LOAN AND SECURITY AGREEMENT

LOAN AND SECURITY AGREEMENT

by and among

      INNOPHOS, INC.,
INNOPHOS CANADA, INC.
 as Borrowers

and

THE LENDERS AND ISSUING BANK FROM TIME TO TIME PARTY HERETO

WACHOVIA BANK, NATIONAL ASSOCIATION
as Administrative and Collateral Agent

and

      WACHOVIA CAPITAL MARKETS, LLC
as Syndication Agent, Lead Arranger and Lead Bookrunner

Dated: May 22, 2009

	TABLE OF CONTENTS
SECTION 1.	DEFINITIONS	1
SECTION 2.	CREDIT FACILITIES	36
2.1	Revolving Loans	36
2.2	Swing Line Loans	37
2.3	Letters of Credit	37
2.4	Requests for Borrowings	42
2.5	Prepayments	43
2.6	Joint and Several Liability of Borrowers	43
2.7	Commitments	45
SECTION 3.	INTEREST AND FEES	45
3.1	Interest	45
3.2	Fees	47
3.3	Inability to Determine Applicable Interest Rate	48
3.4	Illegality	48
3.5	Increased Costs	48
3.6	Capital Requirements	49
3.7	Certificates for Reimbursement	49
3.8	Delay in Requests	49
3.9	Mitigation; Replacement of Lenders	49
3.10	Funding Losses	50
3.11	Maximum Interest	50
3.12	No Requirement of Match Funding	51
SECTION 4.	CONDITIONS PRECEDENT	51
4.1	Conditions Precedent to Initial Loans and Letters of Credit	51
4.2	Conditions Precedent to All Loans and Letters of Credit	54
SECTION 5.	GRANT AND PERFECTION OF SECURITY INTEREST	54
5.1	Grant of Security Interest	54
5.2	Perfection of Security Interests	56
5.3	Special Provisions Relating to Collateral	59
SECTION 6.	COLLECTION AND ADMINISTRATION	60
6.1	Borrowers’ Loan Accounts	60
6.2	Statements	61
6.3	Lenders’ Evidence of Debt	61
6.4	Register	61
6.5	Promissory Notes	62
6.6	Cash Management; Collection of Proceeds of Collateral	62
6.7	Payments	63
6.8	Taxes	64

 

6.9	Use of Proceeds	67
6.10	Appointment of Administrative Borrower as Agent for Requesting Loans and Receipts of
	Loans and Statements	67
6.11	Pro Rata Treatment	68
6.12	Sharing of Payments, Etc	68
6.13	Settlement Procedures	69
6.14	Obligations Several; Independent Nature of Lenders’ Rights	72
6.15	Bank Products	72
SECTION 7.	COLLATERAL REPORTING AND COVENANTS	73
7.1	Collateral Reporting	73
7.2	Accounts Covenants	74
7.3	Inventory Covenants	75
7.4	Equipment and Real Property Covenants	76
7.5	Power of Attorney	76
7.6	Right to Cure	77
7.7	Access to Premises	77
SECTION 8.	REPRESENTATIONS AND WARRANTIES	77
8.1	Existence, Power and Authority	77
8.2	Name; Jurisdiction of Organization; Chief Executive Office; Collateral Locations	78
8.3	Financial Statements; No Material Adverse Effect	79
8.4	Priority of Liens; Title to Properties	79
8.5	Tax Returns	79
8.6	Litigation	79
8.7	Compliance with Other Agreements and Applicable Laws	79
8.8	Environmental Compliance	80
8.9	Employee Benefits	80
8.10	Bank Accounts	82
8.11	Intellectual Property	82
8.12	Subsidiaries; Affiliates; Capitalization; Solvency	82
8.13	Labor Disputes	83
8.14	Certain Restrictions	83
8.15	Material Contracts; Affiliate Indebtedness	83
8.16	Payable Practices	83
8.17	OFAC	84
8.18	Accuracy and Completeness of Information	84
8.19	Survival of Warranties; Cumulative	84
SECTION 9.	AFFIRMATIVE COVENANTS	84
9.1	Maintenance of Existence	84
9.2	New Collateral Locations	85
9.3	Compliance with Laws, Regulations, Etc	85
9.4	Payment of Taxes and Claims	86
9.5	Insurance	86
9.6	Financial Statements and Other Information	87
9.7	Compliance with ERISA; Canadian Pension Plans	90
9.8	End of Fiscal Years; Fiscal Quarters	91

 

9.9	License Agreements	91
9.10	Additional Guaranties and Collateral Security; Further Assurances	92
9.11	Costs and Expenses	93
9.12	Applications under Insolvency Statutes	94
SECTION 10.	NEGATIVE COVENANTS	94
10.1	Sale of Assets, Consolidation, Merger, Dissolution, Etc	94
10.2	Encumbrances	95
10.3	Indebtedness	96
10.4	Loans, Investments, Etc	100
10.5	Restricted Payments	100
10.6	Transactions with Affiliates	101
10.7	Change in Business	102
10.8	Limitation of Restrictions Affecting Subsidiaries	102
10.9	Certain Payments of Indebtedness, Etc	102
10.10	Modifications of Indebtedness, Organizational Documents and Certain Other
	Agreements	103
10.11	Designation of Designated Senior Indebtedness	104
10.12	License Agreements	104
10.13	Foreign Assets Control Regulations, Etc	105
SECTION 11.	FINANCIAL COVENANTS	105
11.1	Fixed Charge Coverage Ratio	105
11.2	Excess Availability	105
SECTION 12.	EVENTS OF DEFAULT AND REMEDIES	105
12.1	Events of Default	105
12.2	Remedies	107
SECTION 13.	JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW	111
13.1	Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver	111
13.2	Waiver of Notices	112
13.3	Amendments and Waivers	112
13.4	Waiver of Counterclaims	114
13.5	Indemnification	114
SECTION 14.	THE AGENT	115
14.1	Appointment, Powers and Immunities	115
14.2	Reliance by Agent	115
14.3	Appointment for the Province of Québec	116
14.4	Events of Default	116
14.5	Wachovia in its Individual Capacity	117
14.6	Indemnification	117
14.7	Non-Reliance on Agent and Other Lenders	117
14.8	Failure to Act	118
14.9	Additional Loans	118

 

14.10	Concerning the Collateral and the Related Loan Documents	118
14.11	Field Audit, Examination Reports and other Information; Disclaimer by Lenders	118
14.12	Collateral Matters	119
14.13	Agency for Perfection	120
14.14	Successor Agent	121
14.15	Other Agent Designations	121
SECTION 15.	TERM OF AGREEMENT; MISCELLANEOUS	121
15.1	Term	121
15.2	Interpretative Provisions	122
15.3	Notices	123
15.4	Partial Invalidity	124
15.5	Confidentiality	124
15.6	Successors	125
15.7	Assignments; Participations	126
15.8	Entire Agreement	127
15.9	USA Patriot Act	127
15.10	Counterparts, Etc	127
15.11	Judgment Currency	128

 

 

      This Loan and Security Agreement (this “Agreement”) dated May 22, 2009 is entered into by and among Innophos, Inc., a Delaware corporation (“Innophos”) and Innophos Canada, Inc., an Ontario, Canada corporation (“Innophos Canada” and, together with Innophos, each individually, a “Borrower” and collectively, “Borrowers”, as hereinafter further defined), the parties hereto from time to time as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders” as hereinafter further defined) and Wachovia Bank, National Association , a national banking association, in its capacity as agent for Issuing Bank and Lenders (in such capacity, “Agent” as hereinafter further defined).

      WHEREAS, Borrowers and Guarantors (as hereinafter defined) have requested that Agent, Issuing Bank and Lenders enter into financing arrangements with Borrowers pursuant to which Lenders may make loans and provide other financial accommodations to Borrowers; and

      WHEREAS, Issuing Bank and each Lender are willing to agree (severally and not jointly) to make such loans and provide such financial accommodations to Borrowers on a pro rata basis according to its Commitment (as defined below) on the terms and conditions set forth herein and Agent is willing to act as agent for Issuing Bank and Lenders on the terms and conditions set forth herein and the other Loan Documents;

      NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1. DEFINITIONS

      For purposes of this Agreement, the following terms shall have the respective meanings given to them below:

      1.1 “Accounts” shall mean, as to each Borrower and Guarantor, all present and future rights of such Borrower and Guarantor to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card.

      1.2 “Administrative Borrower” shall mean Innophos, Inc., a Delaware corporation, in its capacity as Administrative Borrower on behalf of itself and the other Borrowers pursuant to Section 6.10 hereof and its successors and assigns in such capacity.

      1.3 “Affiliate” shall mean, with respect to a specified Person, any other Person (excluding any Subsidiary) which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person. For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power either (a) to vote twenty (20%) percent or more of the securities having ordinary voting power for the election of directors of such Person or (b) to direct or cause the direction of the management and policies, whether through the ownership of Equity Interests, by agreement or otherwise.

      1.4 “Agent” shall mean Wachovia Bank, National Association, in its capacity as agent on behalf of Lenders pursuant to the terms hereof and any replacement or successor agent hereunder.

      1.5 “Agent Payment Account” shall mean account no. 2070482789126 of Agent at Wachovia Bank, National Association, or such other account of Agent as Agent may from time to time designate to Administrative Borrower as the Payment Account for purposes of this Agreement and the other Loan Documents.

      1.6 “Applicable Margin” shall mean, with respect to Base Rate Loans and LMIR Loans, subject to the provisions below, the applicable percentage (on a per annum basis) set forth below based on the Quarterly Average Excess Availability for the immediately preceding three (3) month period beginning on the first day of the month of such period.

 

provided , that , (i) the Applicable Margin shall be calculated and established once every three (3) months and shall remain in effect until adjusted for the next three (3) month period, (ii) each adjustment of the Applicable Margin shall be effective as of the first day of each such three (3) month period based on the Quarterly Average Excess Availability for the immediately preceding three (3) month period, (iii) the Applicable Margin through December 31, 2009 shall be the amount for Tier 2 set forth above and (iv) in the event that Borrowers fail to provide any Borrowing Base Certificate or other information with respect thereto for any period on the date required hereunder, effective as of the date on which such Borrowing Base Certificate or other information was otherwise required, at Agent’s option, the Applicable Margin shall be based on the highest rate above until the next Business Day after the Borrowing Base Certificate or other information is provided for the applicable period at which time the Applicable Margin shall be adjusted as otherwise provided herein. In the event that at any time after the end of any three (3) month period the Quarterly Average Excess Availability for such three (3) month period used for the determination of the Applicable Margin was greater than the actual amount of the Quarterly Average Excess Availability for such period as a result of the inaccuracy of information provided by or on behalf of Borrowers to Agent for the calculation of Excess Availability, the Applicable Margin for such prior period shall be adjusted to the applicable percentage based on such actual Quarterly Average Excess Availability and any additional interest for the applicable period as a result of such recalculation shall be promptly paid to Agent. The foregoing shall not be construed to limit the rights of Agent and Lenders

with respect to the amount of interest payable after a Default or Event of Default whether based on such recalculated percentage or otherwise.

      1.7 “Approved Fund” shall mean any Person (other than a natural Person), including, without limitation, any special purpose entity, that is (or will be) engaged in making, purchasing, holding or otherwise investing in bank revolving loans and similar extensions of credit in the ordinary course of its business; provided , that , such Approved Fund must be administered by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

      1.8 “Arranger” shall mean Wachovia Capital Markets, LLC, a Delaware limited liability company in its capacity as lead arranger, and its successors and assigns hereunder.

      1.9 “Assignment and Acceptance” shall mean an Assignment and Acceptance substantially in the form of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender’s interest hereunder in accordance with the provisions of Section 15.7 hereof.

      1.10 “Bank Product Provider” shall mean any Lender, Affiliate of any Lender or other financial institution (in each case as to any Lender, Affiliate or other financial institution to the extent approved by Agent in writing, with notice to Administrative Borrower) that provides any Bank Products to Borrowers or Guarantors.

      1.11 “Bank Products” shall mean any one or more of the following types or services or facilities provided to a Borrower by a Bank Product Provider: (a) credit cards, debit cards or stored value cards or the processing of credit card, debit card or stored value card sales or receipts, (b) cash management or related services, including (i) the automated clearinghouse transfer of funds for the account of a Borrower pursuant to agreement or overdraft for any accounts of Borrowers maintained at Agent or any Bank Product Provider that are subject to the control of Agent pursuant to any Deposit Account Control Agreement to which Agent or such Bank Product Provider is a party, as applicable, and (ii) controlled disbursement services and (c) Hedge Agreements if and to the extent permitted hereunder.

      1.12 “Base Rate” shall mean the higher of (a) the rate from time to time publicly announced by Wachovia Bank, National Association, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank, (b) the Federal Funds Effective Rate from time to time plus one-half of one (0.50%) percent, or (c) three (3%) percent. The term “Federal Funds Effective Rate” shall mean, for any period, a fluctuating interest rate per annum equal, for each day during such period, to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not published for any day that is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal Funds brokers of recognized standing selected by it.

      1.13 “Base Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Base Rate in accordance with the terms thereof.

      1.14 “Borrowers” shall mean, collectively, the following (together with their respective successors and assigns): (a) Innophos, Inc., a Delaware corporation; (b) Innophos Canada, Inc., an Ontario, Canada corporation, and (c) any other Person that at any time after the date hereof becomes a Borrower; each sometimes being referred to herein individually as a “Borrower”.

