THIRD AMENDED AND RESTATED LOAN AGREEMENT

Exhibit 10.27

EXECUTION VERSION

THIRD AMENDED AND RESTATED LOAN AGREEMENT

by and among

Q.E.P. CO., INC.

THE ENTITIES LISTED ON SCHEDULE 1 HERETO

(collectively, “Borrower”),

BANK OF AMERICA, N.A.,

HSBC BANK USA, NATIONAL ASSOCIATION, successor-by-merger to

HSBC BANK USA,

(collectively, “Lenders,” and individually a “Lender”)

and

BANK OF AMERICA, N.A.,

AS AGENT FOR THE LENDERS

(“Agent”)

Dated as of December 30, 2008

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

Schedules

Schedule 1 – List of Borrowers

Schedule 2 – Commitments and Lender Addresses

Schedule 2.23 – Existing Letters of Credit

Schedule 4.4 – Debt

Schedule 4.6 – Litigation

Schedule 4.8 – Title to Assets

Schedule 4.9 – Subsidiaries

Schedule 4.13 – Capital Stock

Schedule 4.20 – Environmental Compliance

Schedule 4.25 – Canadian Pension Plan

Schedule 6.1 – Liens Foreign Companies

Schedule 6.4 – Leases

Schedule 6.6 – Permissible Restricted Payments

Schedule 6.9 – Guaranties

Schedule 6.11 – Subsidiaries with Net Worth Exception

 

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Exhibits

Exhibit A – Form of Revolving Credit Note

Exhibit B – Mortgage Note

Exhibit C – Roberts Guaranty

 

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EXECUTION VERSION

THIRD AMENDED AND RESTATED LOAN AGREEMENT (“ Agreement ”), dated as of December 30, 2008, by and between Q.E.P. CO., INC. , a Delaware corporation with its chief executive office and principal place of business at 1001 Broken Sound Parkway, NW, Suite A, Boca Raton, Florida 33487 (“ QEP ”), ROBERTS CONSOLIDATED INDUSTRIES, INC. , a Delaware corporation with its chief executive office and principal place of business at 1001 Broken Sound Parkway, NW, Suite A, Boca Raton, Florida 33487, ROBERTS HOLDING INTERNATIONAL, INC. , a Delaware corporation with its chief executive office and principal place of business at 1001 Broken Sound Parkway, NW, Suite A, Boca Raton, Florida 33487, ROBERTS COMPANY CANADA LIMITED , a corporation amalgamated under the laws of the province of Ontario, Canada with its chief executive office and principal place of business at 2070 Steeles Avenue, Bramalea, Ontario, Canada L6T1A7, Q.E.P. ZOCALIS HOLDING L.L.C. , a Delaware limited liability company with a place of business at 1001 Broken Sound Parkway, NW, Suite A, Boca Raton, Florida 33487, BOIARDI PRODUCTS CORPORATION , a Florida corporation, with its chief executive office and principal place of business at 1001 Broken Sound Parkway, NW, Suite A, Boca Raton, Florida 33487, ROBERTS CAPITOL, INC. , a Florida corporation with a chief executive office and principal place of business at 1001 Broken Sound Parkway, NW, Suite A, Boca Raton, Florida 33487, QEP-CALIFORNIA, INC. , a California corporation with its chief executive office and principal place of business at 1001 Broken Sound Parkway, NW, Suite A, Boca Raton, Florida 33487 and Q.E.P. STONE HOLDINGS, INC ., a Florida corporation with its chief executive office and principal place of business at 1001 Broken Sound Parkway, NW, Suite A, Boca Raton, Florida 33487 (all of the foregoing are hereinafter collectively referred to as, the “ Borrower ”), BANK OF AMERICA, N.A., (“BOA”) and HSBC BANK USA, NATIONAL ASSOCIATION, successor-by-merger to HSBC BANK USA (“HSBC” and together with BOA, the “Lenders” and each individually a “ Lender ” ) , and BANK OF AMERICA, N.A., with an office at 2150 Black Rock Turnpike, Fairfield, Connecticut 06825, as agent for the Lenders, (hereinafter referred to as the “Agent” ).

W I T N E S S E T H:

Borrower, Fleet Capital Corporation, and HSBC Bank USA entered into a Second Amended and Restated Loan Agreement dated as of November 14, 2002 (as amended from time to time, the “ Second Amended and Restated Loan Agreement ”). Borrower has requested, among other things, that BOA and HSBC continue to extend certain credit accommodations to Borrower. In furtherance thereof, Borrower, the Lenders, and the Agent desire to amend and restate the Second Amended and Restated Loan Agreement in its entirety as hereinafter set forth.

NOW, THEREFORE, in consideration of these premises and the covenants and agreements herein contained, Borrower, the Lenders and the Agent agree as follows:

ARTICLE 1

DEFINITIONS AND ACCOUNTING TERMS

Section 1.1 Defined Terms . The following capitalized terms are used in this Agreement with the respective meanings set forth in this Section 1.1 . Terms defined in the singular shall have the same meaning when used in the plural, and vice versa.

“Account Debtor” means any Person who is or may become obligated to Borrower on or under a Receivable.

“Affiliate” means any Person: (1) that, directly or indirectly, controls, is controlled by, or is under common control with, Borrower; (2) that is a shareholder, officer, or director of Borrower or of any Person that, directly or indirectly, controls, is controlled by, or is under common control with, Borrower, together with, in each case, their respective relatives (whether by blood or marriage), heirs, executors, administrators, personal representatives, successors, and assigns; and (3) any trust of which any of the foregoing Persons is a settlor, trustee, or beneficiary. For the purposes of this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise; and “controlled” shall have the meaning correlative thereto.

“Agent” means BOA, in its representative capacity as agent for the Lenders.

“Agreement” means this Third Amended and Restated Loan Agreement, as amended, supplemented, or modified and in effect from time to time.

“Alternative Currency” means Euros, Canadian Dollars or any lawful currency other than dollars mutually agreed to by the Agent and Borrower which is freely transferable and convertible into dollars.

“Available Amount” means the maximum aggregate amount from time to time that beneficiaries may draw under outstanding Letters of Credit, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit.

“BOA” means that term as defined in the preamble herein.

“Borrower” means that term as defined in the preamble herein.

“Borrowing Base” means, at the relevant time of reference, the amount which is equal to (i) 85% of Eligible Accounts Receivable, plus (ii) the lesser of (a) the sum of (1) 44% of Eligible Raw Materials Inventory of Q.E.P. Co. Inc., Roberts Consolidated Industries, Inc., Roberts Holding International, Inc., Roberts Company Canada Limited and Roberts Capitol, Inc., plus (2) 65% of Eligible Finished Goods Inventory of Q.E.P. Co. Inc., Roberts Consolidated Industries, Inc., Roberts Holding International, Inc., Roberts Company Canada Limited and Roberts Capitol, Inc.; plus (3) 26% of Eligible Raw Materials Inventory of

 

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Boiardi Products Corporation, plus (4) 51% of Eligible Finished Goods Inventory of Boiardi Products Corporation, or (b) $17,000,000, provided that the Required Lenders may, in their sole discretion, at any time and from time to time upon three (3) Business Days’ prior written notice (unless a Default or an Event of Default shall have occurred and be continuing, in which event no such notice shall be required), adjust the advance rates set forth within this definition of “Borrowing Base”.

“Borrowing Base Certificate” means that term as defined in Section 5.8(d) .

“Borrowing Request” means that term as defined in Section 2.4 .

“Business Day” means a day other than a Saturday, Sunday, or other day on which banks in the States of Connecticut, Florida or New York are required or authorized by law to be closed provided , however , that when used in connection with a LIBOR Rate Advance, the term shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“Canada Property” means that term as defined in Section 2.2(b) .

“Canadian Plan” means any pension or other employee benefit plan in respect of its employees and former employees in Canada and which is: (a) a plan maintained by Borrower or any of its Subsidiaries or Affiliates; (b) a plan to which Borrower or any of its Subsidiaries or Affiliates contributes or is required to contribute; (c) a plan to which Borrower or any of its Subsidiaries or Affiliates was required to make contributions at any time during the five (5) calendar years preceding the date of this Agreement; or (d) any other plan with respect to which Borrower or any of its Subsidiaries or Affiliates has incurred or may incur liability, including contingent liability either to such plan or to any Person, administration or Governmental Authority, including the FSCO.

“Capital Assets” means that term as defined in Section 7.4(a) .

“Capital Expenditures” means that term as defined in Section 7.4(b) .

“Capital Lease” means all leases of property (whether real, personal, or mixed) which have been or should be capitalized on the books of the lessee in accordance with GAAP.

“Collateral” means all property of Borrower now or hereafter subject to the Liens granted in the Security Documents.

“Collateral Assignment of Patents and Patent Applications” means those certain (i) Amended and Restated Collateral Assignment of Patent and Patent Application agreements by and between Bank of America, N.A. as agent and each of (x) Roberts Consolidated Industries, Inc., (y) Roberts Holding International, Inc., and (z) Roberts Company Canada Limited, and that certain Collateral Assignment of Patent and Patent Application by and between Bank of America, N.A. as agent and Boiardi Products Corporation, each dated as of the date hereto.

 

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“Collateral Assignment of Permits, Approvals and Licenses” means those certain Amended and Restated Collateral Assignment of Permits, Approvals and Licenses agreements by and between Bank of America, N.A. as agent and each of (i) Roberts Consolidated Industries, Inc., (ii) Roberts Holding International, Inc., and (iii) Roberts Company Canada Limited, each dated as of the date hereof.

