter; (c) all payments due from Borrower for employee health and welfare insurance have been paid or accrued as a liability on the books of Borrower; (d) except as set forth in Disclosure Schedule (3.7) , Borrower is not a party to or bound by any collective bargaining agreement, management agreement, consulting agreement or any employment agreement (and true and complete copies of any agreements described on Disclosure Schedule (3.7) have been delivered to Agent); (e) there is no organizing activity involving Borrower pending or, to Borrower's knowledge, threatened by any labor union or group of employees; (f) there are no representation proceedings pending or, to Borrower's knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of Borrower has made a pending demand for recognition; and (g) except as set forth in Disclosure Schedule (3.7) , there are no complaints or charges against Borrower pending or, to the knowledge of Borrower, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment by Borrower of any individual.

            3.8. Ventures, Indebtedness .

Except as set forth in Disclosure Schedule (3.8) , Borrower does not have any Subsidiaries, is not engaged in any joint venture or partnership with any other Person, or is an Affiliate of any Person. As of the Closing Date, the Borrower has no Indebtedness or Guaranteed Indebtedness except as set forth in Section 6.3 and Disclosure Schedule (6.3) .

3.9. Government Regulation .

Borrower is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, as amended, or any other federal or state statute that restricts or limits its ability to incur Indebtedness or to perform its obligations hereunder. The borrowings by Borrower, and the application of the proceeds thereof and repayment thereof will not violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission applicable to Borrower.

3. 10. Margin Regulations .

Borrower is not engaged, nor will it engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin security" as such terms are defined in Regulation U or G of the Federal Reserve Board as now and from time to time hereafter in effect (such securities being referred to herein as "Margin Stock"). Borrower does not own any Margin Stock, and none of the proceeds of the Loans or other extensions of credit under this Agreement will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry any Margin Stock or for any other purpose which might cause any of the Loans or other extensions of credit under this Agreement to be considered a "purpose credit" within the meaning of Regulation G, T, U or X of the Federal Reserve Board. Borrower will not take or permit to be taken any action which might cause any Loan Document to violate any regulation of the Federal Reserve Board.

3.11. Taxes .

All tax returns, reports and statements, including information returns, required by any Governmental Authority to be filed by Borrower have been filed with the appropriate Governmental Authority and all Charges have been paid prior to the date on which any fine, penalty, interest or late charge may be added thereto for nonpayment thereof (or any such fine, penalty, interest, late charge or loss has been paid), excluding Charges or other amounts being contested in accordance with Section 5.2(b) . Proper and accurate amounts have been withheld by Borrower from its employees for all periods in full and complete compliance with all applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective Governmental Authorities. None of Borrower's tax returns are currently being audited by the IRS or any other applicable Governmental Authority and no assessments or threatened assessments are currently outstanding. Borrower has not executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges. None of the Borrower and its predecessors are liable for any Charges: (a) under any agreement (including any tax sharing agreements) or (b) to Borrower's knowledge, as a transferee. As of the Closing Date, Borrower has not agreed or been requested to make any adjustment under IRC Section 481(a), by reason of a change in accounting method or otherwise, which would have a Material Adverse Effect.

3.12. ERISA .

(a) Disclosure Schedule (3.12) lists and separately identifies all Title IV Plans, Multiemployer Plans, ESOPs and Retiree Welfare Plans. Each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, and the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred which would cause the loss of such qualification or tax-exempt status. Each Plan is in compliance with the applicable provisions of ERISA and the IRC, including the filing of reports required under the IRC or ERISA. Neither Borrower nor any ERISA Affiliate has failed to make any contribution or pay any amount due as required by either Section 4~12 of the IRC or Section 302 of ERISA or the terms of any such Plan. Neither Borrower nor any ERISA Affiliate has engaged in a prohibited transaction, as defined in Section 4975 of the IRC, in connection with any Plan, which would subject Borrower to a material tax on prohibited transactions imposed by Section 4975 of the IRC.