3

1.15 “Borrowing Base” shall mean, at any time, as to each Borrower:

          (a) the amount equal to: (i) eighty-five (85%) percent of the Eligible Accounts of such Borrower (other than Eligible Foreign Accounts) plus (ii) the lesser of (A) eighty-five (85%) percent of the Eligible Foreign Accounts of such Borrower, and (B) the US Dollar Equivalent of $5,000,000, plus

          (b) the amount equal to the least of (i) sixty (60%) percent of the Value of Eligible Inventory of such Borrower or (ii) eighty-five (85%) percent of the Net Recovery Percentage of Eligible Inventory of such Borrower multiplied by the Value of such Eligible Inventory of such Borrower and (iii) the Inventory Loan Limit of such Borrower, minus

             (c) Reserves attributable to such Borrower.

      1.16 “Borrowing Base Certificate” shall mean a certificate substantially in the form of Exhibit B hereto, as such form, subject to the terms hereof, may from time to time be modified by Agent, which is duly completed (including all schedules thereto) and executed by the chief executive officer, chief financial officer, controller or other appropriate financial officer of Administrative Borrower reasonably acceptable to Agent and delivered to Agent.

      1.17 “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of either the State of New York or the State of North Carolina or, if related to Innophos Canada, the Province of Ontario, or are in fact closed in either the State of New York or the State of North Carolina or, if related to Innophos Canada, the Province of Ontario, and a day on which Agent is open for the transaction of business, except that if a determination of a Business Day shall relate to any LMIR Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable market.

      1.18 “Canadian Dollars” and “C$” shall each mean the lawful currency of Canada.

      1.19 “Canadian Pension Plan” shall mean any plan, program or arrangement that is a pension plan for the purposes of any applicable pension benefits legislation or any tax laws of Canada or a Province or Territory thereof, whether or not registered under any such laws, which is maintained or contributed to by, or to which there is or may be an obligation to contribute by, any Borrower or Guarantor in respect of any Person’s employment in Canada with such Borrower or Guarantor.

      1.20 “Capital Expenditures” shall mean with respect to any Person for any period the aggregate of all expenditures by such Person and its Subsidiaries made during such period that in accordance with GAAP are or should be included in “property, plant and equipment” or in a similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or financed and including all Capitalized Lease Obligations paid or payable during such period, other than the interest component of any Capitalized Lease Obligation (without duplication as to any period).

      1.21 “Capital Leases” shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of such Person.

      1.22 “Cash Dominion Event” shall mean (a) an Event of Default exists or has occurred and is continuing, or (b) Excess Availability is less than $16,000,000.

4

      1.23 “Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with a maturity date of ninety (90) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof; provided , that , the full faith and credit of the United States of America is pledged in support thereof; (b) certificates of deposit or bankers’ acceptances with a maturity of ninety (90) days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of ninety (90) days or less issued by a corporation (except an Affiliate of any Borrower or Guarantor) organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $500,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within ninety (90) days or less from the date of acquisition; provided , that , the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above.

      1.24 “Cash Management Accounts” shall have the meaning set forth in Section 6.6 hereof.

      1.25 “Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

      1.26 “Change of Control” shall mean (a) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), except for one or more Permitted Holders, of beneficial ownership, directly or indirectly, of a majority of the voting power of the total outstanding Equity Interests of Parent; or (b) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of any Borrower or Guarantor (together with any new directors who have been appointed by any Permitted Holder, or whose nomination for election by the stockholders of such Borrower or Guarantor, as the case may be, was approved by a vote of at least a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of any Borrower or Guarantor then still in office; or (c) the failure of Parent to own directly or indirectly one hundred (100%) percent of the voting power of the total outstanding Equity Interests of each Borrower and Guarantor.

      1.27 “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules and regulations thereunder or related thereto.

      1.28 “Collateral” shall have the meaning set forth in Section 5 hereof.

      1.29 “Collateral Access Agreement” shall mean a landlord waiver letter, bailee letter, or acknowledgment agreement or similar letter or agreement, in writing, in form and substance reasonably

5

satisfactory to Agent, from a lessor of premises to a Borrower or Guarantor, or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, in favor of Agent with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other person.

      1.30 “Commercial LC Fee Rate” shall mean a rate equal to three (3%) percent per annum.

      1.31 “Commercial LCs” shall mean any Letter of Credit consisting of a letter of credit issued for the purpose of providing the primary manner of payment for the purchase price of goods or services by a Borrower in the ordinary course of the business of such Borrower (and not in the event that a Borrower fails to make payment); each sometimes being referred to herein individually as a “Commercial LC”.

      1.32 “Commitment” shall mean, at any time, as to each Lender, the principal amount set forth below such Lender’s signature on the signatures pages hereto designated as the Commitment or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 15.7 hereof, as the same may be adjusted from time to time in accordance with the terms hereof; sometimes being collectively referred to herein as “Commitments”.

      1.33 “Compliance Period” shall mean the period commencing on the date on which an Event of Default exists or has occurred and is continuing or Excess Availability has been less than $16,000,000 and ending on a subsequent date on which Excess Availability has been equal to or greater than $16,000,000 for sixty (60) consecutive days during each of which no Event of Default has existed or has occurred and been continuing.

      1.34 “Concentration Accounts” shall mean, collectively, the deposit accounts of Borrowers identified on Schedule 8.10 of the Information Certificate as the concentration accounts and such other accounts as may be established after the date hereof in accordance with the terms hereof used to receive funds from the Cash Management Accounts; sometimes being referred to herein individually as a “Concentration Account”.

      1.35 “Consolidated Net Income” shall mean, with respect to any Person for any period, the aggregate of the net income (loss) of such Person and its Subsidiaries (excluding, with respect to any Borrower’s Subsidiaries, the Mexico Affiliates, for all purposes of this definition), on a consolidated basis, for such period, all as determined in accordance with GAAP; provided, that,

             (a) the net income of any Person that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or a Subsidiary of such Person;

            (b) except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a Subsidiary of such Person or is merged into or consolidated with such Person or any of its Subsidiaries or that Person’s assets are acquired by such Person or by any of its Subsidiaries shall be excluded;

6

          (c) the net income (if positive) of any wholly-owned Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such wholly-owned Subsidiary to such Person or to any other wholly-owned Subsidiary of such Person is not at the date of determination permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such wholly-owned Subsidiary shall be excluded.

      For the purposes of this definition, net income excludes any gain and non-cash loss together with any related Provision for Taxes for such gain and non-cash loss realized upon the sale or other disposition of any assets that are not sold in the ordinary course of business or of any Capital Stock of such Person or a Subsidiary of such Person, and any net income or non-cash loss realized as a result of changes in accounting principles or the application thereof to such Person and any net income or non-cash loss realized as the result of the extinguishment of debt.

      1.36 “Credit Facility” shall mean the Loans and Letters of Credit provided to or for the benefit of any Borrower or Guarantor pursuant to Sections 2 hereof.

      1.37 “Default” shall mean an act, condition or event which with notice or passage of time or both would constitute an Event of Default.

      1.38 “Defaulting Lender” shall have the meaning set forth in Section 6.13 hereof.

      1.39 “Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent, the Borrower or Guarantor with a deposit account at any bank and the bank at which such deposit account is at any time maintained which provides that such bank will comply with instructions originated by Agent directing disposition of the funds in the deposit account without further consent by such Borrower or Guarantor and has such other terms and conditions as Agent may reasonably require.

      1.40 “Domestic Entity” shall mean a Person organized under the laws of the United States or any State or other political subdivision thereof.

      1.41 “EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to (a) the Consolidated Net Income of such Person and its Subsidiaries for such period determined in accordance with GAAP, plus (b) each of the following, in each case to the extent deducted in the calculation of such Consolidated Net Income for such period: (i) depreciation and amortization (including, but not limited to, imputed interest and deferred compensation) of such Person and its Subsidiaries for such period, all in accordance with GAAP, plus (ii) the Interest Expense of such Person and its Subsidiaries for such period, plus (iii) charges for Federal, State, Provincial, Territorial, local and foreign income or franchise taxes for such period, plus (iv) extraordinary cash and non-cash losses and unusual or non-recurring charges, including without limitation, severance costs, relocation costs and integration and facilities opening costs including in connection with any Investment or sale or other disposition of an asset, plus (v) Transaction Expenses paid during such period, plus (vi) any fees, costs, commissions, expenses or other charges (other than the Transaction Expenses) incurred during such period in connection with any Permitted Acquisition, or Permitted Disposition or repayments of Indebtedness or amendment or modification to any Indebtedness, in each case permitted herein or otherwise approved in accordance with the terms hereof; provided , that , (A) in no event shall the aggregate cash amount added to Consolidated Net Income pursuant to clauses (iv) through (vi) hereof at any time exceed $5,000,000 and (B) notwithstanding anything to the contrary set forth in this definition, for purposes of determining the compliance of Borrowers and Guarantors with Section 11.1 hereof prior to the last day of the month after the first anniversary of the date of this Agreement, the EBITDA of Parent and its Subsidiaries on a consolidated basis for each period set forth on EBITDA Schedule 1.41

7

hereto shall be used in the calculation of such EBITDA and (c) with respect to the Borrowers’ Subsidiaries, the Mexico Affiliates shall be excluded for all purposes under this definition.

      1.42 “Eligible Accounts” shall mean Accounts created by a Borrower that in each case at the time of creation and at all times thereafter satisfy the criteria set forth below as determined by Agent. Without limiting Agent’s discretion provided herein, Eligible Accounts shall not include:

           (a) any Account which is not subject to a first priority perfected security interest in favor of Agent;

           (b) any Account which is subject to any security interest, lien or other encumbrance other than the security interest and lien of Agent and those permitted in clauses (c) and (j) of Section 10.2 hereof (but as to liens referred to in clauses (c) and (j) only to the extent that Agent has established a Reserve as provided therein) and any other liens permitted under this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such security interest or lien and Agent;

           (c) any Account that is unpaid more than sixty (60) days after the original due date for it or ninety (90) days after the date of the original invoice for it,

           (d) any Account owing by an account debtor for which more than fifty (50%) percent of the Accounts owing by such account debtor and its Affiliates are ineligible hereunder;

           (e) any Account owing by a single account debtor to the extent that the aggregate amount of such Accounts exceeds twenty (20%) percent of the aggregate amount of all otherwise Eligible Accounts (but the portion of the Accounts not in excess of such percentage that otherwise satisfy the criteria herein will be deemed Eligible Accounts);

           (f) any Account with respect to which any covenant, representation, or warranty contained in this Agreement or in the other Loan Documents has been breached or is not true in any material respect;

           (g) any Account that (i) does not arise from the sale of goods or performance of services in the ordinary course of business, (ii) is not evidenced by an invoice or other documentation satisfactory to Agent and which has been sent to the account debtor, (iii) represents a progress billing, (iv) is contingent upon such Person’s or its Affiliates’ completion of any further performance, (v) represents a sale on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment, cash-on-delivery or any other repurchase or return basis, (vi) relates to payments of interest or (vii) has been invoiced more than once;

           (h) any Account with respect to which any check or other instrument of payment has been returned as uncollectible for any reason;

8

           (i) any Account owed by an account debtor which has (i) applied for, suffered, or consented to the appointment of any receiver, interim receiver, receiver-manager, custodian, trustee, or liquidator of its assets, (ii) had possession of all or a material part of its property taken by any receiver, interim receiver, receiver-manager, custodian, trustee or liquidator, (iii) filed, or had filed against it, any request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as bankrupt, winding-up, or voluntary or involuntary case under any Federal, State, Provincial or territorial bankruptcy laws (other than post-petition accounts payable of an account debtor that is a debtor-in-possession under the US Bankruptcy Code and acceptable to Agent), (iv) admitted in writing its inability, or is generally unable to, pay its debts as they become due, (v) become insolvent, or (vi) ceased operation of its business;

           (j) any Account owed by any account debtor that has sold all or substantially all its assets (unless such Account has been assumed by a Person that shall have acquired such assets and otherwise satisfies the requirements set forth in this definition);

           (k) any Account owed by an account debtor that (i) does not maintain its chief executive office in the United States or Canada or (ii) is not organized under applicable law of the United States, any State of the United States, Canada, or any Province or Territory of Canada, unless, in either case, such Account is backed by a letter of credit acceptable to Agent and that has been assigned to and is directly drawable by Agent;

           (l) any Account owed by (i) the government (or any department, agency, public corporation, or instrumentality thereof) of any country other than the United States or Canada, unless such Account is backed by a letter of credit acceptable to Agent and which has been assigned to and is directly drawable by Agent, or (ii) the government of the United States or Canada, or any department, agency, public corporation, or instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as amended, or the Financial Administration Act (Canada), as amended, as applicable, and any other steps necessary to perfect the security interest and lien of Agent in such Account have been complied with to Agent’s satisfaction;

           (m) any Account owed by any Affiliate, employee, officer, director or agent of any Borrower or Guarantor;

           (n) any Account owed by an account debtor or any Affiliate of such account debtor to which any Borrower or Guarantor is indebted, but only to the extent of such indebtedness, or which is subject to any security, deposit, progress payment, retainage or other similar advance made by or for the benefit of an account debtor, in each case to the extent thereof;

           (o) any Account subject to any counterclaim, deduction, defense, setoff or dispute (including, without limitation, with respect to any of the foregoing, in the form of a rebate or warranty claim), but in each case only to the extent of such counterclaim, deduction, defense, setoff or dispute;

           (p) any Account evidenced by or arising under any promissory note, lease, chattel paper, or instrument;

           (q) any Account owed by an account debtor located in any jurisdiction which requires filing of a “Notice of Business Activities Report” or other similar report in order to permit such Person to seek judicial enforcement in such jurisdiction of payment of such Account, unless such Person has filed such report or qualified to do business in such jurisdiction;

           (r) any Account with respect to which any Borrower or Guarantor has made any agreement with the account debtor for any reduction thereof (to the extent of such reduction), other than discounts and adjustments given in the ordinary course of business, or any Account which was partially paid and such Borrower or Guarantor created a new receivable for the unpaid portion of such Account;

           (s) any Account that does not comply in all material respects with the requirements of all applicable laws and regulations, whether Federal, State, Provincial, territorial or local, including without limitation the Federal Consumer Credit Protection Act, the Federal Truth in Lending Act and Regulation Z of the Board;

           (t) any Account arising from goods that have been sold under a purchase order or pursuant to the terms of a contract or other agreement or understanding (written or oral) that indicates or purports to indicate that any Person other than the account debtor with respect to such Account has or has had an ownership interest in such goods, or which indicates any party other than a Borrower as payee or remittance party; or

           (u) any Account that Agent determines in good faith may not be paid by reason of the account debtor’s inability to pay.