“Collateral Assignment of Trademarks” means those certain (i) Amended and Restated Collateral Assignment of Trademarks and Security Agreements by and between Bank of America, N.A, as agent and each of (x) Roberts Consolidated Industries, Inc., (y) Roberts Holding International, Inc., and (z) Roberts Company Canada Limited; and (ii) Collateral Assignment of Trademarks and Security Agreements by and between Bank of America, N.A, as agent and (y) Q.E.P. Company, Inc., and (z) Boiardi Products Corporation, each dated as of the date hereof.

“Commitment” shall mean any of the commitments of any Lender, i.e. , either a Mortgage Loan Commitment or a Revolving Loan Commitment.

“Contaminant” means any pollutants, hazardous or toxic substances or wastes or contaminated materials including but not limited to oil and oil products, asbestos, asbestos containing materials, urea formaldehyde foam insulation, transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls, flammables, explosives, radioactive materials, laboratory wastes, biohazardous wastes, chemicals, elements, compounds or any other materials and substances (including materials, substances or things which are composed of or which have as constituents any of the foregoing substances), which are or may be subject to regulation under, or the Release of which or exposure to which is prohibited, limited or regulated under any Environmental Law.

“Credit Availability” means, at the relevant time of reference, the dollar for dollar equivalent amount equal to in the case of the Revolving Loan, the lesser of (a) the Borrowing Base and (b) the Revolving Loan Commitment, less, in each case, the sum of the aggregate outstanding principal amount of all Revolving Advances plus the Available Amount plus any unpaid Reimbursement Obligations.

“Current Maturities of Long Term Debt” means that term as defined in Section 7.4(c) .

“Debt”, as applied to any Person, means: (1) indebtedness or liability of such Person for borrowed money, or with respect to deposits or advances of any kind, or for the deferred purchase price of property or services (including trade obligations); (2) all obligations of such Person evidenced by notes, bonds, debentures or similar instruments, (3) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (4) all obligations of such Person for the deferred purchase price of property or services (including trade obligations); (5) all obligations of such Person as lessee under Capital Leases; (6) current liabilities of such Person in respect of the present value of unfunded vested benefits under any Plan; (7) obligations of such Person under letters of credit, bankers acceptances, or comparable arrangements; (8) obligations of such Person arising under acceptance facilities; (9) guaranties, endorsements (other than for collection or deposit in the ordinary course of

 

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business), and other contingent obligations of such Person to purchase, to provide funds for payment, to supply funds to invest in any Persons, or otherwise to assure a creditor against loss; (10) all obligations of such Person secured by any Lien on any of such Person’s assets or property, whether or not the obligations have been assumed, and (11) all obligations of such Person in respect of interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging arrangements, provided that any net positive amount owed to such Person shall not be deemed an obligation. The Debt of any Person shall include the Debt of any partnership in which such person is a general partner.

“Default” means an event or condition the occurrence or existence of which, with the lapse of time or the giving of a required notice, or both, would become an Event of Default.

“Default Rate” means that rate of interest that is equal to the sum of 2% plus the rate of interest otherwise applicable to such Loan under the terms of this Agreement.

“Defaulting Lender” shall mean any Lender with respect to which a Lender Default is in effect.

“Drawdown Date” means the date on which any Revolving Advance or the Mortgage Loan is made.

“Earnings Before Interest, Taxes, Depreciation and Amortization” means that term as defined in Section 7.4(d) .

“Eligible Accounts Receivable” means, at the time of calculation, bona fide outstanding Receivables of Borrower, in which the Agent has a first priority perfected security interest, which satisfy all of the following requirements:

(A) It is owing to Borrower and is subject to a validly perfected security interest in favor of the Agent having priority over any and all other liens or encumbrances thereon;

(B) It arises from the sale or lease of goods by Borrower or the rendering of services by Borrower which have been shipped or delivered to an Account Debtor (i) on an absolute sale basis and not on consignment, on approval, or on a sale or return basis or subject to any other repurchase or return agreement, and (ii) on an open receivable basis, which is not evidenced by chattel paper or an instrument of any kind; provided that in any case, no material part of the subject goods or services has been returned, rejected, lost or damaged, and the Account Debtor is not insolvent or the subject of any bankruptcy or insolvency proceeding of any kind;

(C) If the Account Debtor is located outside the United States or, subject to subparagraph (K) of this definition, Canada, (i) the subject goods shall have been shipped after receipt, by Borrower from the Account Debtor, of (a) an irrevocable letter of credit, which letter of credit shall have been issued or confirmed by a financial institution acceptable to the Agent and shall be in form and substance acceptable to the Agent and shall be transferred, assigned or otherwise made payable to the Agent in form and substance

 

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satisfactory to the Agent, or (b) credit insurance in form and substance and issued by an insurer satisfactory to the Agent, and (ii) the Receivable shall be payable in the full amount of the face value of the Receivable in United States dollars and/or Canadian Dollars for Roberts Company Canada Limited;

(D) It is a valid, legally enforceable obligation of the Account Debtor thereunder and is not and may not become subject to any offset, counterclaim or, in the opinion of the Agent, contra or other defense on the part of such Account Debtor or to any claim on the part of such Account Debtor denying liability thereunder; provided, however, that if it is subject to any such offset, defense, or claim, it shall be ineligible to the extent of such offset, defense or claim;

(E) It is subject to no lien or security interest whatsoever (including purchase money security interests), except for the security interest of the Agent hereunder and under the other Loan Documents and liens or security interests which have been expressly subordinated to the security interests of the Agent in form and substance satisfactory to the Agent;

(F) It is evidenced by an invoice or other proof of delivery in form acceptable to the Agent;

(G) Except as specifically approved in writing by the Agent, it has not remained unpaid for a period exceeding the lesser of (i) ninety (90) days after the date of invoice, or (ii) sixty (60) days after the due date thereof;

(H) It is not owing from an Account Debtor from whom 50% or more of the amounts owing Borrower have remained unpaid for a period exceeding the lesser of (i) ninety (90) days from the date of invoice, or (ii) sixty (60) days after the due date thereof;

(I) It does not arise out of transactions with an employee, officer, director, Affiliate, or Subsidiary of Borrower;

(J) It does not arise out of a transaction with, and is not owing from, the United States of America, Canada or any other foreign country or sovereign state, or of any state, province, territory, municipality or other political subdivision thereof, or of any department, agency, public corporation or other instrumentality thereof in an amount in excess of $1,000, unless Borrower has complied with the Federal Assignment of Claims Act, the Financial Administration Act (Canada), or other applicable law, when applicable;

(K) It is not owing from an Account Debtor located in any jurisdiction in which Borrower has not complied with any laws which might restrict the ability of Borrower to collect such Receivables;

(L) The Agent has determined in its sole discretion that it is an Eligible Account Receivable; and

(M) It is not owed (i) by The Home Depot, Inc. and its affiliates or (ii) by Lowe’s Companies, Inc. and its affiliates, in each

 

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case, representing any amount (after exclusion of any amounts that are otherwise referred to and included in clauses (A) through (L) of this definition) in excess of the percentage of the amount of all Eligible Accounts Receivable set forth below (the “Concentration Percentage”) based on the investment ratings of those Account Debtors by either Moody’s Investors Service or Standard & Poor’s:

Investment Rating of Account Debtor

 

Provided, however, that in the event of a change in the investment rating either of The Home Depot, Inc. or of Lowe’s Companies, Inc. which would result in a change to the Concentration Percentage applicable to such entity and its affiliates, such change in the Concentration Percentage shall (i) if such change would result in an increase to the Concentration Percentage, be effective on the date of such change in investment rating, and (ii) if such change would result in a decrease to the Concentration Percentage, not be effective until the date that is sixty (60) calendar days after such change in investment rating.

With respect to the Receivables, Borrower warrants and represents to the Agent and Lenders that, unless otherwise indicated in writing by Borrower: (A) They are genuine, are in all respects what they purport to be, are not evidenced by a judgment and are only evidenced by one, if any, executed original instrument, agreement, contract or document, which has been delivered to the Agent; (B) They represent undisputed, bona fide transactions completed in accordance with the terms and provisions contained in any documents related thereto; (C) The amounts of the face value shown on any schedule of accounts or accounts receivable aging report provided to the Agent, and all invoices and statements delivered to the Agent with respect to any Receivable are actually and absolutely owing to Borrower and are not contingent for any reason; (D) There are no setoffs, counterclaims or disputes existing or asserted with respect thereto and Borrower has not made any agreement with any Account Debtor thereunder for any deduction therefrom, except a discount or allowance allowed by Borrower in the ordinary course of its business for prompt payment; (E) There are no facts, events or occurrences which in any way impair the validity or enforcement thereof or tend to reduce the amount payable thereunder from the amount of the invoice face value with respect to any Eligible Accounts Receivable, and on all contracts, invoices and statements delivered to the Agent with respect thereto; (F) To the best knowledge of Borrower’s officers, directors and key employees (including, without limitation, any sales personnel dealing with any such Account Debtor), all Account Debtors, under any Eligible Accounts Receivable, (i) had the capacity to contract at the time any contract or other document giving rise to the Receivable was executed, (ii) are solvent, and (iii) are not the subject of a bankruptcy or insolvency proceeding of any kind; (G) The goods

 

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giving rise thereto are not, and were not at the time of the sale thereof, subject to any lien, claim, encumbrance or security interest, except those of the Agent, those terminated prior to the date hereof or those subordinate to the Agent’s security interest and Lien; (H) Borrower has no knowledge of any fact or circumstance which would materially impair the validity or collectability thereof; (I) To the best of Borrower’s knowledge, there are no proceedings or actions which are threatened or pending against any Account Debtor thereunder which might result in any material adverse change in the financial condition of such Account Debtor; and (J) They have not been pledged, assigned or transferred to any other Person.