(b) Except as set forth in Disclosure Schedule (3.12) : (i) no Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is reasonably expected to occur; (iii) there are no pending, or to the knowledge of Borrower, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan; (iv) neither Borrower nor any ERISA Affiliate has incurred or reasonably expects to incur any liability as a result of a complete or partial withdrawal from a Multiemployer Plan; (v) within the last five years no Title IV Plan with Unfunded Pension Liabilities has been transferred outside of the "controlled group" (within the meaning of Section 4001 (a)(14) of ERISA) of Borrower or any ERISA Affiliate; and (vi) no liability under any Title IV Plan has been satisfied with the purchase of a contract from an insurance company that is not rated AAA by the Standard & Poor's Corporation or the equivalent by another nationally recognized rating agency.

3.13. No Litigation .

No action, claim, lawsuit, demand, investigation or proceeding is now pending or, to the knowledge of Borrower, threatened against Borrower, before any Governmental Authority or before any arbitrator or panel of arbitrators (collectively, " Litigation "), (a) which challenges Borrower's right or power to enter into or perform any of its obligations under the Loan Documents to which it is a party, or the validity or enforceability of any Loan Document or any action taken thereunder, or (b) which has a reasonable risk of being determined adversely to Borrower and which, if so determined, could reasonably be expected to have a Material Adverse Effect. As of the Closing Date there is no Litigation pending or threatened which seeks damages in excess of $25,000 or injunctive relief or alleges criminal misconduct of Borrower.

 

3.14. Brokers .

No broker or finder acting on behalf of Borrower brought about the obtaining, making or closing of the Loans or the Related Transactions, and Borrower does not have any obligation to any Person in respect of any finder's or brokerage fees in connection therewith.

3.15. Intellectual Property .

As of the Closing Date, Borrower owns or has rights to use all Intellectual Property necessary to continue to conduct its business as now or heretofore conducted by it or proposed to be conducted by it, and each Patent, Trademark, Copyright and each material License is listed, together with application or registration numbers, as applicable, in Disclosure Schedule (3. 15) hereto. To the best of its knowledge, Borrower conducts its business and affairs without infringement of or interference with any Intellectual Property of any other Person.

3.16. First Priority .

            The Liens granted to Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents will at all times be fully perfected first priority Liens in and to the Collateral described therein, subject, as to priority, only to Permitted Encumbrances with respect to the Collateral other than Accounts.

3.17. Environmental Matters .

(a) As of the Closing Date: (i) to the best of Borrower's knowledge, the Real Estate is free of contamination from any Hazardous Material except for such contamination that would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect; (ii) Borrower has not caused or suffered to occur any Release of Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, except for such Releases as would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect; (iii) Borrower is and has been in compliance with all Environmental Laws, except for such noncompliance which would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect; (iv) Borrower has obtained, and is in compliance with, all Environmental Permits required by Environmental Laws for the operations of their respective businesses as presently conducted or as proposed to be conducted, except where the failure to so obtain or comply with such Environmental Permits would not result in Environmental Liabilities which could reasonably be expected to have a Material Adverse Effect, and all such Environmental Permits are valid, uncontested and in good standing; (v) Borrower is not involved in operations or knows of any facts, circumstances or conditions, including any Releases of Hazardous Materials, that are likely to result in any Environmental Liabilities of such Borrower which could reasonably be expected to have a Material Adverse Effect, and Borrower has not permitted any current or former tenant or occupant of the Real Estate to engage in any such operations; (vi) there is no Litigation arising under or related to any Environmental Laws, Environmental Permits or Hazardous Material which seeks damages, penalties, fines, costs or expenses in excess of $25,000 or injunctive relief, or which alleges criminal misconduct by Borrower; (vii) no notice has been received by Borrower identifying it as a "potentially responsible party" or requesting information under CERCLA or analogous state statutes, and to the knowledge of Borrower, there are no facts, circumstances or conditions that may result in Borrower being identified as a "potentially responsible party" under CERCLA or analogous state statutes; and (viii) Borrower has provided to Agent copies of all existing environmental reports and audits in their possession pertaining to actual or potential Environmental Liabilities, in each case relating to any Real Estate.