The criteria for Eligible Accounts set forth above may only be changed and any new criteria for Eligible Accounts may only be established by Agent based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent that such event, condition or circumstance has not been identified by a Borrower to the field examiners of Agent prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Accounts as reasonably determined by Agent in good faith. Any Accounts that are not Eligible Accounts shall nevertheless be part of the Collateral.

      1.43 “Eligible Domestic In-Transit Inventory” shall mean Inventory that would otherwise be Eligible Inventory (other than for its location) that has been shipped from a location of any Borrower or from the manufacturer or wholesale distributor thereof within the United States or Canada for receipt at a location of any Borrower within the United States or Canada and permitted hereunder, within fifteen (15) days of shipment, but in either case, which has not yet been delivered to such location for which the purchase order is in the name of a Borrower, title has passed to such Borrower (and Agent has received such evidence thereof as it has requested), which is insured in accordance with the terms of this Agreement; provided , that , Eligible Domestic In-Transit Inventory shall not at any time exceed $15,000,000.

      1.44 “Eligible Foreign Accounts” shall mean Accounts of a Borrower owed by account debtors whose chief executive office is located in a jurisdiction other than the United States or Canada which would constitute Eligible Accounts but for the fact that such Accounts are excluded from the definition of “Eligible Accounts” under subsection (k) of such definition set forth herein; provided , that , (a) such Accounts shall at all times be billed and payable in Canadian Dollars or US Dollars, except that up to the US Dollar Equivalent of $1,500,000 of such Accounts in the aggregate at any one time may be denominated in other currencies reasonably acceptable to Agent, (b) all payments in respect of such Accounts shall be made by such account debtors to a Borrower in the United States or to a Cash Management Account in the United States, (c) the account debtor with respect to such Accounts is located in a jurisdiction that Agent determines in its discretion maintains a system of laws with respect to the perfection of security interests and the enforcement thereof by a secured party (including the ability of Agent as secured party to collect such Accounts) that is satisfactory to Agent in all respects, and (d) without limitation upon any other provision of this definition, before any Loans or Letters of Credit may be provided on the basis of such Eligible Foreign Accounts, or such Foreign Accounts may be included in

the Borrowing Base or otherwise deemed to constitute Eligible Foreign Accounts, Borrowers and Guarantors shall have executed and delivered, or caused to be executed and delivered, such other agreements, documents and instruments as may be required by Agent to perfect the security interests of Agent in those Accounts of an account debtor with its chief executive office or principal place of business in such jurisdiction in accordance with the applicable laws of such jurisdiction and take or cause to be taken such other and further actions as Agent may request to enable Agent as secured party with respect thereto to collect such Accounts under the applicable laws of such jurisdiction, including any laws, regulations or procedures applicable to account debtors that are foreign governments or owned by foreign governments or any subdivision, department, agency or instrumentality thereof.

      1.45 “Eligible Inventory” shall mean Inventory of a Borrower consisting of raw materials and finished goods held for resale in the ordinary course of the business of such Borrower that satisfy the criteria set forth below as determined by Agent. Without limiting Agent’s discretion provided herein, Eligible Inventory shall not include:

           (a) any Inventory that is not subject to a first-priority, perfected security interest in favor of Agent;

           (b) any Inventory that is subject to any security interest, lien or other encumbrance other than the security interest and lien of Agent and those permitted in clauses (b), (c) and (j) of Section 10.2 hereof (but as to liens referred to in clause (j) only to the extent that Agent has established a Reserve as provided therein) and any other liens permitted under this Agreement that are subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such security interest or lien and Agent;

           (c) any Inventory that, in Agent’s good faith opinion, is slow moving, obsolete, unmerchantable, defective, used, unfit for sale, not salable at prices approximating at least the cost of such Inventory in the ordinary course of business or unacceptable due to age, type, category and/or quantity;

           (d) any Inventory with respect to which any covenant, representation, or warranty contained in this Agreement or any of the other Loan Documents has been breached or is not true in any material respect or which does not conform in all material respects to all standards imposed by any Governmental Authority;

           (e) any Inventory which any Person other than a Borrower shall (i) have any direct or indirect ownership, interest or title to such Inventory or (ii) be indicated on any purchase order or invoice with respect to such Inventory as having or purporting to have an interest therein;

           (f) any Inventory that constitutes work-in-process, spare or replacement parts, subassemblies, packaging and shipping material, manufacturing supplies, samples, prototypes, displays or display items, bill-and-hold goods, goods that have been returned for repair, replacement of refurbishment, used, repaired or refurbished goods, repossessed goods, unmerchantable, defective or damaged goods, goods unfit for sale, goods held on consignment, goods which are not of a type held for sale in the ordinary course of business, or goods not salable at prices approximating at least the cost of such Inventory in the ordinary course of business;

             (g) any Inventory located outside the United States of America or Canada;

           (h) any Inventory that is not located at premises owned or leased and controlled by a Borrower except for Eligible Domestic In-Transit Inventory and except as set forth in clause (k) below;

11

           (i) any Inventory at any location where the aggregate Value of all the Inventory at such location is less than $250,000;

           (j) any Inventory at any location leased by such Person or its Affiliates unless (i) the lessor (and its mortgagee, if any) has delivered to Agent a Collateral Access Agreement or (ii) a Reserve for rent, charges, and other amounts due or to become due with respect to such facility has been established by Agent;

           (k) any Inventory at any third party warehouse or in the possession of a bailee or being processed offsite at a third party location or outside processor and, in any such case, is not evidenced by a document of title, unless such warehouseman or bailee or the owner of such third party location or such outside processor has delivered to Agent a Collateral Access Agreement and such other documentation as Agent may reasonably require;

           (l) any Inventory that is a discontinued product or component thereof and is not immediately usable in a continuing product;

             (m) any Inventory that is the subject of a consignment by such Person as consignor;

           (n) any Inventory that contains or bears any intellectual property rights licensed to a Borrower or Guarantor unless Agent is satisfied that it may sell or otherwise dispose of such Inventory without (i) infringing the rights of such licensor, (ii) violating any contract with such licensor, or (iii) incurring any liability with respect to payment of royalties other than royalties incurred pursuant to sale of such Inventory under the current licensing agreement;

           (o) any Inventory that is not reflected in a current perpetual inventory report of such Person;

              (p) any Inventory for which reclamation rights have been asserted by the seller; or

           (q) Inventory which is subject to the claims of a supplier pursuant to Section 81.1 of the Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c. B-3, as amended, or any applicable provincial or territorial laws granting revendication or similar rights to unpaid suppliers to the extent of such claims.

The criteria for Eligible Inventory set forth above may only be changed and any new criteria for Eligible Inventory may only be established by Agent based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent that such event, condition or circumstance has not been identified by a Borrower to the field examiners of Agent prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Inventory as reasonably determined by Agent in good faith. Any Inventory that is not Eligible Inventory shall nevertheless be part of the Collateral.

12

      1.46 “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is an Approved Fund, and in each case under clauses (a) and (b) above, is approved by Agent; and (d) any other commercial bank, financial institution or “accredited investor” (as defined in Regulation D under the Securities Act of 1933) approved by Agent; provided , that , (i) neither any Borrower nor any Guarantor or any Affiliate of any Borrower or Guarantor shall qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of any Borrower or Guarantor shall qualify as an Eligible Transferee, except as Agent and Required Lenders may otherwise specifically agree.

      1.47 “Environmental Laws” shall mean all foreign, Federal, State, Provincial, Territorial and local laws (including common law), legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, binding judicial or administrative decisions, injunctions or agreements between any Borrower or Guarantor and any Governmental Authority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials as now or may at any time be in effect during the term of this Agreement.

      1.48 “Equipment” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.

      1.49 “Equity Interests” shall mean, with respect to any Person, all of the shares, interests, participations or other equivalents (however designated) of such Person’s Equity Interests or partnership, limited liability company or other equity, ownership or profit interests at any time outstanding, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of Equity Interests of (or other interests in) such Person, all of the securities convertible into or exchangeable for shares of Equity Interests of (or other interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), but excluding any interests in phantom equity plans and any debt security that is convertible into or exchangeable for such shares, and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

      1.50 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto.

      1.51 “ERISA Affiliate” shall mean any person required to be aggregated with any Borrower, any Guarantor or any of its or their respective Subsidiaries under Sections 414(b) or 414(c) of the Code or, for purposes of provisions relating to Section 412 of the Code, 414(m) or 414(o) of the Code.

13

      1.52 “ERISA Event” shall mean: (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Pension Plan, other than events as to which the requirement of notice has been waived in regulations by the Pension Benefit Guaranty Corporation; (b) the adoption of any amendment to a Pension Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) a complete or partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Pension Plan; (e) an event or condition which could reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; and (f) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of $10,000,000.

      1.53 “Event of Default” shall mean the occurrence or existence of any event or condition described in Section 12.1 hereof.

      1.54 “Excess Availability” shall mean the amount, as determined by Agent, calculated at any date, equal to: (a) the lesser of: (i) the Borrowing Base and (ii) the Maximum Credit (in each case under (i) or (ii) after giving effect to any Reserves), minus (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations (but not including for this purpose Obligations arising pursuant to any guarantees in favor of Agent and Lenders of the Obligations of the other Borrowers), plus (ii) the aggregate amount of all then outstanding and unpaid trade payables and other obligations of Borrowers which are outstanding more than sixty (60) days past due as of the end of the immediately preceding month or at Agent’s option, as of a more recent date based on such reports as Agent may from time to time specify (other than trade payables or other obligations being contested or disputed by Borrowers in good faith), plus (iii) without duplication, the amount of checks issued by Borrowers to pay trade payables and other obligations which are more than sixty (60) days past due as of the end of the immediately preceding month or at Agent’s option, as of a more recent date based on such reports as Agent may from time to time specify (other than trade payables or other obligations being contested or disputed by Borrowers in good faith), but not yet sent.

      1.55 “Exchange Act” shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto.

      1.56 “Exchange Rate” shall mean the prevailing spot rate of exchange of such bank as Agent may reasonably select for the purpose of conversion of one currency to another, at or around 11:00 a.m. New York time, on the date on which any such conversion of currency is to be made under this Agreement or in which such conversion is used in calculating the Borrowing Base.

      1.57 “Exclusive Control Notice” shall mean a written notice delivered pursuant to a Deposit Account Control Agreement instructing the depository bank to comply exclusively with instructions originated by Agent with respect to the deposit account that is covered thereby without further consent of any Borrower or Guarantor.

      1.58 “Existing Lenders” shall mean the lenders to Borrowers listed on Schedule 1.58 hereto (and including Bear Stearns Corporate Lending Inc., in its capacity as agent acting for such lenders) and their respective predecessors, successors and assigns.

14

      1.59 “Existing Letters of Credit” shall mean, collectively, the letters of credit issued for the account of a Borrower or Guarantor or for which such Borrower or Guarantor is otherwise liable listed on Schedule 1.59 hereto, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. Agent, Lenders, Borrowers and Guarantors agree that Existing Letters of Credit shall, for the unexpired term thereof only, be deemed to constitute Letters of Credit issued hereunder.

      1.60 “Fee Letter” shall mean the letter agreement, dated of even date herewith, by and among Borrowers, Guarantors and Agent, setting forth certain fees payable by Borrowers to Agent and Wachovia, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

      1.61 “Fixed Charge Coverage Ratio” shall mean, with respect to any date of determination, the ratio of (a) the amount equal to EBITDA of any Person and its Subsidiaries, on a consolidated basis, for the immediately preceding twelve (12) consecutive fiscal months as of the end of the most recent month for which Agent has received financial statements pursuant to Section 9.6 hereof, to (b) Fixed Charges of such Person and its Subsidiaries, on a consolidated basis, for such period.