In the event of any dispute as to whether a Receivable is or has ceased to be an Eligible Account Receivable, the decision of the Agent shall control.

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

“Eligible Inventory” means that portion of the inventory of Borrower consisting of raw materials normally and currently used in Borrower’s business, work-in-process and finished goods held for sale by Borrower, normally and currently saleable in the ordinary course of Borrower’s business, and which at all times pertinent hereto is of good and merchantable quality, free from defects, as to which the Agent has a perfected first priority Lien, and which is located at the locations set forth in the Security Agreement, and as to which Borrower has satisfied all terms, conditions, warranties and representations of this Agreement and the other Loan Documents; but Eligible Inventory does not include any of the following: (a) catalogs and other promotional materials of any kind; (b) used items; (c) any returned items (unless returned in a saleable form and any account receivable arising from the sale of such returned item has been reversed); (d) any damaged, defective or recalled items; (e) any obsolete items; (f) any items used as demonstrators, prototypes or salesmen’s samples; (g) any items of inventory which have been consigned to Borrower or as to which a Person claims a Lien; (h) any items of inventory which have been consigned by Borrower to a consignee; (i) packing and shipping materials; (j) inventory located on premises leased by Borrower from a landlord with whom Agent has not entered into a landlord’s waiver on terms satisfactory to Agent in its reasonable judgment; (k) inventory in transit; (l) spare parts; and (m) inventory which in the reasonable judgment of Agent is considered to be slow-moving or otherwise not merchantable. Eligible Inventory shall be valued at the lower of (a) cost, (b) market value, or (c) the valuation consistent with that employed in the preparation of the financial statements of Borrower referred to in Section 4.4 hereof.

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

“Eligible Transferee” shall mean and include a commercial bank, an insurance company, a finance company, a financial institution, any fund that invests in loans or any other “accredited investor” (as defined in Regulation D of the Securities Act).

 

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“Enforcement Action” means any action, proceeding or investigation (administrative or judicial, civil or criminal) instituted or threatened by U.S. Environmental Protection Agency, or any other federal, state, provincial, territorial, municipal, local or foreign governmental agency related to any alleged or actual violation of any Environmental Law with respect to any property owned or leased by Borrower and/or any business conducted thereon, including, but not limited to, actions seeking Remediation, the imposition or enforcement of liability pursuant to any Environmental Law and compliance with any Environmental Law. Enforcement Action shall also include any similar actual or threatened action by any private party pursuant to any Environmental Law.

“Environmental Laws” means any and all present and future: United States and Canadian federal, state, provincial, territorial, municipal, local and laws, statutes, ordinances, rules, and regulations, relating to protection of human health and the environment from Contaminants including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act, as amended, (CERCLA), 42 USC §9601 et seq. ; the Resource Conservation and Recovery Act, as amended, (RCRA), 42 USC §6901 et seq. the Clean Air Act, as amended, 42 USC §7401 et seq. ; the Federal Water Pollution Control Act, as amended (including but not limited to as amended by the Clean Water Act), 33 USC §1251 et seq. ; The Toxic Substances Control Act, as amended (TSCA), 15 USC §2601 et seq. ; the Emergency Planning and Community Right-to-Know Act (also known as SARA Title III), as amended, (EPCRA), 42 USC §11001 et seq. ; the Safe Drinking Water Act, as amended, 42 USC §300(f) et seq. ; the Federal Insecticide, Fungicide and Rodenticide Act, as amended (FIFRA), 7 USC §136 et seq. ; the Occupational Safety and Health Act, as amended, (OSHA), 29 USC §651 et seq. ; the Endangered Species Act, as amended, 16 USC §1531 et seq. ; the National Environmental Policy Act, as amended, (NEPA), 42 USC §4321 et seq. ; the Rivers and Harbors Act of 1899 33 USC §401 et seq. ; state provincial, territorial, municipal, local or foreign laws, rules and regulations similar to or addressing similar matters as the foregoing laws; laws, rules and regulations governing underground or above-ground storage tanks; laws, rules and regulations imposing liens for response costs or costs of other Remediation, whether or not those liens have a higher priority than existing liens; laws, rules and regulations conditioning transfer of property upon a form of negative declaration or other approval of a Governmental Authority of the environmental condition of a property; laws, rules and regulations requiring the disclosure of conditions relating to Contaminants in connection with transfer of title to or interest in property law; laws, rules and regulations requiring notifying of any government entity with regard to a Release of any Contaminant; conditions or requirements imposed in connection with any permits; government orders and demands and judicial orders pursuant to any of the foregoing; laws, rules and regulations relating to the Release, use, treatment, storage, disposal, transportation, transfer, generation, processing, production, refining, control, management, or handling of Contaminants; any and all other laws, rules, regulations, guidance, guidelines and common law of any governmental entity relating to the protection of human health or the environment from Contaminants. The reference in this paragraph to state laws specifically includes, but is not limited to, the applicable laws of the States of Connecticut, Florida, California, Missouri and Georgia.

 

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“Equipment” means all “Equipment” as that term is defined in the UCC, of Borrower, whether presently owned or hereafter acquired, and including, without limitation, machinery, furniture, furnishings, and fixtures, and any and all goods used or bought for use in or being used for use in the conduct of Borrower’s business and all goods used or bought for use in business which are not included within the definition of Inventory, and all accessions and additions thereto, replacements therefor.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereunder.

“ERISA Affiliate” means any trade or business (whether or not incorporated) which, together with Borrower, would be treated as a single employer under Section 4001 of ERISA.

“Event of Default” means any of the events specified in Section 9.1 of this Agreement.

“Excess Cash Flow” shall mean, for any period, the difference arrived at by subtracting (i) the sum of Current Maturities of Long Term Debt plus Interest Expense from (ii) Earnings Before Interest, Taxes, Depreciation and Amortization minus the sum of unfinanced capital expenditures, taxes and dividends.

“Existing Letter of Credit” means each letter of credit previously issued for the account of Borrower or any Subsidiary that (i) is outstanding on the date hereof and (b) is listed on Schedule 2.23 .

“Foreign Companies” shall mean Roberts Japan KK, Roberts U.K. Limited, Roberts Deutschland GmbH, Roberts S.A.R.L., Roberts Holland B.V., Q.E.P. Holding B.V., Q.E.P. Aust. Pty. Limited, Q.E.P. Chile Limitada, Q.E.P. Co., New Zealand Limited, Zocalis S.R.L., Q.E.P. Co. U.K. Limited, Vitrex Limited, Q.E.P. Roberts Mexicana, S.A. de C.V. P.R.C.I. SA, Q.E.P. HK Limited, Q.E.P. Co. Aust. Pty. Limited, Roberts Distribution S.A.R.L., Q.E.P. Roberts Ireland Limited, Harmony Depot Shanghai Trading Company Limited, Q.E.P. Holdings Chile Limitada and Q.E.P. Peru S.A.C.

“FSCO” means the Financial Services Commission of Ontario and any Person succeeding to the functions thereof and includes the Superintendent under such statute and any other Governmental Authority empowered or created by the Supplemental Pension Plans Act (Québec) or the Pension Benefits Act (Ontario) or any Governmental Authority of any other Canadian jurisdiction exercising similar functions in respect of any Canadian Plan and any Governmental Authority succeeding to the functions thereof.

“GAAP” means (i) when used in general, other than as provided below, generally accepted accounting principles in the United States as in effect from time to time, applied on a consistent basis and, (ii) when used in Article 7, whether directly or indirectly through reference to a capitalized term used or defined therein, principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the fiscal year ended on February 28, 2008.

 

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“Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government.

“Guaranty” means any obligation, contingent or otherwise, of any Person guaranteeing or having the economic effect of guaranteeing any Debt of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Debt, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Debt of the payment of such Debt, or (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt; provided, however, that the term Guaranty shall not include endorsements for collection or deposit in the ordinary course of business.

“Head Office” means the principal office of the Agent at 200 Glastonbury Boulevard, Glastonbury, Connecticut.

“Interest Expense” means that term as defined in Section 7.4(e) of this Agreement.

“Interest Period” means in the case of any Revolving Advance or the Mortgage Loan, other than a Prime Rate Advance, the one, two, three, or six month period selected by Borrower pursuant to this Agreement. Each Interest Period shall commence on the date such advance is made or the date of a subsequent interest rate election, as the case may be, and shall end on the date as Borrower may select in accordance with the above, provided, that:

 

(i)

any Interest Period which would otherwise end on a day which is not a Business Day shall end on the next or succeeding Business Day unless, in the case of a LIBOR Rate Advance only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day;

 

(ii)

each Interest Period which commences before and would otherwise end after the Maturity Date, shall end on the Maturity Date;

 

(iii)

any Interest Period which begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest Period is to end, shall (subject to clause (i) above) end on the last day of such calendar month;

 

(iv)

each Interest Period which commences during an Interest Period in effect for outstanding LIBOR Rate Advances shall end on the last day of such Interest Period then in effect for LIBOR Rate Advances; and

 

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(v)

all Interest Periods which commence on the same date shall end on the same date.

“Inventory” means all “Inventory” as that term is defined in the UCC, including, without limitation, any and all goods, merchandise or other personal property, wheresoever located and whether or not in transit, now owned or hereafter acquired by Borrower in the normal course of business, which is or may at any time be held for sale or lease, or furnished or to be furnished under any contract or service or held as raw materials, work in process, supplies or materials used or consumed in Borrower’s business, and all such property the sale or other disposition of which has given rise to accounts, chattel paper, documents, or instruments (as such terms are defined in the Uniform Commercial Code) and which has been returned to or repossessed or stopped in transit by Borrower.