(b) Borrower hereby acknowledges and agrees that Agent (i) is not now, and has not ever been, in control of any of the Real Estate or any of Borrower's affairs, and (ii) does not have the capacity through the provisions of the Loan Documents or otherwise to influence Borrower's conduct with respect to the ownership, operation or management of any of its Real Estate or compliance with Environmental Laws or Environmental Permits.

3.18. Insurance .

Disclosure Schedule (3. 18) lists all insurance policies of any nature maintained, as of the Closing Date, for current occurrences by Borrower, as well as a summary of the terms of each such policy.

3. 19. Deposit and Disbursement Accounts .

Disclosure Schedule (3.19) lists all banks and other financial institutions at which Borrower maintains deposits and/or other accounts as of the Closing Date, including any Disbursement Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number.

3.20. Government Contracts .

Borrower is not a party to any contract or agreement with any Governmental Authority and no Borrower's Accounts are subject to the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727), or any similar state or local law.

3.21. Customer and Trade Relations .

There exists no actual or, to the knowledge of Borrower, threatened termination or cancellation of, or any material adverse modification or change in: the business relationship of, Borrower with any customer or group of customers whose purchases during the preceding twelve (12) months caused them to be ranked among the ten (10) largest customers of Borrower; or the business relationship of Borrower with any supplier material to its operations.

3.22. Agreements and Other Documents .

As of the Closing Date, Borrower has provided to Agent or its counsel, on behalf of Lenders, accurate and complete copies (or summaries) of all of the following agreements or documents to which any it is subject and each of which are listed on Disclosure Schedule (3.22) : supply agreements and purchase agreements not terminable by Borrower within sixty (60) days following written notice issued by Borrower and involving transactions in excess of $1,000,000 per annum; any lease of Equipment having a remaining term of one year or longer and requiring aggregate rental and other payments in excess of $500,000 per annum; licenses and permits held by the Borrower, the absence of which could be reasonably likely to have a Material Adverse Effect; instruments or documents evidencing Indebtedness of Borrower and any security interest granted by Borrower with respect thereto; and instruments and agreements evidencing the issuance of any equity securities, warrants, rights or options to purchase equity securities of Borrower.

3.23. Solvency .

Both before and after giving effect to (a) the Loans to be made or extended on the Closing Date or such other date as Loans requested hereunder are made or extended, (b) the disbursement of the proceeds of such Loans pursuant to the instructions of Borrower, and (c) the payment and accrual of all transaction costs in connection with the foregoing, Borrower is Solvent.

 

4. FINANCIAL STATEMENTS AND INFORMATION

4.1. Reports and Notices .

(a) Borrower hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent and/or Lenders, as required, the Financial Statements, notices, projections and other information at the times, to the Persons and in the manner set forth in Annex C .

(b) Borrower hereby agrees that from and after the Closing Date and until the Termination Date, it shall deliver to Agent and/or Lenders, as required, the various Collateral Reports at the times, to the Persons and in the manner set forth in Annex D .

4.2. Communication with Accountants .

Borrower authorizes Agent and, so long as a Default or Event of Default shall have occurred and be continuing, each Lender, to communicate directly with its independent certified public accountants, and authorizes and shall instruct those accountants and advisors to disclose and make available to Agent and each Lender any and all Financial Statements and other supporting financial documents, schedules and information relating to Borrower (including copies of any issued management letters) with respect to the business, financial condition and other affairs of Borrower in a manner consistent with the policies of such accountants and advisors.

 

5. AFFIRMATIVE COVENANTS

Borrower agrees that from and after the date hereof and until the Termination Date:

5.1. Maintenance of Existence and Conduct of Business .

Borrower shall: do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises; continue to conduct its business substantially as now conducted or as otherwise permitted hereunder; at all times maintain, preserve and protect all of its assets and properties used or useful in the conduct of its business, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices; and transact business only in such corporate and trade names as are set forth in Disclosure Schedule (5.1) .