      1.62 “Fixed Charges” shall mean, as to any Person and its Subsidiaries (excluding, with respect to the Borrowers’ Subsidiaries, the Mexico Affiliates, for all purposes of this definition), on a consolidated basis, with respect to any period, the sum of, without duplication, (a) all Interest Expense paid in cash (net of cash interest payments received), plus (b) all scheduled principal payments of Indebtedness for borrowed money, and payments of Indebtedness for the deferred purchase price of any property or services (including, without limitation, any indemnification, adjustment of purchase price, earn-outs or other similar obligations incurred in connection with any acquisition or sale or other disposition of assets) and Capital Leases (and without duplication of items (a) and (b) of this definition, the cash interest component with respect to Indebtedness under Capital Leases), plus (c) the amount of Capital Expenditures of such Person and its Subsidiaries paid in cash during such period to the extent not financed by Indebtedness permitted hereunder for such purpose, plus (d) all taxes paid by such person and its Subsidiaries in cash during such period, plus (e) all dividends, distributions, repurchases and redemptions in respect of Equity Interests paid by such Person and its Subsidiaries during such period in cash (exclusive of amounts paid as dividends to Parent to pay amounts with respect to the Holdings Notes to the extent such dividends are paid pursuant to and in accordance with the terms of Section 10.9 hereof); provided , that , notwithstanding anything to the contrary set forth in this definition, for purposes of determining the compliance of Borrowers and Guarantors with Section 11.1 hereof, prior to the first anniversary of the date of this Agreement, the Fixed Charges of Borrowers their Subsidiaries (exclusive of the Mexico Affiliates) on a consolidated basis for each period set forth on Fixed Charge Schedule 1.62 hereto shall be used in the calculation of such Fixed Charges.

      1.63 “Foreign Entity” shall mean a Person organized under the laws of any jurisdiction other than the United States or any State or political subdivision thereof.

      1.64 “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied; provided , that , in the event of any change in GAAP after the date hereof that affects the calculation of the covenant in Section 11.1 hereof, Administrative Borrower may by notice to Agent, or Agent may, and at the request of Required Lenders shall, by notice to Administrative Borrower require that such covenants be calculated in accordance with GAAP as in effect, and as applied by Parent and its Subsidiaries, immediately before the applicable change in GAAP

15

became effective, until either the notice from the applicable party is withdrawn or such covenant is amended in a manner satisfactory to Administrative Borrower, Agent and the Required Lenders. Administrative Borrower shall deliver to Agent and upon Agent’s request, to each Lender at the same time as the delivery of any financial statements given in accordance with the provisions of Section 9.6 hereof (a) a description in reasonable detail of any material change in the application of accounting principles employed in the preparation of such financial statements from those applied in the most recently preceding monthly, quarterly or annual financial statements and (b) a reasonable estimate of the effect on the financial statements on account of such changes in application.

      1.65 “Governmental Authority” shall mean the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national body exercising such function, such as the European Union or the European Central Bank).

      1.66 “Guarantors” shall mean any Person that at any time after the date hereof becomes party to a guarantee in favor of Agent or any Lender in respect of or otherwise liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations (other than a Borrower); each sometimes being referred to herein individually as a “Guarantor”. Notwithstanding anything herein to the contrary, no Subsidiary of Innophos that is a Foreign Entity (including, for the avoidance of doubt, Innophos Canada) shall guarantee the obligations hereunder of Innophos and its Subsidiaries that are Domestic Entities.

      1.67 “Guaranty Obligations” shall mean, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including, without limitation, any obligation, whether or not contingent, (a) to purchase any such Indebtedness or any property constituting security therefor, (b) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including, without limitation, keep-well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (c) to lease or purchase property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (d) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made.

      1.68 “Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic under any Environmental Law).

      1.69 “Hedge Agreement” shall mean an agreement between any Borrower or Guarantor and Agent or any Bank Product Provider that is a swap agreement as such term is defined in 11 U.S.C. Section 101, and including any rate swap agreement, basis swap, forward rate agreement, commodity

16

swap, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement rate, floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, and any other similar agreement (including any option to enter into any of the foregoing or a master agreement for any the foregoing together with all supplements thereto) entered into for the purpose of protecting against or managing exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices; sometimes being collectively referred to herein as “Hedge Agreements”.

      1.70 “Holdings Documents” shall mean, collectively, the Holdings Indenture, the Holdings Notes and all agreements, documents and instruments executed and/or delivered in connection therewith, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

      1.71 “Holdings Indenture” shall mean the Indenture governing the 9.5% Senior Unsecured Notes, dated as of April 16, 2007, between Parent, as issuer, and U.S. Bank National Association, as trustee, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

      1.72 “Holdings Notes” shall mean, collectively, the 9.5% Senior Notes due 2012 issued by Parent pursuant to the Holdings Indenture, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

      1.73 “Holdings Payments” shall mean regularly scheduled payments of interest, when due, in respect of the Holdings Notes pursuant to and in accordance with the terms thereof and of the other Holdings Documents, in each case as in effect on the date hereof.

      1.74 “Indebtedness” shall mean, with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid or accrued, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services purchased by such Person which are due six (6) months or more from the date after such property is acquired or such services are completed, and including, without limitation, customary indemnification, adjustment of purchase price or similar obligations, earn-outs or other similar obligations, in each case, incurred in connection with a Permitted Acquisition (but excluding trade debt and accrued expenses incurred in the ordinary course of business on normal trade terms and not overdue by more than ninety (90) days) which would appear as liabilities on a balance sheet of such Person in accordance with GAAP, (f) all obligations of such Person under take-or-pay or similar arrangements or under commodities agreements, (g) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any security interest in, lien or other encumbrance upon, or payable out of the proceeds of production from property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (h) all Guaranty Obligations of such Person with respect to Indebtedness of another Person, (i) the principal portion of all obligations in respect of Capital Leases of such Person, (j) all obligations of such Person under Hedge Agreements, (k) the maximum amount of all standby letters of credit issued or bankers’ acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (l) all preferred Equity Interests issued by such Person and which by the terms thereof could be (at the request of the holders thereof or otherwise) subject to mandatory sinking fund payments, redemption or other acceleration prior to the date which is ninety-one (91) days after the

17

Maturity Date, except in connection with a Change of Control, liquidation or similar event, so long as the obligation only arises after full and final payment in cash of all of the Obligations and the termination of the Loan Documents in accordance with the terms hereof, (m) the principal balance outstanding under any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product and (n) the Indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer, but only to the extent such Person is liable for such Indebtedness.

      1.75 “Information Certificate” shall mean, collectively, the Information Certificates of Borrowers and Guarantors constituting Exhibit C hereto containing material information with respect to Borrowers and Guarantors, their respective businesses and assets provided by or on behalf of Borrowers and Guarantors to Agent in connection with this Agreement and the other Loan Documents and the financing arrangements provided for herein.

      1.76 “Intellectual Property” shall mean, as to each Borrower and Guarantor, such Borrower’s and Guarantor’s now owned and hereafter arising or acquired: (a) patents, copyrights, works which are the subject matter of copyrights, trademarks, service marks, together with the good will associated with any trademark or service mark, trade names, and licenses and rights to use any of the foregoing and all applications, registrations and recordings relating to any of the foregoing as may be filed in the Canadian Intellectual Property Office or any similar office or agency of Canada, any Province or Territory thereof and any political subdivision thereof, the United States Copyright Office, the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, any political subdivision thereof or in any other country or jurisdiction, together with all rights and privileges arising under applicable law with respect to any use of any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; (b) inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards, customer and other lists and trade secret rights; (c) internet domain names and domain name registration; and (d) software and contract rights relating to computer programs, in whatever form created or maintained.

      1.77 “Interest Expense” shall mean, for any period, as to any Person, as determined in accordance with GAAP, the amount equal to total interest expense of such Person and its Subsidiaries (excluding, with respect to the Borrowers’ Subsidiaries, the Mexico Affiliates, for all purposes of this definition) on a consolidated basis for such period, whether paid or accrued (including the interest component of any Capital Lease for such period), and in any event, including, without limitation, (a) discounts in connection with the sale of any Accounts, (b) bank fees, commissions, discounts and other fees and charges owed with respect to letters of credit, banker’s acceptances or similar instruments or any factoring, securitization or similar arrangements, (c) interest payable by addition to principal or in the form of property other than cash and any other interest expense not payable in cash, and (d) the costs or fees for such period associated with Hedging Agreements to the extent not otherwise included in such total interest expense (excluding breakage costs incurred in connection with the termination of Hedging Agreements on or about the date hereof, if any), provided, that, Interest Expense shall not include, to the extent treated as interest in accordance with GAAP, all non-cash amounts in connection with borrowed money (including paid-in-kind interest).

     1.78 “Interest Rate” shall mean,

          (a) Subject to clause (b) of this definition below:

              (i) as to Base Rate Loans and Swingline Loans, a rate equal to the then Applicable Margin for Base Rate Loans on a per annum basis plus the Base Rate, and

18

                (ii) as to LMIR Loans, a rate equal to the then Applicable Margin for LMIR Loans on a per annum basis plus the LMIR, and shall be calculated on a 360-day basis for the actual number of days elapsed, which rate shall be adjusted daily as applicable to reflect any changes up or down in the LIBOR Market Index Rate.

          (b) Notwithstanding anything to the contrary contained herein,

                (i) Agent may, at its option, and Agent shall, at the direction of the Required Lenders, increase the Applicable Margin otherwise used to calculate the Interest Rate for Base Rate Loans, LMIR Loans and Swing Line Loans in each case to the highest percentage set forth in the definition of the term Applicable Margin for each category of Loans (without regard to the amount of Quarterly Average Excess Availability) plus two (2%) percent per annum, for the period from and after the date of the occurrence of an Event of Default but only for so long as such Event of Default is continuing; and

                (ii) Agent may, at its option, and Agent shall, at the direction of the Required Lenders, increase the Applicable Margin otherwise used to calculate the Interest Rate for Base Rate Loans, LMIR Loans and Swing Line Loans, in each case to the highest percentage set forth in the definition of the term Applicable Margin for each category of Loans (without regard to the amount of Quarterly Average Excess Availability) plus two (2%) percent per annum, on Revolving Loans or Swing Line Loans at any time outstanding in the aggregate in excess of the Borrowing Base (in each case whether or not such excess(es) arise or are made with or without the knowledge or consent of Agent or any Lender and whether made before or after an Event of Default).

      1.79 “Inventory” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s now owned and hereafter existing or acquired goods, wherever located, including, but not limited to, any such goods which (a) are leased by such Borrower or Guarantor as lessor; (b) are held by such Borrower or Guarantor for sale or lease or to be furnished under a contract of service; (c) are furnished by such Borrower or Guarantor under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business.

      1.80 “Inventory Loan Limit” shall mean, at any time, the amount equal to $32,500,000; provided , that , then outstanding principal amount of Loans based on Eligible Inventory (and including Letters of Credit to the extent provided in the definition of the term Borrowing Base) to Innophos Canada and all other Borrowers that are Foreign Entities, shall not at any time exceed the US Dollar Equivalent of $5,000,000 in the aggregate.

      1.81 “Investment Property Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent, any Borrower or Guarantor (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of such Borrower or Guarantor acknowledging that such securities intermediary, commodity intermediary or other person has custody, control or possession of such investment property on behalf of Agent, that it will comply with entitlement orders originated by Agent with respect to such investment property, or other instructions of Agent, and has such other terms and conditions as Agent may require.

     1.82 “Investment” shall have the meaning set forth in Section 10.4 hereof.

      1.83 “Issuing Bank” shall mean Wachovia Bank, National Association or any Lender that is approved by Agent that shall issue a Letter of Credit for the account of a Borrower and has agreed in a manner satisfactory to Agent to be subject to the terms hereof as an Issuing Bank.

19

      1.84 “Lenders” shall mean the financial institutions who are signatories hereto as Lenders and other persons made a party to this Agreement as a Lender in accordance with Section 15.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a “Lender”.

      1.85 “Letter of Credit Documents” shall mean, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk or (b) any collateral security for such obligations.

      1.86 “Letter of Credit Limit” shall mean, at any time, as to each Borrower, $20,000,000, minus the sum of the US Dollar Equivalent of the principal amounts of each of the outstanding Letters of Credit issued for the account of the other Borrowers.

      1.87 “Letter of Credit Obligations” shall mean, at any time, the sum of (a) the aggregate undrawn amount of all Letters of Credit issued for the account of a Borrower outstanding at such time, plus (b) the aggregate amount of all drawings under Letters of Credit for a Borrower for which Issuing Bank has not at such time been reimbursed, plus (c) without duplication, the aggregate amount of all payments made by each Lender to the Issuing Bank with respect to such Lender’s participation in Letters of Credit issued for the account of a Borrower as provided in Section 2.3 for which Borrowers have not at such time reimbursed the Lenders, whether by way of a Revolving Loan or otherwise.

      1.88 “Letters of Credit” shall mean all letters of credit (whether documentary or stand-by and whether for the purchase of inventory, equipment or otherwise) issued by Issuing Bank for the account of any Borrower pursuant to this Agreement, and all amendments, renewals, extensions or replacements thereof and including, but not limited to, the Existing Letters of Credit.

      1.89 “LIBOR Market Index Rate” or “LMIR” shall mean, for any day, the higher of (a) two (2%) percent per annum and (b) the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) for one (1) month U.S. Dollar deposits as reported on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by Agent from time to time for purposes of providing quotations of interest rates applicable to eurodollar deposits in dollars in the London interbank market) at approximately 11:00 a.m. (London time) on such day, or if such day is not a Business Day, then the immediately preceding London business day; provided, that, if more than one rate is specified on Reuters Screen LIBOR01 Page, the applicable rate shall be the arithmetic mean of all such rates. In the event that such rate is not available at such time for any reason, then the term “LIBOR Market Index Rate” shall mean, with respect to any LMIR Loans, the rate of interest per annum at which dollar deposits of $5,000,000 and for a one-month period are offered by the principal London office of Agent in immediately available funds in the London interbank market at approximately 11:00 a.m. on the applicable Business Day.

     1.90 “License Agreements” shall have the meaning set forth in Section 8.11 hereof.

      1.91 “Liquidity” shall mean, as of any date, the sum of (a) the amount equal to the Excess Availability as of such date in excess of the minimum Excess Availability required to be maintained pursuant to Section 11.2 hereof and (b) the Unrestricted Cash.