“Issuing Lender” means BOA. BOA may, in its discretion, arrange for one or more Letters of Credit to be issued by one or more of its Affiliates or branches, provided in each case that Borrower does not reasonably object based on such Affiliate’s or branch’s creditworthiness, and the term Issuing Lender shall include any such Affiliate or branch with respect to any Letters of Credit issued by it.

“Lender Default” shall mean (i) the refusal (which has not been retracted) or the failure of a Lender to make available its portion of any Borrowing in violation of the requirements of this Agreement or to fund its portion of any unreimbursed payment under Sections 2.23 or 2.24 or (ii) a Lender having notified in writing the Agent that such Lender does not intend to comply with its obligations under Section 2.1 or 2.2 .

“Lender Parties” means that term as defined in Section 11.5(b) .

“Lenders” means BOA and HSBC, or any successors, assigns or holders of all or any part of the obligations of Borrower.

“Letter of Credit Application” means that term as defined in Section 2.23(b) of this Agreement.

“Letters of Credit” means, collectively, any letters of credit issued, extended or renewed by the Issuing Lender for the account of Borrower pursuant to this Agreement, including existing Letters of Credit.

“LIBOR” shall mean, as applicable to any LIBOR Rate Advance, the rate per annum (rounded upward, if necessary, to the nearest  ¹ / 32 of one percent) as determined on the basis of the offered rates for deposits in U.S. dollars, for a period of time comparable to such LIBOR Rate Advance which appears on the Telerate page 3750 as of 11:00 a.m. (London time) on the day that is two (2) London Banking Days preceding the first day of such LIBOR Rate Advance; provided, however, if the rate described above does not appear on the Telerate System on any applicable interest determination date, the LIBOR rate shall be the rate (rounded upwards as described above, if necessary) for deposits in U.S. dollars for a period substantially equal to the interest period on the Reuters Page

 

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“LIBO” (or such other page as may replace the LIBO Page on that service for the purpose of displaying such rates), as of 11:00 a.m. (London Time), on the day that is two (2) London Banking Days prior to the beginning of such interest period. If both the Telerate and Reuters systems are unavailable, then the rate for that date will be determined on the basis of the offered rates for deposits in U.S. dollars for a period of time comparable to such LIBOR Rate Advance which are offered by four (4) major banks in the London interbank market at approximately 11:00 a.m. (London time), on the day that is two (2) London Banking Days preceding the first day of such LIBOR Rate Advance as selected by the Agent. The principal London office of each of the major London Banks so selected will be requested to provide a quotation of its U.S. dollar deposit offered rate. If at least two (2) such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in U.S. dollars to leading European banks for a period of time comparable to such LIBOR Rate Advance offered by major banks in New York City at approximately 11:00 a.m. (New York City time), on the day that is two (2) London Banking Days preceding the first day of such LIBOR Rate Advance. In the event that the Agent is unable to obtain any such quotation as provided above, it will be determined that LIBOR pursuant to a LIBOR Rate Advance cannot be determined. In the event that the Board of Governors of the Federal Reserve System shall impose a Reserve Percentage with respect to LIBOR deposits of the Agent, any Lender or any Affiliate thereof then for any period during which such Reserve Percentage shall apply, LIBOR shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage.

“LIBOR Rate Advance” means any Revolving Advance or principal portion of any other Loan that bears interest with reference to LIBOR.

“LIBOR Spread” means that term as defined in Section 2.3(a) .

“Lien” means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on common law, statute, or contract, and including but not limited to the security interest lien arising from a security agreement, mortgage, hypothecation, encumbrance, pledge, collateral assignment, conditional sale or trust receipt, or a lease, consignment, or bailment for security purposes.

“Loans” means the Revolving Advances and the Mortgage Loan made or to be made pursuant to this Agreement.

“Loan Documents” means this Agreement, the Notes, the Security Documents and all other promissory notes, guaranties, mortgages, security documents, deeds to secure debt, deeds of trust, pledges, assignments, contracts, negative pledges, powers of attorney, landlord waivers, environmental indemnity agreements, trust account agreements, and written matters, whenever executed and delivered to Lender, with respect to the transactions contemplated by this Agreement.

“Lockbox Account” means that term as defined in Section 2.8 .

 

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“Lockbox Agreement” means the lockbox agreement from time to time in effect among Borrower and the Agent.

“London Banking Day” shall mean any date on which commercial banks are open for business in London, England.

“Make-Whole Premium” means the present value of the interest expense incurred by a Lender in funding the portion of indebtedness evidenced by the applicable Note which bears interest at the per annum rate of interest for the Interest Period then in effect, less the present value of the interest on the reinvested principal prepaid for the remainder of the Interest Period then in effect, at the Reinvestment Rate, plus any other expenses that Lender may sustain or incur by reason of the prepayment; provided that any negative value resulting from the foregoing calculation will be disregarded.

“Material Adverse Effect” means, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, results in a material adverse change in, or a material adverse effect upon, any of (i) the condition (financial or otherwise), operations, business, properties or prospects of Borrower and its Subsidiaries taken as a whole; (ii) the rights and remedies of the Agent hereunder or under any of the other Loan Documents, or the ability of Borrower to perform its respective Obligations; or (iii) the legality, validity or enforceability of this Agreement or any of the other Loan Documents.

“Maturity Date” means May 20, 2011, or earlier as set forth in this Agreement.

“Mortgage Loan” means the term as defined in Section 2.2(a) .

“Mortgage Loan Commitment” means, for each Lender, the amount set forth opposite such Lender’s name in Schedule 2 directly below the column entitled “Mortgage Loan Commitment,” and in the aggregate, as set forth in Schedule 2 below such column in the row entitled “Total”, as same may be adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 11.4 .

“Mortgage Note” means the term as defined in Section 2.2(c) .

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA and that is covered by Title IV of ERISA to which Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions or has within any of the preceding five plan years made or accrued an obligation to make contributions.

“Negative Pledge Agreement” means that certain Negative Pledge Agreement by and among BOA, as agent for itself and HSBC, and Roberts Japan KK, Roberts Deutschland GmbH, Q.E.P. Holdings B.V., Q.E.P. Chile Limitada, Zocalis S.R.L., Q.E.P. Roberts Mexicana, S.A. de C.V., Harmony Depot Shanghai Trading Company Limited, Roberts Holland B.V., and Q.E.P. Co., HK Limited dated May 21, 2008.

 

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“Non-Defaulting Lender” shall mean and include each Lender, as the case may be, other than a Defaulting Lender.

“Notes” means collectively the Revolving Credit Notes and the Mortgage Notes.

“Obligations” means all present and future indebtedness and other liabilities of Borrower owing to the Agent or any Lender or any of their respective successors, transferees or assigns, of every type and description, whether or not evidenced by any note, guaranty or other instrument, arising under or in connection with this Agreement, the Notes or any other Loan Document, whether or not for the payment of money, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all principal, interest, charges, expenses, fees, attorneys’ fees and disbursements and any other sum chargeable to Borrower under this Agreement or any other Loan Document.

“Overadvance” means that term as defined in Section 2.1(b) .

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.

“Permitted Acquisition” shall mean the acquisition by Borrower or any of its Subsidiaries of assets constituting a business, division or product line of any Person not already a Subsidiary of Borrower or any of its Subsidiaries or of not less than 80% (or a lesser percentage to the extent that the laws of any jurisdiction require a minimum percentage ownership by a resident of such jurisdiction, such minimum, the “Local Owned Stock”) of the capital stock or other equity interests of any such Person, provided, that (A) the consideration paid by Borrower or any Subsidiary consists solely of cash, the issuance of common stock of Borrower, the issuance of Debt otherwise permitted in Section 5.14 and the assumption/acquisition of any Permitted Acquired Debt (calculated in accordance with GAAP) relating to such business, division, product line or Person which is permitted to be assumed/acquired and to remain outstanding in accordance with the requirements of Section 5.14 , (B) those acquisitions that are structured as stock acquisitions shall be effected through a purchase of not less than 80% (minus, if applicable, the Local Owned Stock) of the capital stock or other equity interests of such Person by Borrower or such Subsidiary or through a merger between such Person and a Subsidiary of Borrower, so that after giving effect to such purchase or merger not less than 80% (minus, if applicable, the Local Owned Stock) of the capital stock of the surviving corporation of such purchase or merger is owned by Borrower or any Subsidiary of Borrower, (C) in the case of the acquisition of not less than 80% (minus, if applicable, the Local Owned Stock) of the capital stock or other equity interests of any Person, such Person (the “ Acquired Person ”) shall own no capital stock or other equity interests in any other Person unless the Acquired Person owns 100% (minus, if applicable, the Local Owned Stock) of the capital stock or other equity interests of such other Person, (D) substantially all of the business, division or product line acquired pursuant to the respective

 

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Permitted Acquisition, or the business of the Person acquired pursuant to the respective Permitted Acquisition and its Subsidiaries, is in same line of business as Borrower or such Subsidiary (E) after giving effect to such acquisition, Borrower or such Subsidiary has the power to elect at least a majority of the directors or managers of such Person and (F) all applicable requirements of Section 5.14 applicable to the Permitted Acquisitions are satisfied. Notwithstanding anything to the contrary contained in the immediately preceding sentence, an acquisition which does not otherwise meet the requirements set forth in the above definition of “Permitted Acquisition” shall constitute a Permitted Acquisition if, and to the extent, the Required Lenders agree in writing that such acquisition shall constitute a Permitted Acquisition for purposes of this Agreement.

“Person” means a human being, sole proprietorship, partnership, corporation, business trust, joint stock company, trust, unincorporated association, organization, joint venture, institution, Governmental Authority, or other entity of any nature whatsoever.