5.2. Payment of Obligations .

(a) Subject to Section 5.2(b) , Borrower shall pay and discharge or cause to be paid and discharged promptly all Charges payable by it, including (A) Charges imposed upon it, its income and profits, or any of its property (real, personal or mixed) and all Charges with respect to tax, social security and unemployment withholding with respect to its employees, and (B) lawful claims for labor, materials, supplies and services or otherwise, before any thereof shall become past due.

(b) Borrower may in good faith contest, by appropriate proceedings, the validity or amount of any Charges or claims described in Section 5.2(a) ; provided, that (i) at the time of commencement of any such contest no Default or Event of Default shall have occurred and be continuing, (ii) adequate reserves with respect to such contest are maintained on the books of Borrower, in accordance with GAAP, (iii) such contest is maintained and prosecuted continuously and with diligence and operates to suspend collection or enforcement of such Charges or claims or any Lien in respect thereof, (iv) none of the Collateral becomes subject to forfeiture or loss as a result of such contest, (v) no Lien shall be imposed to secure payment of such Charges or claims other than Permitted Encumbrances, (vi) Borrower shall promptly pay or discharge such contested Charges or claims and all additional charges, interest, penalties and expenses, if any, and shall deliver to Agent evidence acceptable to Agent of such compliance, payment or discharge, if such contest is terminated or discontinued adversely to Borrower or the conditions set forth in this Section 5.2(b) are no longer met, and (vii) Agent has not advised Borrower in writing that Agent reasonably believes that nonpayment or nondischarge thereof could have or result in a Material Adverse Effect.

5.3. Books and Records .

Borrower shall keep adequate books and records with respect to its business activities in which proper entries, reflecting all financial transactions, are made in accordance with GAAP and on a basis consistent with the Financial Statements attached as Disclosure Schedule (3.4(A)).

5.4. Insurance: Damage to or Destruction of Collateral .

(a) The Borrower shall, at its sole cost and expense, maintain the policies of insurance described on Disclosure Schedule (3.18) as in effect on the date hereof in form and with insurers acceptable to Agent. If Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay all premiums relating thereto, Agent may at any time or times thereafter obtain and maintain such policies of insurance and pay such premiums and take any other action with respect thereto which Agent deems advisable. Agent shall have no obligation to obtain insurance for Borrower or pay any premiums therefor. By doing so, Agent shall not be deemed to have waived any Default or Event of Default arising from Borrower's failure to maintain such insurance or pay any premiums therefor. All sums so disbursed, including attorneys' fees, court costs and other charges related thereto, shall be payable on demand by Borrower to Agent and shall be additional Obligations hereunder secured by the Collateral.

(b) Agent reserves the right at any time upon any material change in Borrower's risk profile (including any change in the product mix maintained by Borrower or any laws affecting the potential liability of Borrower) to require additional forms and limits of insurance to, in Agent's reasonable opinion, adequately protect both Agent's and Lender's interests in all or any portion of the Collateral and to ensure that Borrower is protected by insurance in amounts and with coverage customary for its industry. If requested by Agent, Borrower shall deliver to Agent from time to time a report of a reputable insurance broker, reasonably satisfactory to Agent, with respect to its insurance policies.