      1.92 “LMIR Loan” shall mean a Loan, or portion thereof, during any period in which it bears interest at a rate based upon the LIBOR Market Index Rate in accordance with the terms hereof.

20

      1.93 “Loan Documents” shall mean, collectively, this Agreement and all notes, guarantees, security agreements, hypothecs, deposit account control agreements, investment property control agreements, intercreditor agreements and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by any Borrower or Guarantor in connection with this Agreement; provided , that , the Loan Documents shall not include Hedge Agreements.

      1.94 “Loan Limit” shall mean, (a) as to Innophos Canada, and all other Persons that are Borrowers hereunder and are Foreign Entities, at any time, the US Dollar Equivalent of $10,000,000 in the aggregate and (b) as to each other Borrower, at any time, the amount equal to the Maximum Credit minus the then outstanding principal amount of the Loans and the Letters of Credit provided to the Borrower identified in clause (a).

     1.95 “Loans” shall mean, collectively, the Revolving Loans and the Swing Line Loans.

      1.96 “Material Adverse Effect” shall mean a material adverse effect on (a) the financial condition, business, performance or operations of Borrowers and Guarantors, taken as a whole; (b) the legality, validity or enforceability of this Agreement or any of the other Loan Documents or the legality, validity, enforceability, perfection or priority of the security interests and liens of Agent upon the Collateral; (c) the Collateral or its value, taken as a whole; (d) the ability of any Borrower to repay the Obligations or of any Borrower to perform its obligations under this Agreement or any of the other Loan Documents as and when to be performed; or (e) the ability of Agent or any Lender to enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and remedies of Agent and Lenders under this Agreement or any of the other Loan Documents.

      1.97 “Material Contract” shall mean, at the time of any determination, (a) any contract or other agreement (other than the Loan Documents and Hedge Agreements), written or oral, of any Borrower or Guarantor involving monetary liability of or to any Person in an amount in excess of $10,000,000 in any fiscal year (but excluding for this purpose contracts or other agreements for the purchase and sale of goods or services where the other party thereto has no obligation to purchase or sell such goods or services under such contract or other agreement) and (b) any other contract or other agreement (other than the Loan Documents and Hedge Agreements), whether written or oral, to which any Borrower or Guarantor is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect.

     1.98 “Maturity Date” shall mean May 22, 2013.

     1.99 “Maximum Credit” shall mean the amount of $65,000,000.

      1.100 “Maximum Interest Rate” shall mean the maximum non-usurious rate of interest under applicable Federal or State law as in effect from time to time that may be contracted for, taken, reserved, charged or received in respect of the indebtedness of a Borrower to Agent or a Lender, or to the extent that at any time such applicable law may thereafter permit a higher maximum non-usurious rate of interest, then such higher rate.

      1.101 “Mexico Affiliates” shall mean, collectively, the following (together with their respective successors and assigns): (a) Innophos Mexico Holdings, LLC, a Delaware limited liability company; (b) Innophos Mexicana S.A. de C.V., a Mexican corporation, and (c) the wholly-owned subsidiaries of Innophos Mexicana S.A. de C.V.; each sometimes being referred to herein individually as a “Mexico Affiliate”.

     1.102 “Moody’s” shall mean Moody’s Investors Service, Inc., and its successors and assigns.

21

      1.103 “Multiemployer Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by any Borrower, Guarantor or any ERISA Affiliate or with respect to which any Borrower, Guarantor or any ERISA Affiliate could reasonably be expected to incur any liability.

      1.104 “Net Cash Proceeds” shall mean the aggregate cash proceeds received by Parent or any of its Subsidiaries in respect of any sale, lease, transfer or other disposition of any assets or properties, or interest in assets and properties or as proceeds of any loans or other financial accommodations provided to it or as proceeds from the issuance and/or sale of any Equity Interests, in each case net of the reasonable and customary direct costs relating to such sale, lease, transfer or other disposition or loans or other financial accommodation or issuance and/or sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and taxes paid or payable as a result thereof and in the case of a sale of any assets or properties or interest in assets and properties, amounts applied to the repayment of Indebtedness secured by a valid and enforceable lien (other than a lien created under the Loan Documents) on the asset or assets that are the subject of such sale or other disposition required to be repaid in connection with such transaction.

      1.105 “Net Recovery Percentage” shall mean the fraction, expressed as a percentage, (a) the numerator of which is the amount equal to the amount of the recovery in respect of the Inventory at such time on a “net orderly liquidation value” basis as set forth in the most recent acceptable appraisal of Inventory received by Agent in accordance with Section 7.3, net of estimated liquidation expenses, and (b) the denominator of which is the applicable original cost of the aggregate amount of the Inventory subject to such appraisal.

      1.106 “Obligations” shall mean (a) any and all Loans, Letter of Credit Obligations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers to Agent or any Lender or any Issuing Bank, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Loan Documents or on account of any Letter of Credit and all other Letter of Credit Obligations, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to such Borrower under the United States Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, or secured or unsecured and (b) for purposes only of Section 5.1 hereof and subject to the priority in right of payment set forth in Section 6.7 hereof, all obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers or Guarantors to Agent or any Bank Product Provider arising under or pursuant to any Bank Products, whether now existing or hereafter arising; provided , that , (i) as to any such obligations, liabilities and indebtedness arising under or pursuant to a Hedge Agreement, the same shall only be included within the Obligations if upon Agent’s request, Agent shall have entered into an agreement, in form and substance satisfactory to Agent, with the Bank Product Provider that is a counterparty to such Hedge Agreement, as acknowledged and agreed to by Borrowers and Guarantors, providing for the delivery to Agent by such counterparty of information with respect to the amount of such obligations and providing for the other rights of Agent and such Bank Product Provider in connection with such arrangements, (ii) any Bank Product Provider, other than Wachovia and its Affiliates, shall have delivered written notice to Agent that (A) such Bank Product Provider has entered into a transaction to provide Bank Products to a Borrower and Guarantor and (B) the obligations arising pursuant to such Bank Products provided to Borrowers and Guarantors constitute Obligations entitled to the benefits of the security interest of Agent granted hereunder, and Agent shall

22

have accepted such notice in writing, (iii) in no event shall any Bank Product Provider acting in such capacity to whom such obligations, liabilities or indebtedness are owing be deemed a Lender for purposes hereof to the extent of and as to such obligations, liabilities or indebtedness except that each reference to the term “Lender” in Sections 14.1, 14.2, 14.3(b), 14.6, 14.7, 14.9, 14.12 and 15.6 hereof shall be deemed to include such Bank Product Provider and in no event shall the approval of any such person in its capacity as Bank Product Provider be required in connection with the release or termination of any security interest or lien of Agent, and (iv) in accordance with Section 5.3(b), the Obligations of Innophos Canada and any other Borrower that is a Foreign Entity shall be determined on a separate basis.

     1.107 “OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

      1.108 “Opco Documents” shall mean, individually and collectively, the Opco Indenture, the Opco Notes and all agreements, documents and instruments executed and/or delivered in connection therewith, as the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

      1.109 “Opco Indenture” shall mean the Indenture governing the 8.875% Senior Subordinated Notes due 2014, dated as of August 13, 2004, among Innophos, Inc., as issuer, the guarantors party thereto and Wachovia Bank, National Association, as trustee, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

      1.110 “Opco Notes” shall mean, collectively, the 8.875% Senior Subordinated Notes due 2014 issued by Innophos, Inc., pursuant to the Opco Indenture, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

      1.111 “Opco Permitted Payments” shall mean regularly scheduled payments of interest, when due, in respect of the Opco Notes, pursuant to and in accordance with the terms thereof and of the other Opco Documents, in each case as in effect on the date hereof.

      1.112 “Other Taxes” shall mean any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any political subdivision thereof or any applicable foreign jurisdiction, and all liabilities with respect thereto, in each case arising from any payment made hereunder or under any of the other Loan Documents or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Loan Documents

      1.113 “Parent” shall mean Innophos Holdings, Inc., a Delaware corporation, and its successors and assigns.

      1.114 “Participant” shall mean any financial institution that acquires and holds a participation in the interest of any Lender in any of the Loans and Letters of Credit in conformity with the provisions of Section 15.7 of this Agreement governing participations.

      1.115 “Pension Plan” shall mean a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which any Borrower or Guarantor sponsors, maintains, or to which any Borrower, Guarantor or ERISA Affiliate makes, is making, or is obligated to make contributions, other than a Multiemployer Plan.

23

      1.116 “Permitted Acquisitions” shall mean the purchase by a Borrower or Guarantor after the date hereof of all or substantially all of the assets of any Person or a business or division of such Person (whether pursuant to a merger or other transaction) or of all or a majority of the Equity Interest (such assets or Person being referred to herein as the “Acquired Business”) and in one or a series of transaction that satisfies each of the following conditions as determined by Agent:

           (a) Agent shall have received not less than ten (10) Business Days’ prior written notice of the proposed acquisition and such information with respect thereto as Agent may request, including (i) the proposed date and amount of the acquisition, (ii) a description of the Acquired Business, including any assets of a Borrower which Borrowers may wish to have included in the Borrowing Base, (iii) the total purchase price for the Acquired Business (and the terms of payment of such purchase price), (iv) a summary of the due diligence undertaken by Borrowers in connection with such acquisition, and (v) the most recently available financial statements of the Acquired Business,

           (b) the Acquired Business shall be an operating company that engages in a line of business substantially similar to, or reasonably related, complementary or ancillary to, the business that Borrowers are engaged in on date hereof,

           (c) Borrowers, Guarantors and their Subsidiaries other than Mexico Affiliates (but including the Acquired Business), on a consolidated basis, shall have a Fixed Charge Coverage Ratio of 1.0:1.0 on the date of and on a pro forma basis for the trailing twelve (12) month period after giving effect to the Permitted Acquisition and Agent shall have received a Compliance Certificate completed on a pro forma basis giving effect to the acquisition and showing that Borrowers and Guarantors are in compliance with all of the covenants set forth in Section 11 hereof without regard to the amount of the Excess Availability,

           (d) Agent shall have received: (i) the most recently available annual and interim financial statements with respect to the Acquired Business and related statements of income and cash flows for the immediately preceding fiscal year of such Acquired Business, (ii) detailed forecasts of cash flows for the Acquired Business, (iii) detailed projections for Parent and its Subsidiaries through the Maturity Date giving pro forma effect to such acquisition, based on assumptions satisfactory to Agent and demonstrating pro forma compliance with all financial covenants set forth in this Agreement, prepared in good faith and in a manner and using such methodology as is consistent with the most recent financial statements delivered to Agent pursuant to Section 9.6 and in form and substance satisfactory to Agent and (iv) current, updated projections of the amount of the Borrowing Base and Excess Availability for the twelve (12) month period after the date of such acquisition, in a form reasonably satisfactory to Agent, representing Borrowers’ reasonable best estimate of the future Borrowing Base and Excess Availability for the period set forth therein as of the date not more than ten (10) days prior to the date of such acquisition, which projections shall have been prepared on the basis of the assumptions set forth therein which Borrowers believe are fair and reasonable as of the date of preparation in light of current and reasonably foreseeable business conditions and which projections shall demonstrate that Excess Availability shall continue to be maintained at the level required by Section 11.2 hereof,

           (e) if Agent so elects, Agent shall have received an appraisal of the inventory of the Acquired Business and such other assets of the Acquired Business as Agent may specify, if any such assets are to be included in the Borrowing Base, in each case in form and containing assumptions and appraisal methods satisfactory to Agent by an appraiser reasonably acceptable to Agent, on which Agent and Lenders are expressly permitted to rely,

24

            (f) if Agent so elects, Agent shall have completed a field examination with respect to the business and assets of the Acquired Business in accordance with Agent’s customary procedures and practices and as otherwise required by the nature and circumstances of the business of the Acquired Business, the scope and results of which shall be reasonably satisfactory to Agent and any accounts and inventory of the Acquired Business shall only be Eligible Accounts and Eligible Inventory, respectively, to the extent Agent has completed such field examination with respect thereto and the criteria for Eligible Accounts and Eligible Inventory set forth herein are satisfied with respect thereto in accordance with this Agreement (or such other or additional criteria as Agent may, at its option, reasonably establish with respect thereto in accordance with this Agreement and subject to such Reserves as Agent may establish in connection with the Acquired Business),

           (g) in the case of the acquisition of Equity Interests of any Person or the formation of any Subsidiary in connection with such acquisition, (i) the Borrower or Guarantor forming such Subsidiary shall, except as Agent may otherwise agree, but, for the avoidance of doubt, subject to Section 5.3(b), (A) execute and deliver to Agent, a pledge and security agreement, in form and substance reasonably satisfactory to Agent, granting to Agent a first pledge of and lien (1) on all of the issued and outstanding shares of Equity Interests of any such Subsidiary that is organized under the laws of a State or other jurisdiction of the United States and (2) sixty-five (65%) percent of all issues and outstanding Equity Interests of any Person organized under the laws of any jurisdiction outside the United States, (B) deliver the original stock certificates evidencing such shares of Equity Interests (or such other evidence as may be issued in the case of a limited liability company), together with stock powers with respect thereto duly executed in blank (or the equivalent thereof in the case of a limited liability company in which such interests are certificated, or otherwise take such actions as Agent shall reasonably require with respect to Agent’s security interests therein) and (ii) as to any such Subsidiary organized under the laws of the United States becoming a Borrower or Guarantor under this Agreement, except as Agent may otherwise agree, the Borrower or Guarantor forming such Subsidiary shall cause any such Subsidiary to execute and deliver to Agent, the following (each in form and substance similar to the corresponding Financing Agreement and otherwise satisfactory to Agent), (A) an absolute and unconditional guarantee of payment of the Obligations, (B) a security agreement granting to Agent a first security interest and lien (except as otherwise consented to in writing by Agent) upon all of the assets of any such Subsidiary, and (C) such other agreements, documents and instruments as Agent may require in connection with the documents referred to above in order to make such Subsidiary a party to this Agreement as a “Borrower” or as a “Guarantor” as Agent may determine, including, but not limited to, supplements and amendments hereto, authorization to file UCC financing statements with respect to assets and property of a type or category constituting Collateral hereunder, Collateral Access Agreements and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem reasonably necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets purchased to the extent consisting of assets and property of a type or category constituting Collateral hereunder, corporate resolutions and other organization and authorizing documents of such Person, and favorable opinions of counsel to such person,