“Plan” means any plan established, maintained, or to which contributions have been made by Borrower or any ERISA Affiliate for the benefit of any of their employees.

“Pledge Agreement” means the following agreements: (i) Amended and Restated Stock Pledge Agreement dated May 1, 2008 by and among Q.E.P. Co., Inc., Roberts Consolidated Industries, Inc., Marion Tool Corporation, Q.E.P. Zocalis Holding L.L.C., Q.E.P Aust. Pty. Limited, Q.E.P. Co. U.K. Limited, Vitrex Limited, Q.E.P. Holding B.V., Roberts Holland B.V., and Roberts S.A.R.L., (ii) Share Charge between Roberts Holland B.V and Fleet Capital Corporation dated March 5, 2002; and (iii) Debenture between FCC and Vitrex Limited dated March 31, 2005, each as amended, restated or in effect from time to time.

“Prime Rate” means the Agent’s annual rate of interest designated by the Agent from time to time as a standard for setting loan rates, which rate shall not be construed as the Agent’s lowest or most favorable rate on loans.

“Prime Rate Advance” means any Revolving Advance or portion of any other Loan which bears interest with reference to the Prime Rate.

“Prohibited Transaction” means any transaction set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from time to time.

“Property” means all real property with improvements thereon owned or leased by Borrower in the United States or Canada.

“Q.E.P.” means Q.E.P. Co., Inc.

“Receivable” means the right to payment for goods sold or leased or for services rendered by Borrower.

“Reimbursement Obligations” means that term as defined in Section 2.23(e) .

 

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“Reinvestment Rate” means the rate available to Lender as determined by Lender in its sole discretion for the investment of principal amounts prepaid pursuant to Sections 2.1(d) and/or 2.2(e) in U.S. Treasury obligations or domestic or eurodollar options as offered by Lender in its sole discretion for the approximate remaining term of the Interest Period then in effect as of the date of such prepayment.

“Release” means any spilling, leaking, migrating, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment of any Contaminant.

“Reportable Event” means any of the events set forth in Section 4043 of ERISA.

“Required Lenders” means BOA and HSBC.

“Reserve Percentage” means for any day with respect to a LIBOR Rate Advance, the maximum rate (expressed as a decimal) at which any lender subject thereto is required to maintain reserves (including all basic, supplemental, marginal or other reserves) under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against “Eurocurrency Liabilities” (as that term is used in Regulation D), if such liabilities were outstanding.

“Restricted Payment” means (i) any cash or property dividend, distribution or payment of any kind, direct or indirect, by Borrower or any of its Subsidiaries to any Person who now or in the future may hold an equity interest in Borrower or any of its Subsidiaries, whether evidenced by a security or not, other than stock options or regular compensation or bonuses paid to employees or directors of Borrower and its Subsidiaries in the ordinary course of business and consistent with past practices, (ii) any payment on account of the purchase, redemption, retirement or other acquisition for value of any capital stock of Borrower or its Subsidiaries, or any other payment or distribution made in respect thereof, either directly or indirectly, and (ii) any management or similar fees paid or payable by Borrower or any of its Subsidiaries to any Person who now or in the future may, directly or indirectly, hold an equity interest in Borrower or any of its Subsidiaries.

“Revolving Advance” or “Revolving Advances” means the term as defined in Section 2.1(a) .

“Revolving Credit Note” means that term as defined in Section 2.1(c) .

“Revolving Loan” means the Revolving Advance or Revolving Advances made pursuant to Section 2.1(a) .

“Revolving Loan Commitment” means, for each Lender, the amount set forth opposite such Lender’s name in Schedule 2 directly below the column entitled “Revolving Loan Commitment” and in the aggregate, as set forth in Schedule 2 below such column in the row entitled “Total”, as same may be (x) reduced from time to time or (y) adjusted from time to time as a result of assignments to or from such Lender pursuant to Section 11.4 .

 

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“Roberts Guarantee” means the term as defined in Section 2.2(f) .

“SEC” means the United States Securities and Exchange Commission.

“Security Agreement” means the respective Security Agreement or Amended and Restated Security Agreement as applicable between the Agent and each Borrower, as amended, restated and in effect from time to time.

“Security Documents” means the Security Agreement, the Roberts Guarantee, the Pledge Agreements, the Negative Pledge Agreement, the Collateral Assignment of Patents and Patent Applications, the Collateral Assignment of Trademarks and Security Agreements, the Collateral Assignment of Permits, Approvals and Licenses, the Hazardous Substances Indemnity Agreement, all assignments of contracts, documents or instruments in favor of the Agent, all hazardous waste indemnity letters in favor of Lender and all other documents, guaranties, contracts, assignments, instruments and the like now or hereafter guaranteeing or securing the Loans.

“Seller Notes” mean (i) that certain promissory note in the outstanding principal amount of Two Hundred and Fifty Thousand and  ⁰⁰ / 100 Dollars ($250,000.00) dated as of September 10, 1999, executed by QEP in favor of John J. Mezzone and (ii) that certain promissory note in the outstanding principal amount of Two Hundred and Ten Thousand Euros (€210,000.00) dated September 22, 2004 and executed by Q.E.P. in favor of Valfin, S.A.

“Senior Debt” means that term as defined in Section 7.4(f) .

“Solvent” means, as to any Person, that such Person (a) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage; (b) is able to pay its debts as they mature; and (c) owns property whose fair salable value is greater than the amount required to pay its debts.

“Standby Letter of Credit” shall mean each irrevocable letter of credit issued pursuant to Section 2.23(a) under which the Issuing Lender agrees to make payments for the account of Borrower, on behalf of Borrower, in respect of obligations of Borrower incurred pursuant to contracts made or performances undertaken or to be undertaken or like matters relating to contracts to which Borrower is or proposes to become a party in the ordinary course of Borrower’s business.

“Subordinated Debt” means that term as defined in Section 7.4(g) .

“Subsidiary” means any Person of which Borrower directly or indirectly through one or more intermediaries (i) owns shares of stock having ordinary voting power to elect a majority of the Board of Directors (or equivalent managing body) of such Person (irrespective of whether at the time stock of any other class or classes of such Person shall or might have voting power upon the occurrence of any contingency), or (ii) owns more than 50% of any other equity or ownership interest in such Person.

 

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“Tangible Net Worth” means that term as defined in Section 7.4(h) .

“Total Liabilities” means that term as defined in Section 7.4(i) .

“Trade Letter of Credit” shall mean each commercial documentary Letter of Credit issued by the Issuing Lender for the account of Borrower pursuant to Section 2.23(a) for the purchase of goods in the ordinary course of business.

“Type” refers to whether a Revolving Advance or principal portion of any other Loan is a Prime Rate Advance or LIBOR Rate Advance.

“UCC” shall mean the Uniform Commercial Code as in effect in the State of Connecticut, as amended or otherwise modified and in effect from time to time or, when the laws of any other jurisdiction govern the perfection, validity or enforcement of any Lien, the Uniform Commercial Code or other applicable law of such jurisdiction (including the Personal Property Security Act (Ontario)).

Section 1.2 Terms Generally . Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, (a) any reference in this Agreement to any Loan Document shall mean such document as amended, restated, supplemented or otherwise modified from time to time, and (b) all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time.

Section 1.3 Currency Equivalents Generally . For all purposes of this Agreement other than Article 2 , the equivalent in any Alternative Currency of an amount in dollars shall be determined at the rate of exchange quoted by the Agent in Boston, Massachusetts, at 9:00 A.M. (Boston time) on the date of determination, to prime banks in New York City for the spot purchase in the New York foreign exchange market of such amount of dollars with such Alternative Currency. Whenever the word “dollars” is used in this Agreement, it shall mean U.S. Dollars, unless the context denotes otherwise.

 

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ARTICLE 2

AMOUNTS AND TERMS OF THE LOANS

A. THE LOANS

Section 2.1 Revolving Loan .

(a) In Lenders’ sole discretion and subject to the terms and conditions set forth in this Agreement, Lenders severally, but not jointly, agree to make advances (each a “Revolving Advance” and collectively “Revolving Advances”) to Borrower from time to time during the period from the date of this Agreement up to, but not including, the Maturity Date; provided , however , that at no time shall the aggregate outstanding principal balance of all Revolving Advances plus the Available Amount plus any unpaid Reimbursement Obligations exceed the Credit Availability. Subject to the limits of this Agreement, Borrower may borrow, pay, prepay (pursuant to Section 2.1(d) below), and re-borrow under this Section 2.1 . Nothing herein shall be construed to require any Lender to make Revolving Advances, it being agreed that such Revolving Advances and any formulas or advance rates contained within or comprising the Borrowing Base shall be at the Agent’s sole discretion, may be increased or decreased in accordance with the definition of Borrowing Base and from time to time by the Agent in its sole discretion and shall not establish a pattern or custom binding upon the Agent or any Lender.