(c) Borrower shall deliver to Agent, in form and substance satisfactory to Agent, endorsements to (i) all "All Risk" and business interruption insurance naming Agent, on behalf of itself and Lenders, as loss payee, and (ii) all general liability and other liability policies naming Agent, on behalf of itself and Lenders, as additional insured. Borrower irrevocably makes, constitutes and appoints Agent (and all officers, employees or agents designated by Agent), so long as any Default or Event of Default shall have occurred and be continuing, as Borrower's true and lawful agent and attorney-in-fact for the purpose of making, settling and adjusting claims under such "All Risk" policies of insurance, endorsing the name of Borrower on any check or other item of payment for the proceeds of such "All Risk" policies of insurance and for making all determinations and decisions with respect to such "All Risk" policies of insurance. Agent shall have no duty to exercise any rights or powers granted to it pursuant to the foregoing power-of-attorney. Borrower shall promptly notify Agent of any loss, damage, or destruction to the Collateral in the amount of $50,000 or more, whether or not covered by insurance. After deducting from such proceeds the expenses, if any, incurred by Agent in the collection or handling thereof, Agent may, at its option, apply such proceeds to the reduction of the Obligations in accordance with Section 1.3(d) , or permit or require the Borrower to use such money, or any part thereof, to replace, repair, restore or rebuild the Collateral in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the loss, damage or destruction. Notwithstanding the foregoing, (a) if the casualty giving rise to such insurance proceeds would not reasonably be expected to have a Material Adverse Effect and such insurance proceeds do not exceed $50,000.00 in the aggregate, Agent shall permit the Borrower to replace, restore, repair or rebuild the property, and (b) if the casualty giving rise to such insurance proceeds would not reasonably be expected to have a Material Adverse Effect and such insurance proceeds exceed $50,000.00 in the aggregate, Agent shall permit the Borrower to replace, restore, repair or rebuild the property, provided that if Borrower shall not have completed such replacement, restoration, repair or rebuilding within 360 days of such casualty, Agent may apply such insurance proceeds to the Obligations in accordance with Section 1.3(d) . All insurance proceeds which are to be made available to Borrower to replace, repair, restore or rebuild the Collateral shall be applied by Agent to reduce the outstanding principal balance of the Revolving Loan of Borrower (which application shall not result in a permanent reduction of the Revolving Loan Commitment) and upon such application, Agent shall establish a reserve in an amount equal to the amount of such proceeds so applied or a cash collateral account subject to a Control Letter. Thereafter, such funds shall be made available to that Borrower to provide funds to replace, repair, restore or rebuild the Collateral as follows: (i) Borrower shall request a Revolving Credit Advance or a release from such cash collateral account be made to such Borrower in the amount requested to be released; (ii) so long as the conditions set forth in Section 2.2 have been met, Revolving Lenders shall make such Revolving Credit Advance or release from such cash collateral account; and (iii) the reserve established with respect to such insurance proceeds shall be reduced by the amount of such Revolving Credit Advance. To the extent not used to replace, repair, restore or rebuild the Collateral, such insurance proceeds shall be applied in accordance with Section 1.2(d) .

5.5. Compliance with Laws .

Borrower shall comply with all federal, state, local and foreign laws and regulations applicable to it, including without limitation those relating to licensing, ERISA and labor matters, except to the extent that the failure to comply, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

5.6. Supplemental Disclosure .

From time to time as may be requested by Agent (which request will not be made more frequently than once each year absent the occurrence and continuance of a Default or an Event of Default), the Borrower shall supplement each Disclosure Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in such Disclosure Schedule or as an exception to such representation or which is necessary to correct any information in such Disclosure Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to show the changes made therein); provided that (a) no such supplement to any such Disclosure Schedule or representation shall be or be deemed a waiver of any Default or Event of Default resulting from the matters disclosed therein, except as consented to by Agent and Requisite Lenders in writing; and (b) no supplement shall be required as to representations and warranties that relate solely to the Closing Date.

5.7. Intellectual Property .

Borrower will use its best efforts to conduct its business and affairs without infringement of or interference with any Intellectual Property of any other Person which could reasonably be expected to have a Material Adverse Effect.

5.8. Environmental Matters .

Borrower shall and shall cause each Person within its control to: (a) conduct its operations and keep and maintain its Real Estate in compliance with all Environmental Laws and Environmental Permits other than noncompliance which could not reasonably be expected to have a Material Adverse Effect; (b) implement any and all investigation, remediation, removal and response actions which are necessary to comply with Environmental Laws and Environmental Permits pertaining to the presence, generation, treatment, storage, use, disposal, transportation or Release of any Hazardous Material on, at, in, under, above, to, from or about any of its Real Estate; (c) notify Agent promptly after Borrower becomes aware of any violation of Environmental Laws or Environmental Permits or any Release on, at, in, under, above, to, from or about any Real Estate which is reasonably likely to result in Environmental Lia