           (h) in the case of an acquisition of assets (other than as to Equity Interests), Agent shall have received, in form and substance reasonably satisfactory to Agent, (i) evidence that Agent has valid and perfected security interests in and liens upon all purchased assets to the extent such assets consist of assets or property of a type or category constituting Collateral hereunder, (ii) such other agreements, documents and instruments as Agent may require in connection with such assets, including, but not limited to, supplements and amendments hereto, authorization to file UCC financing statements with respect to Collateral hereunder, PPSA financing statements, Collateral Access Agreements and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets purchased, corporate resolutions and other organization and authorizing documents of such Person,

25

and favorable opinions of counsel to such person, and (iii) the agreement of the seller consenting to the collateral assignment by the Borrower purchasing such assets of all rights and remedies and claims for damages of such Borrower relating to the Collateral (including, without limitation, any bulk sales indemnification) under the agreements, documents and instruments relating to such acquisition,

          (i) in the case of the acquisition of the Equity Interests of another Person, the board of directors (or other comparable governing body) of such other Person shall have duly approved such acquisition and such Person shall not have announced that it will oppose such acquisition or shall not have commenced any action which alleges that such acquisition will violate applicable law,

           (j) no Default or Event of Default shall exist or have occurred and be continuing as of the date of the acquisition or any payment in respect thereof and after giving effect to the acquisition or such payment,

           (k) Liquidity shall have been not less than $22,500,000 for the thirty-day (30) period immediately prior to the date of any such acquisition and not less than $22,500,000 after giving effect to all payments in connection with such acquisition, and

           (l) Agent shall have received true, correct and complete copies of all material agreements, documents and instruments relating to such acquisition, which documents shall be reasonably satisfactory to Agent.

     1.117 “Permitted Dispositions” shall mean each of the following:

          (a) sales of Inventory in the ordinary course of business;

        (b) the sale or other disposition of assets (including worn-out or obsolete Equipment or Equipment) no longer used or useful in the business of any Borrower or Guarantor);

        (c) the sale or other disposition of assets and properties acquired in Permitted Acquisitions which assets and properties are incidental and immaterial to the conduct of the Acquired Business (after giving effect to the acquisition thereof) and are not assets or property of a type or category constituting Collateral hereunder; provided , that , as of the date of each such sale or other disposition and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

        (d) sales, discounting or otherwise disposing of Accounts in connection with the compromise or collection thereof, and not as part of any transaction the primary purpose of which is to provide financing for any Borrower or Guarantor; provided , that , such Accounts were not included as Eligible Accounts in the Borrowing Base Certificate most recently delivered or, if so included, the exclusion of such accounts as Eligible Accounts (after giving effect to any concurrent prepayment of the Loans) would not violate any of the limitations set forth in Section 2.1(b) hereof;

        (e) sales, transfers or other dispositions of assets or properties by any Subsidiary of a Borrower or Guarantor that is not a Borrower or Guarantor or by any Borrower or Guarantor to any other Borrower or Guarantor; provided , that , in each such case, (i) such sales, transfers or other dispositions are made in a bona fide arm’s-length transaction, (ii) the Net Cash Proceeds thereof in respect of Collateral shall to the extent payable to any Borrower or Guarantor be promptly remitted to Agent for application to the Obligations in accordance with Section 6.7 hereof if a Cash Dominion Event has occurred as of the date of the receipt thereof by such Borrower or Guarantor, and (iii) the aggregate Net Cash Proceeds of all such sales, transfers or other dispositions shall not in any fiscal year of Borrowers and Guarantors exceed $5,000,000 in the aggregate;

26

           (f) the issuance and sale by any Borrower or Guarantor of Equity Interests of such Borrower or Guarantor after the date hereof; provided, that, (i) Agent shall have received not less than ten (10) Business Days’ prior written notice of such issuance and sale by such Borrower or Guarantor, which notice shall specify the parties to whom such shares are to be sold, the terms of such sale, the total amount which it is anticipated will be realized from the issuance and sale of such stock and the Net Cash Proceeds which it is anticipated will be received by such Borrower or Guarantor from such sale, (ii) such Borrower or Guarantor shall not be required to pay any cash dividends or repurchase or redeem such Equity Interests or make any other payments in respect thereof, except as otherwise permitted in Section 10.5 hereof, (iii) the terms of such Equity Interests, and the terms and conditions of the purchase and sale thereof, shall not include any terms that include any limitation on the right of any Borrower to request or receive Loans or Letters of Credit or the right of any Borrower and Guarantor to amend or modify any of the terms and conditions of this Agreement or any of the other Loan Documents or otherwise in any way relate to or affect the arrangements of Borrowers and Guarantors with Agent and Lenders or are more restrictive or burdensome to any Borrower or Guarantor than the terms of any Equity Interests in effect on the date hereof, and (iv) as of the date of such issuance and sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred;

           (g) the issuance of Equity Interests of any Borrower or Guarantor consisting of common stock pursuant to an employee stock option or grant or similar equity plan or 401(k) plans of such Borrower or Guarantor for the benefit of its employees, directors and consultants, provided, that, in no event shall such Borrower or Guarantor be required to issue, or shall such Borrower or Guarantor issue, Equity Interests pursuant to such stock plans or 401(k) plans which would result in a Change of Control or other Event of Default;

           (h) the abandonment or other disposition of Intellectual Property that is not material to the business of any Borrower or Guarantor or is no longer used or useful in any material respect in the business of any Borrower, Guarantor or their Subsidiaries and does not appear on or is otherwise not affixed to or incorporated in any Inventory in any manner that would affect the ability of Agent or any lender to exercise any rights and remedies available to Agent and Lenders hereunder with respect to the Inventory or may affect the value of such Inventory, or necessary in connection with the Records and does not have any material value; provided , that , as of the date of such abandonment or other disposition and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

           (i) the licensing to third parties by a Borrower or Guarantor of Intellectual Property in the ordinary course of business and in bona fide, arms-length transactions; provided , that , as of the date of the grant of any such license and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

          (j) any transfer of property or assets, or issuance of Equity Interests, that is a Restricted Payment permitted under Section 10.5 or Permitted Investment permitted under Section 10.4;

          (k) the disposition by Borrowers of Real Property pursuant to arms-length sale-leaseback transactions with respect thereto on terms reasonably acceptable to Agent; provided , that, (i) as of the date of and after giving effect to such sale-leaseback transaction, no Default or Event of Default shall exist or have occurred and be continuing, (ii) Borrowers shall use commercially reasonable efforts promptly to provide to Agent a Collateral Access Agreement with respect to the applicable Real Property, to the extent necessary or appropriate for the exercise by Agent of its rights and remedies with respect to the Collateral, duly authorized, executed and delivered by the lessor and lessee in respect of such Real Property and (iii) without the prior written consent of Agent, Borrowers and Guarantors shall not

27

optionally prepay any rent or similar amounts in connection with the leaseback (other than prepayment of rent in an amount equal to rent for one month under any such lease);

           (l) the sale of Real Property not material to the business and operations of Borrowers;

           (m) voluntary terminations of Hedge Agreements pursuant to and in accordance with the terms thereof;

           (n) the transfer of cash for the payment of Indebtedness to the extent such payments are permitted hereunder and for the payment of other payables in the ordinary course of the business of Borrowers and Guarantors; and

           (o) the disposition at any time of substantially all of the assets and properties or Equity Interests in one or more of the Mexico Affiliates, in a bona fide arm’s-length transaction; and

           (p) the disposition of other assets and properties not constituting Collateral, having a value not to exceed $5,000,000 for all such assets and properties included in any one such disposition or $10,000,000 in the aggregate for all such dispositions during the term hereof.

     1.118 “Permitted Holders” shall mean the persons listed on Schedule 1.118 hereto and their respective successors and assigns.

     1.119 “Permitted Investments” shall mean each of the following:

           (a) the endorsement of instruments for collection or deposit in the ordinary course of business;

           (b) investments in cash or Cash Equivalents, subject to the terms and conditions of Section 6.6 hereof;

           (c) advance payments to suppliers (net of the purchase price of goods received from such suppliers substantially contemporaneously with such payments) in an aggregate amount outstanding at any time not to exceed $10,000,000 for the purchase of goods in the ordinary course of Borrowers’ business as conducted on the date hereof; provided , that , the amount of all such payments made in any ten (10) consecutive day period shall not exceed $5,000,000;

           (d) the existing equity investment of each Borrower and Guarantor as of the date hereof in its Subsidiaries; provided , that , no Borrower or Guarantor shall have any further obligations or liabilities to make any capital contributions or other additional investments or other payments to or in or for the benefit of any of such Subsidiaries;

           (e) loans and advances by any Borrower or Guarantor to employees of such Borrower or Guarantor not to exceed the principal amount of $2,000,000 in the aggregate at any time outstanding for: (i) reasonable and necessary work-related travel or other ordinary business expenses to be incurred by such employees in connection with their work for such Borrower or Guarantor and (ii) reasonable and necessary relocation expenses of such employees (including home mortgage financing for relocated employees);

28

           (f) stock or obligations issued to any Borrower or Guarantor by any Person (or the representative of such Person) in respect of Indebtedness of such Person owing to such Borrower or Guarantor in connection with the insolvency, bankruptcy, receivership or reorganization of such Person or a composition or readjustment of the debts of such Person; provided, that, the original of any such stock or instrument evidencing such obligations shall be promptly delivered to Agent, upon Agent’s request, together with such stock power, assignment or endorsement by such Borrower or Guarantor as Agent may request;

           (g) obligations of account debtors to any Borrower or Guarantor arising from Accounts which are past due evidenced by a promissory note made by such account debtor payable to such Borrower or Guarantor; provided , that , promptly upon the receipt of the original of any such promissory note by such Borrower or Guarantor, such promissory note shall be endorsed to the order of Agent by such Borrower or Guarantor and promptly delivered to Agent as so endorsed;

           (h) loans by a Borrower or Guarantor to another Borrower or Guarantor after the date hereof; provided , that ,

             (i) as to all of such loans,

          (A) the Indebtedness arising pursuant to any such loan shall not be evidenced by a promissory note or other instrument, unless the single original of such note or other instrument is promptly delivered to Agent upon its request to hold as part of the Collateral, with such endorsement and/or assignment by the payee of such note or other instrument as Agent may require, and

          (B) as of the date of any such loan and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

          (ii) as of the date of any such loan from any Borrower to Guarantor and after giving effect thereto, such Borrower or Guarantor shall be Solvent;

          (iii) as to loans by a Guarantor to a Borrower, (A) the Indebtedness arising pursuant to such loan shall be subject to, and subordinate in right of payment to, the right of Agent and Lenders to receive the prior final payment and satisfaction in full of all of the Obligations on terms and conditions reasonably acceptable to Agent, (B) promptly upon Agent’s request, Agent shall have received a subordination agreement, in form and substance reasonably satisfactory to Agent, providing for the terms of the subordination in right of payment of such Indebtedness of such Borrower to the prior final payment and satisfaction in full of all of the Obligations, duly authorized, executed and delivered by such Guarantor and such Borrower, and (C) no Borrower or Guarantor shall, directly or indirectly make, or be required to make, any payments in respect of such Indebtedness prior to the end of the then current term of this Agreement; and

         (iv) as to loans by a Borrower to a Guarantor, as of the date of any such loan and after giving effect thereto, the aggregate outstanding principal amount of all such loans to Guarantors shall not exceed $10,000,000 at any time;

         (i) the existing equity investments of each Borrower and Guarantor set forth in the Information Certificate;

29

           (j) the loans and advances not otherwise permitted hereunder and set forth on Schedule 9.10 to the Information Certificate; provided , that , as to such loans and advances, Borrowers and Guarantors shall not, directly or indirectly, amend, modify, alter or change the terms of such loans and advances or any agreement, document or instrument related thereto and Borrowers and Guarantors shall furnish to Agent all notices or demands in connection with such loans and advances either received by any Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or sent by any Borrower or Guarantor or on its behalf, concurrently with the sending thereof, as the case may be;

           (k) loans or capital contributions by a Borrower or Guarantor to one or more of the Mexico Affiliates after the date hereof; provided , that , as to all such loans and capital contributions:

                (i) the Indebtedness arising pursuant to any such loan shall not be evidenced by a promissory note or other instrument, unless the single original of such note or other instrument is promptly delivered to Agent upon its request to hold as part of the Collateral, with such endorsement and/or assignment by the payee of such note or other instrument as Agent may require, it being agreed that Agent shall not be entitled to request such delivery prior to the occurrence of a Default or Event of Default;

                (ii) as of the date of any such loan or capital contribution and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

                (iii) as of the date of any such loan or capital contribution from any Borrower to Guarantor and after giving effect thereto, such Borrower or Guarantor shall be Solvent; and

                (iv) as of the date of any such loan or capital contribution and after giving effect thereto, Excess Availability shall be:

           (A) if the aggregate outstanding amount of such loans or capital contributions increases the aggregate amount of all such loans and capital contributions to Mexico Affiliates to an amount that is greater than $77,450,000, then as of the date of each such loan or capital contribution and after giving effect thereto, aggregate Excess Availability of Borrowers at all times that the aggregate outstanding principal amount of such loans and capital contributions exceeds $77,450,000 shall be not less than $24,000,000 in excess of the amount required at all times to be maintained pursuant to Section 11.2 hereof, plus the amount by which the aggregate outstanding net amount of such loans and capital contributions to Mexico Affiliates exceeds $77,450,000; and

           (B) if the aggregate principal amount of such loans and capital contributions increases the aggregate principal amount of all such loans and capital contributions outstanding to Mexico Affiliates to an amount that is less than $77,450,000, then as of the date of each such loan and capital contribution and after giving effect thereto, aggregate Excess Availability of Borrowers shall be not less than $24,000,000; and

           (l) loans by Borrowers and Guarantors to Persons not otherwise identified in this definition of Permitted Investments, in an aggregate amount at any time outstanding not to exceed $10,000,000; provided , that , as of the date of the making of each such loan and after giving effect thereto, aggregate Excess Availability of Borrowers shall be not less than $50,000,000.