(b) Notwithstanding the provisions of Section 2.1(a) , the Required Lenders may, in their sole discretion and subject to the terms and conditions set forth in this Agreement or any other conditions which the Lenders may impose in their sole discretion, including without limitation the payment of fees, an increased interest rate, or posting of additional collateral, make temporary advances in excess of the Borrowing Base to Borrower from time to time (each such temporary Revolving Advance is referred to herein as an “Overadvance”), provided that in no event shall the aggregate principal amount of outstanding Overadvances, when combined with the outstanding principal amount of all other Revolving Advances plus the Available Amount plus any unpaid Reimbursement Obligations, exceed the Revolving Loan Commitment. To the extent that the Borrowing Base increases at any time during which an Overadvance is outstanding, the portion of the Overadvance which, as a result of such increase, would be available for borrowing under Section 2.1(a) shall be deemed to be prepaid as of the date of such increase and reborrowed as a Revolving Advance under Section 2.1(a) as of such date. To the extent that the Borrowing Base decreases at any time, the portion of the outstanding Revolving Advances which exceeds the Borrowing Base as a result of such decrease shall be deemed, subject to the provisions of this Agreement, to be prepaid as of the date of such decrease and reborrowed as an Overadvance under this Section 2.1(b) as of such date. Nothing contained in this Section 2.1(b) or elsewhere in this Agreement shall constitute or be deemed to constitute a commitment or agreement by the Lenders to make any Overadvances, nor shall the making of an Overadvance at any time or from time to time constitute or be deemed to constitute a course of dealing by the Agent or any Lender with respect to Overadvances.

 

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(c) All Revolving Advances shall be evidenced by, and repaid with interest in accordance with one or more promissory notes of Borrower, each substantially in the form of Exhibit A hereto (each such promissory note is referred to herein as a “Revolving Credit Note”, and all such notes are collectively referred to as “Revolving Credit Notes”). The Revolving Credit Note issued to each Lender shall (i) be executed by Borrower, (ii) be payable to such Lender or its registered assigns and be dated the date of this Agreement, (iii) be in a stated principal amount equal to the Revolving Loan Commitment of such Lender and be payable in the outstanding principal amount of the Revolving Loans evidenced thereby, (iv) mature on the Maturity Date, (v) bear interest as provided in the appropriate clause of Section 2.3 in respect of the Prime Rate Advances and LIBOR Rate Advances, as the case may be, evidenced thereby, and (vi) be entitled to the benefits of this Agreement and the other Loan Documents. Borrower hereby authorizes each Lender to record on its Revolving Credit Note or in its internal computerized records the amount of each Revolving Advance and of each payment of principal received by such Lender on account of the Revolving Loan, which recordation shall, in the absence of manifest error, be conclusive as to the outstanding principal balance of the Revolving Loan and shall be considered correct and binding on Borrower provided, however, that the failure to make such recordation with respect to any Revolving Advance or payment shall not limit or otherwise affect the obligations of Borrower under this Agreement or the Revolving Credit Note. With respect to the Revolving Loan, Borrower shall pay to the Agent, for the ratable benefit of the Lenders, a fee on the first day of each month and on the Maturity Date, in an amount equal to one-quarter of one percent (.25%) per annum of the difference between the Revolving Loan Commitment and the average daily outstanding principal balance of the Revolving Loan for the prior one month period.

(d) Borrower may prepay the Revolving Loan, in whole or in part, together with accrued interest to the date of prepayment on the amount prepaid (i) with respect to any principal portion that bears interest with reference to the Prime Rate, on any Business Day, without the Make-Whole Premium, and (ii) with respect to any principal portion that bears interest with reference to LIBOR either (1), on the last Business Day of the Interest Period applicable to the portion being prepaid, without the Make-Whole Premium or (2) on any other Business Day, together with the Make-Whole Premium.

(e) Until the Agent exercises its rights to collect the Receivables as provided for in this Agreement, Borrower may continue its present policies for returned merchandise and adjustments, but shall promptly notify the Agent of any credits, adjustments or disputes arising about the goods or services represented by Receivables. In any event, Borrower will immediately pay the Agent from its own funds (and not from the proceeds of Receivables), for application to the Revolving Loans, an amount equal to any credit or adjustment made to any Eligible Receivables; provided, however, that so long as Borrower is not in default hereunder, such payment need not be made if Borrower shall have, after making such credit or adjustment, sufficient Eligible Receivables to maintain the aggregate outstanding balance of the Revolving Loans under the Borrowing Base.

 

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Section 2.2 Mortgage Loan .

(a) Lenders have previously made a loan to Q.E.P. such that the outstanding principal balance as of June 10, 2008 of such loan was Two Million Two Hundred and Ninety Eight Thousand One Hundred and Eighty Seven Dollars and Ten Cents ($2,298,187.10) (CAD) (the “ Mortgage Loan ”).

(b) The Mortgage Loan was used to repay all indebtedness owed to the existing mortgagee on the real property owned by Roberts Company Canada Limited at 2070 Steeles Avenue East, Brampton, Ontario, Canada (the “ Canada Property ”), to discharge such mortgagee’s security from the Canada Property, and to fund expenditures related to the repair of the Canada Property.

(c) The Mortgage Loan shall be evidenced by, and repaid in accordance with one or more promissory notes of Q.E.P., substantially in the form attached as Exhibit A hereto (the “ Amended and Restated Mortgage Note ” or “Mortgage Note” ). The Amended and Restated Mortgage Note issued to each Lender shall (i) be executed by Q.E.P., (ii) be payable to such Lender or its registered assign and be dated as of June 10, 2008, (iii) be in a stated principal amount equal to the maximum amount of the Mortgage Loans to be made by such Lender and be payable in the outstanding principal amount of the Mortgage Loans evidenced thereby, (iv) mature on the Maturity Date, (v) bear interest as provided in the appropriate clause of Section 2.3 in respect of Prime Rate Advances and LIBOR Rate Advances, as the case may be, evidenced thereby, (vi) be entitled to the benefits of this Agreement and the other Loan Documents.

(d) Commencing with July of 2008, payments shall be made (i) on the first business day of each month in arrears with respect to Prime Rate Advances, and (ii) on the last business day of each applicable Interest Period with respect to Libor Rate Advances. Q.E.P. shall make mandatory scheduled principal payments under the Amended and Restated Mortgage Note monthly in equal monthly installments of $19,268.63 (CAD) plus interest on the outstanding principal balance of the Mortgage Loan as stated in the Amended and Restated Mortgage Note, until the outstanding principal amount of the Amended and Restated Mortgage Note, together with all interest accrued thereon, has been fully paid, except that if not sooner paid, the principal amount, together with all accrued but unpaid interest thereon, shall be due and payable on the Maturity Date for the Mortgage Loan.

(e) Q.E.P. may prepay any portion of the outstanding principal of the Mortgage Loan, in whole or in part, together with accrued interest to the date of such prepayment on the amount prepaid and all amounts required under Section 2.19 hereof, (i) with respect to any principal portion that bears interest with reference to the Prime Rate, on any Business Day, without Make-Whole Premium, and (ii) with respect to any principal portion that bears interest with reference to LIBOR either (1) on the last Business Day of the Interest Period applicable to that portion of the Mortgage Loan being prepaid, without Make-Whole Premium or (2) on any other Business Day, together with Make-Whole Premium.

 

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(f) The Obligations, including the obligations of Q.E.P. under the Mortgage Loan are unconditionally guaranteed by Roberts Company Canada Limited pursuant to that certain (i) Amended and Restated Guarantee dated as of the date hereof by and between the Agent and Roberts Company Canada Limited amending and restating in its entirety the Guarantee by Roberts Company Canada Limited dated July 30, 2003, and (ii) Guarantee dated as of the date hereof by and between the Agent and Roberts Company Canada Limited, (each as amended, restated, and in effect from time to time, collectively, the “Roberts Guarantee”).

(g) The Lenders acknowledge and agree that (i) Q.E.P. may prepay, without penalty or fee, the entire outstanding principal of the Mortgage Loan, (ii) Roberts Company Canada Limited may obtain a mortgage loan (“Third Party Mortgage Loan”), in an amount not to exceed Six Million Dollars (CAD), with a third party lender, which loan may be secured solely by the Canada Property, provided, however, that the lender of the Third Party Mortgage Loan shall enter into an intercreditor agreement with the Lenders and the Agent in form and substance satisfactory to the Agent; (iii) in connection with the closing of the Third Party Mortgage Loan, the Lenders shall waive the requirements of (a) Section 6.1 to permit the incurrence of a mortgage over the Canada Property by Roberts Company Canada Limited in favor of the lender of the Third Party Mortgage Loan and (b) Section 6.2 to permit the incurrence by Roberts Company Canada Limited of the Third Party Mortgage Loan; and (iv) to the extent that the Roberts Guarantee only secures the obligation of Q.E.P. under the Mortgage Loan, Lenders shall release Roberts Company Canada Limited from the Roberts Guarantee in the event that the outstanding principal amount of the Mortgage Loan is paid in full.

Section 2.3 Interest Provisions .

(a) Commencing with the first such date following the date of this Agreement, Borrower promises to pay interest to the Agent, on the outstanding and unpaid principal balances of the Revolving Loan, at a rate per annum equal to, at the option of Borrower, (i) the Prime Rate or (ii) the LIBOR Rate plus the LIBOR Spread (the “LIBOR Spread”) as set forth in the following table:

 

 

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Changes in the LIBOR Spread resulting from a change in the above ratios shall become effective on the due date of delivery by Borrower of a compliance certificate evidencing such change. If Borrower shall fail to timely deliver a compliance certificate within five days of such certificate’s due date in accordance with Section 5.8(c) of this Agreement, the LIBOR Spread shall be 250 basis points from the day such certificate was due until the day a certificate evidencing a lower LIBOR Spread is actually delivered to the Lender. Each Revolving Advance shall be comprised entirely of a Prime Rate Advance or a LIBOR Rate Advance as Borrower may request pursuant to Section 2.4 . Borrower shall not be entitled to request any Revolving Advance which, if made, would result in more than six (6) LIBOR Rate Advances outstanding hereunder at any time. For purposes of the foregoing, LIBOR Rate Advances having different Interest Periods, regardless of whether they commence on the same date, shall be considered separate LIBOR Rate Advances. Each LIBOR Rate Advance shall be in a principal amount of $500,000 (or the equivalent in an Alternative Currency) or in $50,000 (or the equivalent in an Alternative Currency) increments in excess thereof.