     1.120 “Permitted Liens” shall have the meaning set forth in Section 10.2 hereof.

30

      1.121 “Person” or “person” shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.

      1.122 “Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA), other than any Multiemployer Plan, which any Borrower or Guarantor, in each case that is not a Foreign Entity, sponsors, maintains, or to which it makes, is making, or is obligated to make contributions.

      1.123 “PPSA” shall mean the Personal Property Security Act (Ontario), the Civil Code of Quebec or any other applicable Canadian Federal, Provincial or Territorial statute pertaining to the granting, perfecting, priority or ranking of security interests, liens, hypothecs on personal property, and any successor statutes, together with any regulations thereunder, in each case as in effect from time to time. References to sections of the PPSA shall be construed to also refer to any successor sections.

      1.124 “Priority Payables” shall mean, as to any Borrower or Guarantor at any time, (a) the full amount of the liabilities of such Borrower or Guarantor at such time which (i) have a trust imposed to provide for payment or a security interest, pledge, lien or charge ranking or capable of ranking senior to or pari passu with security interests, liens or charges securing the Obligations under Federal, Provincial, Territorial, State, county, district, municipal, or local law in Canada or (ii) have a right imposed to provide for payment ranking or capable of ranking senior to or pari passu with the Obligations under local or national law, regulation or directive, including, but not limited to, claims for unremitted and/or accelerated rents, taxes, wages, withholding taxes (including claims for debts due to Canada Revenue Agency and the Revenue Administration Service ( Servicio de Administración Tributaria ) of the Ministry of Finance and Public Credit ( Secretaría de Hacienda y Crédito Público ) of Mexico), VAT and other amounts payable to an insolvency administrator, employee withholdings or deductions and vacation pay, workers’ compensation obligations, government royalties or pension fund obligations in each case to the extent such trust, or security interest, lien or charge has been or may be imposed and (b) the amount equal to the percentage applicable to Inventory in the calculation of the Borrowing Base multiplied by the aggregate Value of the Eligible Inventory which Agent, in good faith, considers is or may be subject to retention of title by a supplier or a right of a supplier to recover possession thereof, where such supplier’s right has priority over the security interests, liens or charges securing the Obligations, including, without limitation, Eligible Inventory subject to a right of a supplier to repossess goods pursuant to Section 81.1 of the Bankruptcy and Insolvency Act (Canada) or any applicable laws granting revendication or similar rights to unpaid suppliers or any similar laws of Canada, Mexico or any other applicable jurisdiction ( provided , that , to the extent such Inventory has been identified and has been excluded from Eligible Inventory, the amount owing to the supplier shall not be considered a Priority Payable).

      1.125 “Pro Rata Share” shall mean, as to any Lender, the fraction (expressed as a percentage) the numerator of which is such Lender’s Commitment and the denominator of which is the aggregate amount of all of the Commitments of the Lenders, as adjusted from time to time in accordance with the provisions hereof; provided , that , if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Revolving Loans and its interest in the Swing Line Loans, Special Agent Advances and Letter of Credit Obligations and the denominator shall be the aggregate amount of all unpaid Revolving Loans, Swing Line Loans, Special Agent Advances and Letter of Credit Obligations.

      1.126 “Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by net income, whether Federal, State, Provincial, Territorial county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP.

31

      1.127 “Quarterly Average Excess Availability” shall mean, for any three (3) month period commencing on the first day of the month of such period, the daily average of the Excess Availability for such period.

      1.128 “Real Property” shall mean all now owned and hereafter acquired real property of each Borrower and Guarantor, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located.

      1.129 “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of each Borrower and Guarantor: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of such Borrower or Guarantor; (d) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued payable to any Borrower or Guarantor or otherwise in favor of or delivered to any Borrower or Guarantor in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to any Borrower or Guarantor, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by any Borrower or Guarantor or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of any Borrower or Guarantor) or otherwise associated with any Accounts, Inventory or general intangibles of any Borrower or Guarantor (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to any Borrower or Guarantor in connection with the termination of any Plan or other employee benefit plan and any other amounts payable to any Borrower or Guarantor from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which any Borrower or Guarantor is a beneficiary).

      1.130 “Records” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of any Borrower or Guarantor with respect to the foregoing maintained with or by any other person).

     1.131 “Register” shall have the meaning set forth in Section 6.4 hereof.

     1.132 “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate more than sixty-six and two-thirds (66 ^2/3 %) percent of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom more than sixty-six and two-thirds (66 ^2/3 %) percent of the then outstanding Loans and participation interests in other Obligations are owing.

32

      1.133 “Reserves” shall mean as of any date of determination, such amounts as Agent may from time to time establish and revise in good faith, reducing the amount of Loans and Letters of Credit which would otherwise be available to any Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which, as determined by Agent, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the Collateral or any other property which is security for the Obligations, its value or the amount that might be received by Agent from the sale or other disposition or realization upon such Collateral, or (ii) the assets or business of any Borrower or Guarantor or (iii) the security interests and other rights of Agent or any Lender in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Agent’s good faith belief that any collateral report or financial information furnished by or on behalf of any Borrower or Guarantor to Agent is or may have been incomplete, inaccurate or misleading in any material respect or (c) in respect of any Default or an Event of Default. Without limiting the generality of the foregoing, Reserves may be established pursuant to the foregoing sentence to reflect any of the following: (i) inventory shrinkage, (ii) reserves in respect of markdowns and cost variances (pursuant to discrepancies between the purchase order price of Inventory and the actual cost thereof), (iii) dilution with respect to Accounts (based on the ratio of the aggregate amount of non-cash reductions in Accounts for any period to the aggregate dollar amount of the sales of such Borrower for such period) as calculated by Agent for any period is or is reasonably anticipated to be greater than five (5) percent, (iv) returns, discounts, claims, credits and allowances of any nature that are not paid pursuant to the reduction of Accounts, (v) the sales, excise or similar taxes included in the amount of any Accounts reported to Agent and amounts due or to become due in respect of sales, use and/or withholding taxes, (vi) Priority Payables and any obligations of Borrowers or Guarantors subject to superpriority liens under the Bankruptcy and Insolvency Act (Canada), including Bill 55-C with respect thereto and (vii) any rental payments, service charges or other amounts due or to become due to owners or lessors of real property to the extent Inventory or Records are located in or on such property or in the possession or control of such parties or such Records are needed to monitor or otherwise deal with the Collateral (other than for locations where Agent has received a Collateral Access Agreement executed and delivered by the owner and lessor of such real property that Agent has acknowledged in writing is in form and substance satisfactory to Agent), (viii) any rental payments, service charges or other amounts due or to become due to lessors of personal property; (ix) an increase in the number of days of the turnover of Inventory or a change in the mix of the Inventory that results in an overall decrease in the value thereof or a deterioration in its nature or quality (but only to the extent not addressed by the lending formulas in a manner satisfactory to Agent), (x) variances between the perpetual inventory records of Borrowers and the results of the test counts of Inventory conducted by Agent with respect thereto in excess of the percentage acceptable to Agent, (xi) the aggregate amount of deposits, if any, received by any Borrower from its customers in respect of unfilled orders for goods, (xii) obligations, liabilities or indebtedness (contingent or otherwise) of Borrowers or Guarantors to any Bank Product Provider arising under or in connection with any Bank Products of any Borrower or Guarantor with a Bank Product Provider or as such Bank Product Provider may otherwise require and Agent may agree in connection therewith to the extent that such obligation, liabilities or indebtedness constitute Obligations as such term is defined herein or otherwise receive the benefit of the security interest of Agent in any Collateral. The amount of any Reserve established by Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such Reserve as determined by Agent in good faith.

      1.134 “Restricted Payment” shall mean any (a) dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests of Parent or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or on account of any return of capital to Parent or such Subsidiary’s stockholders, partners or members (or the equivalent Person thereof), or payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any

33

Equity Interests of Parent or any of its Subsidiaries, or any setting apart of funds or property for any of the foregoing, and (b) the payment by Parent or any of its Subsidiaries of any management, advisory or consulting fee to any Person.

      1.135 “Revolving Loans” shall mean the loans now or hereafter made by or on behalf of any Lender or by Agent for the account of any Lender on a revolving basis pursuant to the Credit Facility (involving advances, repayments and readvances) as set forth in Section 2.1 hereof.

      1.136 “Sanctioned Entity” shall mean (a) an agency of the government of, (b) an organization directly or indirectly controlled by, or (c) a person resident in, a country that is subject to a sanctions program identified on the list maintained and published by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/programs, or as otherwise published from time to time as such program may be applicable to such agency, organization or person.

      1.137 “Sanctioned Person” shall mean a person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise published from time to time.

      1.138 “Secured Parties” shall mean, collectively, (a) Agent, (b) Lenders, (c) the Issuing Bank and (d) any Bank Product Provider; provided , that , (i) as to any Bank Product Provider, only to the extent of the Obligations owing to such Bank Product Provider and (ii) such parties are sometimes referred to herein individually as a “Secured Party”.

      1.139 “Solvent” shall mean, at any time with respect to any Person, that at such time such Person (a) is able to pay its debts as they mature and has (and has a reasonable basis to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business consistent with its practices as of the date hereof, and (b) the assets and properties of such Person at a fair valuation (and including as assets for this purpose at a fair valuation all rights of subrogation, contribution or indemnification arising pursuant to any guarantees given by such Person) are greater than the Indebtedness of such Person, and including subordinated and contingent liabilities computed at the amount which, such person has a reasonable basis to believe, represents an amount which can reasonably be expected to become an actual or matured liability (and including as to contingent liabilities arising pursuant to any guarantee the face amount of such liability as reduced to reflect the probability of it becoming a matured liability).

      1.140 “Special Agent Advances” shall have the meaning set forth in Section 14.12 hereof.

      1.141 “Standby LCs” shall mean all Letters of Credit other than Commercial LCs; each sometimes being referred to herein individually as a “Standby LC”.

       1.142 “Standby LC Fee Rate” shall mean a rate equal to three (3%) percent per annum.

      1.143 “Subordinated Debt” shall mean any Indebtedness of a Borrower or Guarantor that is subject to, and subordinate in right of payment to, the right of Agent and Lenders to receive the prior final payment and satisfaction in cash in full of all of the Obligations and subject to such other terms and conditions as Agent may require with respect thereto.

34

      1.144 “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Equity Interests or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Equity Interests of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person.

      1.145 “Swing Line Lender” shall mean Wachovia Bank, National Association, in its capacity as a lender of Swing Line Loans.

      1.146 “Swing Line Loan Limit” shall mean $15,000,000.

      1.147 “Swing Line Loans” shall mean loans now or hereafter made by Swing Line Lender on a revolving basis pursuant to the Credit Facility (involving advances, repayments and readvances) as set forth in Section 2.2 hereof.

      1.148 “Taxes” shall mean any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of Agent, any Issuing Bank or any Lender, (a) such taxes (including income taxes, franchise taxes, branch profits or capital taxes) as are imposed on or measured by Agent’s, such Issuing Bank’s, or such Lender’s net income or capital (or other taxes imposed in lieu thereof) by any jurisdiction or political subdivision thereof and (b) all interest and penalties imposed on Agent, such Issuing Bank or such Lender with respect to the taxes described in clause (a) above.

      1.149 “Transaction Expenses” shall mean the reasonable and customary direct legal, accounting, or similar fees, costs and expenses, paid by Borrowers or Guarantors attributable to the consummation of the transactions under the Agreement.

      1.150 “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Agent may otherwise determine).

      1.151 “Unrestricted Cash” shall mean aggregate cash and Cash Equivalents in excess of the US Dollar Equivalent of $8,000,000 owned by Borrowers maintained in deposit accounts located in the United States or Canada and available for their use without restriction, free and clear of any pledge, security interest, lien, claim or other encumbrance other than in favor of Agent, for itself and the benefit of Lenders, that is included in the balance sheet of Borrowers in accordance with GAAP and designated on such balance sheet as unrestricted cash.

      1.152 “US Dollar Equivalent” shall mean at any time (a) as to any amount denominated in US Dollars, the amount thereof at such time, and (b) as to any amount denominated in any other currency, the equivalent amount in US Dollars calculated by Agent in good faith at such time using the Exchange Rate in effect on the Business Day of determination.