Interest payments shall be made (i) in the case of Prime Rate Advances, on the first day of each month in arrears, and (ii) in the case of LIBOR Rate Advances, on the last day of each applicable Interest Period, or in the case of Interest Periods having a duration of more than three (3) months, on each three-month anniversary date of the commencement of such Interest Period.

Q.E.P. promises to pay interest to the Lenders, on the outstanding and unpaid principal balance of the Mortgage Loan, at a rate per annum equal to, at the election of Q.E.P. (i) the Prime Rate or (ii) the Libor Rate plus 200 basis points.

(b) For purposes of the computation of interest, and notwithstanding anything to the contrary contained in this Agreement, items shall not be deemed to be collected until one (1) day after their actual receipt by Lender.

(c) The interest rate on each Prime Rate Advance shall change when and as the Agent’s Prime Rate changes. Any change in the interest rate resulting from a change in the Prime Rate shall become effective as of the opening of business on the day on which such change in the Prime Rate shall become effective.

(d) Overdue principal and interest and, upon the occurrence and during the continuance of an Event of Default, all principal and accrued but unpaid interest shall bear interest until paid in full, payable on demand, at the Default Rate, provided that with respect to the Mortgage Loan, the Default Rate shall be charged to the extent permitted by applicable law.

(e) The Agent may collect for the ratable benefit of the Lenders a “late charge” equal to two percent (2%) of any installment of interest or principal or any other amount due hereunder which is not paid or reimbursed by Borrower within fifteen (15) days of the due date thereof to cover the extra expense involved in handling such delinquent payment.

(f) For the purpose of complying with the Interest Act (Canada), it is expressly stated that where interest is calculated pursuant hereto at a rate based upon a 360-day period (for the purposes of this subsection, the “first rate”), the yearly rate or percentage of

 

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interest to which the first rate is equivalent is the first rate multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360, and the parties hereto acknowledge that there is a material distinction between the nominal and effective rates of interest and that they are capable of making the calculations necessary to compare such rates and that the calculations herein are to be made using the nominal rate method and not on any basis that gives effect to the principle of deemed reinvestment of interest.

Section 2.4 Notice and Manner of Borrowing; Conversion or Continuation of Interest Rate .

(a) Borrower shall give the Agent irrevocable notice by telecopy or otherwise in writing of its request that the Lenders make a Revolving Advance (each a “Borrowing Request”) not later than 11:00 a.m. Connecticut time (i) in the case of Prime Rate Advances, on the proposed Drawdown Date thereof, and (ii) in the case of LIBOR Rate Advances, two (2) Business Days prior to the proposed Drawdown Date thereof. Notice received by the Agent after 11:00 a.m. Connecticut time shall be loaned against by the Agent on the next Business Day after the proposed Drawdown Date. Each such notice shall, in the case of a LIBOR Rate Advance, specify the duration of the Interest Period therefor. If no election is made in a Borrowing Request as to the Type applicable to any Revolving Advance, then the requested Revolving Advance shall be a Prime Rate Advance. If no election is made in a Borrowing Request as to the Interest Period applicable to any requested LIBOR Rate Advance, then the Interest Period applicable to such requested LIBOR Rate Advance shall (subject to the provisions contained in the definition of “Interest Period” in Section 1.1 ) be one month in duration. Subject to the fulfillment of the applicable conditions set forth in Article 3 hereof, the Agent will make the Revolving Advance in immediately available funds by crediting the amount thereof to Borrower’s account with the Agent.

(b) Provided that no Event of Default shall have occurred and be continuing, Borrower may, on any Business Day, convert any outstanding Prime Rate Advance to a LIBOR Rate Advance in the same aggregate principal amount and convert a LIBOR Rate Advance to a Prime Rate Advance only on the last Business Day of the then current Interest Period applicable to such Revolving Advance. If Borrower desires to convert a Prime Rate Advance or a LIBOR Rate Advance pursuant to this Section, it shall give the Lender not less than three (3) Business Days’ prior written notice, specifying the date of such conversion, the amount to be converted and if conversion is from a Prime Rate Advance to a LIBOR Rate Advance, the duration of the first Interest Period therefor. If, not less than three (3) Business Days prior to the end of the Interest Period then in effect for any LIBOR Rate Advance, Borrower shall not have delivered to Lender (i) a notice requesting conversion of a LIBOR Rate Advance to a Prime Rate Advance in accordance with this Section or (ii) a Borrowing Request requesting that such Revolving Advance be reborrowed as a Revolving Advance of the same Type having an Interest Period of the same or a different duration then the Interest Period in effect, in accordance with Section 2.4(a) , or (iii) a notice that such Revolving Advance is to be paid at the end of such Interest Period, then, in each such case, Borrower shall be deemed to have delivered a notice that such Revolving Advance is to be converted to a Prime Rate Advance pursuant to this Section 2.4 .

 

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Section 2.5 Excess Advances . Except to the extent that any excess constitutes an Overadvance permitted by Section 2.1(b) if at any time the aggregate outstanding principal amount of the Revolving Loan plus the Available Amount plus any unpaid Reimbursement Obligations exceeds the Credit Availability, Borrower shall immediately pay the amount of such excess to the Agent for application to the applicable Loan.

Section 2.6 Settlements . On Friday of each week, the Agent shall notify HSBC of its pro rata share, based upon its percentage of Revolving Loans, of all such Loans outstanding as of such date. HSBC shall make available such pro rata portion to the Agent not later than 1:00 P.M. (Hartford, Connecticut time) that day. All such amounts will be made available in lawful money of the United States in immediately available funds at the Head Office of the Agent. Unless the Agent shall have been notified by any Lender prior to such day that such Lender does not intend to make available to the Agent such Lender’s portion of such loans, the Agent may assume that such Lender has made such amount available to the Agent on such day and the Agent may (but shall not be obligated to), in reliance upon such assumption, make available to Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Lender, the Agent shall be entitled to recover such corresponding amount on demand from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Agent’s demand therefor, the Agent shall promptly notify Borrower and Borrower shall immediately pay such corresponding amount to the Agent. The Agent also shall be entitled to recover on demand from such Lender or Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to Borrower until the date such corresponding amount is recovered by the Agent, at a rate per annum equal to (i) if recovered from such Lender, the overnight Federal Funds Rate for the first three days and at the interest rate otherwise applicable to such Loans for each day thereafter and (ii) if recovered from Borrower, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 2.3 . Nothing in this Section 2.6 shall be deemed to relieve any Lender from its obligation to make Loans hereunder or to prejudice any rights which Borrower may have against any Lender as a result of any failure by such Lender to make Loans hereunder.

Section 2.7 Method of Payment . Borrower shall make each payment due under this Agreement and under the Notes to the Agent at its Head Office not later than 11:00 A.M., Connecticut time, on the date when due in lawful money of the United States or Canada, as appropriate in immediately available funds. Borrower hereby authorizes the Agent to charge from time to time (including without limitation any time at which any amount is due under this Agreement) any amount due under this Agreement or the Notes, including without limitation principal, interest, fees and charges, against any account of Borrower with the Agent. Subject to the provisions contained in the definition of Interest Period in Section 1.1 , whenever any payment to be made under this Agreement or under a Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of the payment of interest.

 

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Section 2.8 Collection of Funds . All proceeds of notes, instruments, Inventory and Receivables of Borrower shall be collected into a lockbox account established by Borrower with the Agent pursuant to the Lockbox Agreement (the “Lockbox Account”). Promptly after the execution of this Agreement, Borrower shall direct each of its Account Debtors to make all payments to Borrower directly into the Lockbox Account. Borrower shall hold in trust for the Agent and immediately remit to the Agent by depositing the same into the Lockbox Account all checks, notes, cash and other proceeds of its Receivables as well as all proceeds from the sale of inventory, securities (other than securities issued by Borrower) and other Collateral and other cash receipts of every kind and nature (other than the proceeds of other borrowings expressly permitted by this Agreement). Borrower agrees that all payments received in the Lockbox Account will be the sole and exclusive property of the Agent. The Agent shall on the Business Day on which any payment is received into the Lockbox Account, and on a provisional basis until the final receipt of good funds, credit such payments to the principal amount of the outstanding Revolving Advances as a prepayment of such Revolving Advances. Any such provisional credit is subject to reversal if the final collection of a payment is not received by the Agent within five (5) Business Days following the initial receipt of such payment and will thereafter be credited when such payment is actually received in good funds. If at the time of any such credit there are no outstanding Revolving Advances such credit shall (i) if a Default or an Event of Default shall exist, be credited to a cash collateral account under the sole dominion and control of the Agent until such Default or Event of Default is cured by Borrower or waived by Agent or (ii) subject to the provisions of Section 2.2(d), to amounts due on the Mortgage Loan, in each case in the inverse order of maturity, (iii) be applied to cash collateralize any outstanding Letters of Credit, or (iv) otherwise be made to Borrower’s regular account with Lender.

B. CERTAIN GENERAL PROVISIONS

Section 2.9 Taxes .

(a) All payments by Borrower under the Loan Documents to or for the account of the Agent or any Lender shall be made without setoff or counterclaim and free and clear of, and without any deduction or withholding for or on account of, any and all present or future income, stamp or other taxes, levies, imposts, duties, fees, assessments, deductions, withholdings, or other charges of whatever nature, now or hereafter imposed, levied, collected, withheld, or assessed by any jurisdiction, or by any department, agency, state or other political subdivision thereof or therein (collectively, “ Taxes ”), excluding as to (i) a Tax on the Income imposed on the Agent or any Lender, and (ii) any interest, fees, additions to tax or penalties for late payment thereof (each such non-excluded Tax, an “ Indemnified Tax ”). For purposes hereof, “Tax on the Income” shall mean, as to any Person, a Tax imposed by one of the following jurisdictions or by any political subdivision or taxing authority thereof: (i) the United States, (ii) the jurisdiction in which such Person is organized, or (iii) the jurisdiction in which such Person’s principal office is located, which Tax is an income tax or franchise tax imposed on all or part of the net income or net profits of such Person or which Tax represents interest, fees, or penalties for late payment of such any income tax or franchise tax. If any such obligation is imposed upon Borrower with respect to any amount payable by it hereunder or under an of the other Loan Documents, Borrower will pay to the Agent on the date on which such amount

 

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is due and payable hereunder or under such other Loan Document, such additional amount in dollars as shall be necessary to enable a Lender to receive the same net amount which such Lender would have received on such due date had no such obligation been imposed upon Borrower. Borrower will deliver promptly to the Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by Borrower hereunder or under such other Loan Document.

(b) If Borrower, the Agent, any Lender or any other Person is required by any law, rule, regulation, order, directive, treaty or guideline to make any deduction or withholding (which deduction or withholding would constitute an Indemnified Tax) from any amount required to be paid by any Borrower to or on behalf of the Agent or any Lender under any Loan Document, (i) such Borrower shall pay such Indemnified Tax before the date on which penalties attach thereto, such payment to be made for its own account (if the liability to pay is imposed on such Borrower) or on behalf of and in the name of the Agent or any Lender (if the liability is imposed on Lender), and (ii) the sum payable to the Agent or such Lender shall be increased as may be necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) the Agent or such Lender receives an amount equal to the sum it would have received had no such deductions or withholdings been made.

(c) Each Borrower agrees to pay any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, the Loan Documents or otherwise with respect to, the Loan Documents (collectively, the “ Other Taxes ”).

(d) Within 30 days after the request therefor by the Agent or any Lender in connection with any payment of Indemnified Taxes or Other Taxes, each Borrower will furnish to the Agent or such Lender the original or certified copy of an official receipt from the jurisdiction to which payment is made evidencing payment thereof or, if unavailable, a certificate from its chief financial officer or president that states that such payment has been made and that sets forth the date and amount of such payment.

(e) Each Lender agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its applicable lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in is reasonable judgment, be otherwise disadvantageous to such Lender.

(f) Without prejudice to the survival of any other agreement of Borrower hereunder, the agreements and obligations of Borrower contained in this Section 2.9 shall survive the payment in full of principal and interest hereunder.

(g) If requested by Borrower, the Agent shall use its best efforts to provide Borrower with such IRS forms as are reasonably necessary for Borrower to fulfill its obligations hereunder, but the failure of the Agent to provide such forms shall not in any way relieve or postpone Borrower’s obligations hereunder.

 

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Section 2.10 Computations . Subject to Section 2.3(f), all computations of interest on the Loans and of fees or other charges shall be based on a 360-day year and paid for the actual number of days elapsed.

Section 2.11 Additional Payments . If any present or future applicable law, statute, rule or regulation thereunder or any interpretation thereof by any competent court or by any Governmental Authority charged with the administration or the interpretation thereof, or any request, directive, instruction or notice at any time or from time to time hereafter made upon or otherwise issued to the Agent or any Lender by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall:

(a) subject the Agent or any Lender to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the other Loan Documents, any Letters of Credit, the Commitment or the Loans (other than taxes based upon or measured by the income or profits of the Agent or such Lender), or

(b) materially change the basis of taxation (except for changes in taxes on income or profits) of payments to the Agent or any Lender of the principal of or the interest on any Loans or any other amounts payable to the Agent or such Lender under this Agreement or any of the other Loan Documents, or

(c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of an office of the Agent or any Lender, or

(d) impose on the Agent or any Lender any other conditions or requirements with respect to this Agreement, the other Loan Documents, the Loans, any Letters of Credit, the Commitment or any class of loans, letters of credit or commitments of which any of the Loans, any Letters of Credit or the Commitment forms a part, and the result of any of the foregoing is

(i) to increase the cost to the Agent or such Lender of making, funding, issuing, renewing, extending or maintaining the Loans, any Letters of Credit or the Commitment; or

(ii) to reduce the amount of principal, interest, or other amount payable to the Agent or such Lender hereunder on account of the Loans, any Letters of Credit or the Commitment; or

 

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(iii) to require the Agent or such Lender to make any payment or to forego any interest or fee or other sum payable hereunder, the amount of which payment of foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by the Agent or such Lender from Borrower hereunder,

then, and in each such case, Borrower will, upon demand made by the Agent or such Lender at any time and from time to time and as often as the occasion therefor may arise, pay to the Agent or such Lender such additional amounts as will be sufficient to compensate the Agent or such Lender for such additional cost, reduction, payment, foregone interest or other sum.

Section 2.12 Capital Adequacy . If any present or future law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) or the interpretation thereof by a court or governmental authority with appropriate jurisdiction affects the amount of capital required or expected to be maintained by the Agent or any Lender or any corporation controlling the Agent or such Lender and the Agent or such Lender determines that the amount of capital required to be maintained by it is increased by or based upon the existence of the Agent or such Lender’s commitment with respect to the Loans, then the Agent or such Lender may notify Borrower of such fact. To the extent that the costs of such increased capital requirements are not reflected in the Prime Rate or LIBOR, Borrower and the Agent or such Lender shall thereafter attempt to negotiate in good faith, within thirty (30) days of the day on which Borrower receives such notice, an adjustment payable hereunder that will adequately compensate the Agent or such Lender in light of these circumstances. If Borrower and the Agent or such Lender are unable to agree to such adjustment within thirty (30) days of the date on which Borrower receives such notice, then commencing on the date of such notice (but not earlier than the effective date of any such increased capital requirement), the amounts payable hereunder shall increase by an amount that will, in the Agent or such Lender’s reasonable determination, provide adequate compensation. The Agent or such Lender shall allocate such cost increases among its customers in good faith and on an equitable basis.

Section 2.13 Certificate; Protection . A certificate setting forth any additional amounts payable pursuant to Sections 2.11 or 2.12 and a brief explanation of such amounts which are due, submitted by the Agent to Borrower, shall be conclusive, absent manifest error, that such amounts are due and owing. The protection of Sections 2.11 or 2.12 shall be available to the Agent and each Lender regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, agreement, guideline or other change or condition which shall have been imposed or shall have occurred.

Section 2.14 Obligations Absolute . The obligations of Borrower under this Agreement shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and such other agreement or instrument under all circumstances, and irrespective of, the following circumstances:

(a) any lack of validity or enforceability of all or any portion of this Agreement or any other agreement or any instrument relating hereto;

 

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(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the obligations of Borrower;

(c) the existence of any claim, setoff, defense or other right that Borrower may have; or

(d) any amendment or waiver of or consent to departure from any of the Loan Documents, or all or any of the obligations of Borrower in respect of the Loans or this Agreement.

C. ADDITIONAL CLAUSES FOR LIBOR RATE ADVANCES

Section 2.15 Notice . In the event the Agent determines that by reason of circumstances affecting the inter-bank Eurodollar market, adequate and reasonable means do not exist for determining LIBOR or that the eurodollar deposits in the relevant amount and for the relevant maturity are not available to the Agent in the inter-bank eurodollar market, with respect to a proposed LIBOR Rate Advance, the Agent shall give Borrower prompt notice to such determination. If such notice is given, then (a) any requested LIBOR Rate Advance shall be made as a Prime Rate Advance, unless Borrower gives the Agent one (1) Business Day’s prior written notice that its request for such borrowing is canceled; (b) any Prime Rate Advance which was to have been converted to a LIBOR Rate Advance shall be continued as a Prime Rate Advance; and (c) any outstanding LIBOR Rate Advance shall be converted to a Prime Rate Advance on the last Business Day of the then current Interest Period for such LIBOR Rate Advance. Until such notice has been withdrawn, the Agent shall have no obligation to make LIBOR Rate Advances or maintain outstanding LIBOR Rate Advances and Borrower shall not have the right to convert Prime Rate Advances to LIBOR Rate Advances.

Section 2.16 Invalidity; Enforceability . Notwithstanding any other provision of this Agreement, if, after the date of this Agreement, any applicable law, treaty, regulation or directive, or any change therein or in the interpretation or application thereof, shall make it unlawful for any Lender to make or maintain any LIBOR Rate Advance in dollars or in an Alternative Currency, the obligation of such Lender hereunder to make or maintain such LIBOR Rate Advance shall forthwith be suspended for the duration of such illegality and Borrower shall, if any such Advance is outstanding promptly, upon request from such Lender, convert such advance to another Type of Advance. If any such payment is made on a day that is not the last Business Day of the then current Interest Period applicable to such Advance, Borrower shall pay such Lender, upon such Lender’s request, such amount or amounts as may be necessary to compensate such Lender for any loss or expense sustained or incurred by such Lender in respect of such advance as a result of any such payment, in accordance with Section 2.19 .

Section 2.16A Currency Equivalents . For purposes of the provisions of this Article 2 , (i) the equivalent in dollars of any Alternative Currency shall be determined by using the quoted spot rate at which the Agent’s Head Office offers to exchange dollars for such Alternative Currency in London at 11:00 a.m. (London time) two Business Days prior to the date on which such equivalent is to be determined, (ii) the equivalent in any Alternative Currency of any other Alternative Currency shall be determined by using the

 

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quoted spot rate at which the Agent’s Head Office offers to exchange such Alternative Currency for the equivalent in dollars of such other Alternative Currency in Londo