      1.153 “US Dollars”, “US$” and “$” shall each mean lawful currency of the United States of America.

35

      1.154 “US Person” shall mean a “United States Person” as defined in section 7701(a)(30) of the Code.

      1.155 “Value” shall mean, as determined by Agent in good faith, with respect to Inventory, the lower of (a) cost computed on a first-in first-out basis in accordance with GAAP or (b) market value; provided , that , for purposes of the calculation of the Borrowing Base, (i) the Value of the Inventory shall not include: (A) the portion of the value of Inventory equal to the profit earned by any Affiliate on the sale thereof to any Borrower or (B) write-ups or write-downs in value with respect to currency exchange rates and (ii) notwithstanding anything to the contrary contained herein, the cost of the Inventory referred to in clause (a) above shall be computed in the same manner and consistent with the most recent appraisal of the Inventory received and accepted by Agent prior to the date hereof, if any.

      1.156 “Wachovia” shall mean Wachovia Bank, National Association, in its individual capacity, and its successors and assigns.

      1.157 “Weighted Average Life to Maturity” shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding principal amount of such Indebtedness into (b) the total of the product obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment.

SECTION 2. CREDIT FACILITIES

     2.1 Revolving Loans .

           (a) Subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to make its Pro Rata Share of Revolving Loans to a Borrower from time to time in amounts requested by such Borrower (or Administrative Borrower on behalf of such Borrower) up to the aggregate amount outstanding for all Lenders at any time equal to the lesser of: (i) the Borrowing Base of such Borrower at such time or (ii) the amount equal to the Loan Limit of such Borrower at such time.

           (b) Except with the consent of Agent and all Lenders, or as otherwise provided herein, (i) the aggregate amount of the Loans and the Letter of Credit Obligations outstanding at any time shall not exceed the Maximum Credit, (ii) the aggregate principal amount of the Loans and Letter of Credit Obligations outstanding at any time to a Borrower shall not exceed the Borrowing Base of such Borrower, (iii) the sum of the principal amount of the Loans and Letter of Credit Obligations outstanding at any time to Innophos Canada and all other Borrowers that are Foreign Entities shall not exceed the US Dollar Equivalent of $10,000,000, (iv) the aggregate principal amount of the Loans and Letter of Credit Obligations outstanding at any time to a Borrower shall not exceed the Loan Limit of such Borrower, (v) the outstanding amount of Swingline Loans shall not exceed the Swingline Loan Limit, (vi) the aggregate principal amount of the Loans outstanding at any time to Borrowers based on the Eligible Inventory shall not exceed the Inventory Loan Limit and (vii) the aggregate principal amount of the Loans outstanding at any time to Borrowers based on the Eligible Foreign Accounts shall not exceed the US Dollar Equivalent of $5,000,000. Subject to the terms and conditions hereof, each Borrower (or Administrative Borrower on behalf of Borrowers) may from time to time borrow, prepay and reborrow Revolving Loans. No Lender shall be required to make any Revolving Loan, if, after giving effect thereto the aggregate outstanding principal amount of all Revolving Loans of such Lender, together with such Lender’s Pro Rata Share of the aggregate amount of all Swing Line Loans and Letter of Credit Obligations, would exceed such Lender’s Commitment.

36

     2.2 Swing Line Loans .

           (a) Subject to the terms and conditions contained herein, the Swing Line Lender agrees that it will make Swing Line Loans to a Borrower from time to time in amounts requested by such Borrower (or Administrative Borrower on behalf of such Borrower) up to the aggregate amount outstanding equal to the Swing Line Loan Limit; provided , that , after giving effect to any such Swing Line Loan, the aggregate principal amount of the Loans and Letter of Credit Obligations outstanding shall not exceed the Maximum Credit at such time and the aggregate principal amount of the Loans and Letter of Credit Obligations outstanding to a Borrower shall not exceed the Borrowing Base of such Borrower. On the terms and subject to the conditions hereof, each Borrower (or Administrative Borrower on behalf of Borrowers) may from time to time borrow, prepay and reborrow Swing Line Loans. Swing Line Lender shall not be required to make Swing Line Loans, if, after giving effect thereto, the aggregate outstanding principal amount of all Swing Line Loans would exceed the then existing Swing Line Loan Limit. Swing Line Lender shall not be required to make a Swing Line Loan to refinance an outstanding Swing Line Loan. Each Swing Line Loan shall be subject to all of the terms and conditions applicable to other Base Rate Loans funded by the Lenders constituting Revolving Loans, except that all payments thereon shall be payable to the Swing Line Lender solely for its own account. All Revolving Loans and Swing Line Loans shall be subject to the settlement among Lenders provided for in Section 6.13 hereof.

           (b) Upon the making of a Swing Line Loan, without further action by any party hereto, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from the Swing Line Lender, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share in such Swing Line Loan. To the extent that there is no settlement in accordance with Section 6.13 below, the Swing Line Lender may at any time, require the Lenders to fund their participations. From and after the date, if any, on which any Lender has funded its participation in any Swing Line Loan, Agent shall promptly distribute to such Lender, not less than weekly, such Lender’s Pro Rata Share of all payments of principal and interest received by Agent in respect of such Swing Line Loan.

     2.3 Letters of Credit .

           (a) General . Subject to and upon the terms and conditions contained herein and in the Letter of Credit Documents, at the request of a Borrower (or Administrative Borrower on behalf of such Borrower), Agent agrees to cause Issuing Bank to issue, and Issuing Bank agrees to issue, for the account of such Borrower one or more Letters of Credit, for the ratable risk of each Lender according to its Pro Rata Share, containing terms and conditions acceptable to Agent and Issuing Bank.

           (b) Notice of Issuance, Amendment, Renewal, Extension . The Borrower requesting such Letter of Credit (or Administrative Borrower on behalf of such Borrower) shall give Agent and the Issuing Bank with respect thereto three (3) Business Days’ prior written notice of such Borrower’s request for the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit). Such notice shall be irrevocable and shall (i) specify the original face amount of the Letter of Credit requested (or identify the Letter of Credit to be amended, renewed or extended), (ii) the effective date (which date shall be a Business Day and in no event shall be a date less than ten (10) days prior to the end of the then current term of this Agreement) of issuance of such requested Letter of Credit (or such amendment, renewal or extension), (iii) whether such Letter of Credit may be drawn in a single or in partial draws, (iv) the date on which such requested Letter of Credit is to expire, (v) the purpose for which such Letter of Credit is to be issued, (vi) the name and address of the beneficiary of the requested Letter of Credit, and (vii) such other information as shall be necessary to enable the Issuing Bank to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, the Borrower requesting the Letter of Credit (or Administrative Borrower on behalf of such Borrower) shall attach to

37

the request the proposed terms of the Letter of Credit. In no event shall a Letter of Credit be issued, amended, renewed or extended unless the forms and terms of the proposed Letter of Credit (as amended, renewed or extended, as the case may be) is satisfactory to Agent and Issuing Bank. The renewal or extension of, or increase in the amount of, any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder.

          (c) Certain Conditions to Letters of Credit . In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit shall be available to any Borrower unless each of the following conditions precedent have been satisfied in a manner satisfactory to Agent: (i) the Borrower requesting such Letter of Credit (or Administrative Borrower on behalf of such Borrower) shall have delivered to the Issuing Bank at such times and in such manner as Issuing Bank may require, an application, in form and substance satisfactory to Issuing Bank and Agent, for the issuance of the Letter of Credit and such other Letter of Credit Documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit shall be satisfactory to Agent and Issuing Bank, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that Issuing Bank (or other issuer) refrain from, the issuance of letters of credit generally or the issuance of such Letter of Credit, (iii) after giving effect to the issuance of such Letter of Credit, the Letter of Credit Obligations shall not exceed the Letter of Credit Limit, and (iv) after giving effect to the issuance of such Letter of Credit, the aggregate principal amount of all Loans and Letter of Credit Obligations shall not exceed the lesser of the Borrowing Base at such time or the Maximum Credit at such time, giving effect to any Reserves with respect to such Letter of Credit, on the date of the proposed issuance of such Letter of Credit, which Reserve shall be equal to or greater than: (A) if the proposed Letter of Credit is for the purpose of purchasing Eligible Inventory consisting of finished goods and the documents of title with respect thereto are consigned to Issuing Bank, the sum of (1) the percentage equal to one hundred (100%) percent minus the then applicable percentage with respect to Eligible Inventory set forth in the definition of the term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2) unpaid freight, taxes, duty and other amounts which Agent estimates must be paid in connection with such Inventory upon arrival and for delivery to one of Borrowers’ locations for Eligible Inventory within the United States of America or Canada and (B) if the proposed Letter of Credit is for any other purpose or the documents of title are not consigned to Issuing Bank in connection with a Letter of Credit for the purpose of purchasing Inventory, an amount equal to one hundred (100%) percent of the Letter of Credit Obligations with respect thereto. Effective on the issuance of each Letter of Credit, a Reserve shall be established in the applicable amount set forth in Section 2.3(c)(iv)(A) or Section 2.3(c)(iv)(B).

           (d) Letter of Credit Sublimit . Except in Agent’s discretion and with the consent of all Lenders, the amount of all outstanding Letter of Credit Obligations with respect to any Borrower shall not at any time exceed the Letter of Credit Limit with respect to such Borrower.

           (e) Expiration . Each Standby LC shall expire at or prior to the earlier of (i) twelve (12) months after the date of the issuance of such Standby LC (or in the case of any renewal or extension thereof, twelve (12) months after such renewal or extension) and (ii) the date that is five (5) Business Days prior to the Maturity Date; provided , that , (A) any Standby LC with a one year tenor may provide for automatic renewal or extension thereof for additional one year periods (which in no event shall extend beyond the date referred to in clause (ii) above) so long as such Standby LC permits the Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Standby LC) by giving prior notice to the beneficiary thereof within a time period during

38

such twelve-month period to be agreed upon at the time such Standby LC is issued and (B) if the Issuing Bank and Agent each consent, the expiration date on any Standby LC may extend beyond the date referred to in clause (ii) above. Each Commercial LC shall expire on the earlier of one hundred eighty (180) days after such Commercial LC’s date of issuance, renewal or extension (as applicable) or the date five (5) Business Days prior to the Maturity Date.

           (f) Letter of Credit Participations . Immediately upon the issuance or amendment of any Letter of Credit issued for the account of a Borrower, each Lender shall be deemed to have irrevocably and unconditionally purchased and received, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share of the liability with respect to such Letter of Credit and the obligations of Borrowers with respect thereto (including all Letter of Credit Obligations with respect thereto). Each Lender shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to Issuing Bank therefor and discharge when due, its Pro Rata Share of all of such obligations arising under such Letter of Credit. Without limiting the scope and nature of each Lender’s participation in any such Letter of Credit, to the extent that Issuing Bank has not been reimbursed or otherwise paid as reasonably required hereunder with respect to any such Letter of Credit or under any such Letter of Credit, each such Lender shall pay to Issuing Bank its Pro Rata Share of such unreimbursed drawing or other amounts then due to Issuing Bank in connection therewith. Notwithstanding anything to the contrary contained in this Agreement, in the event that there is a Defaulting Lender, Issuing Bank shall not be required to issue any Letter of Credit, or increase or extend or otherwise amend any Letter of Credit, unless Issuing Bank has entered into arrangements reasonably satisfactory to it and Borrowers with respect to the participation in Letters of Credit by such Defaulting Lender. Issuing Bank may require that Borrower provide cash collateral to it, or to Agent to hold on behalf of Issuing Bank, on terms and conditions satisfactory to Issuing Bank, in an amount equal to such Defaulting Lender's Pro Rata Share of any Letter of Credit Obligations.

           (g) Letter of Credit Reimbursement . If Issuing Bank shall make any payment in respect of a Letter of Credit, the Borrowers shall reimburse Issuing Bank by paying to Agent an amount equal to such payment by Issuing Bank not later than 12:00 noon on the date that such payment by Issuing Bank is made, if the applicable Borrower (or Administrative Borrower on behalf of such Borrower) shall have received notice of such payment by the Issuing Bank prior to 10:00 a.m. on such date, or, if such notice shall not have been received by such Borrower (or Administrative Borrower) prior to such time on such date, then not later than 12:00 noon on the Business Day immediately following the day that such Borrower (or Administrative Borrower) receives such notice; provided , that , unless such Borrower (or Administrative Borrower) requests otherwise, and, subject to the conditions to borrowing set forth herein, each drawing under any Letter of Credit or other amount payable in connection therewith when due shall constitute a request by the Borrower for whose account such Letter of Credit was issued to Agent for a Base Rate Loan in the amount of such drawing or other amount then due, and shall be made by Agent on behalf of Lenders as a Revolving Loan or Swing Line Loan as Administrative Borrower requests, or if such request is not received in a timely manner, as Agent determines (or Special Agent Advance, as the case may be) in an equivalent amount and, to the extent so financed, such Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Revolving Loan, Swing Line Loan or Special Agent Advance, as the case may be. If the applicable Borrower fails to make such payment when due, subject to the rights of Agent under Section 6.13 hereof, Agent may notify each Lender of the applicable payment made by the Issuing Bank in respect of such Letter of Credit, the payment then due from such Borrower in respect thereof and such Lender’s Pro Rata Share thereof. Promptly following receipt of such notice, each Lender shall pay to Agent its Pro Rata Share of the payment then due and Agent shall promptly pay to the applicable Issuing Bank the amounts so received by it from Lenders. Promptly following receipt by Agent of any payment from a Borrower pursuant to this paragraph, Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse such Issuing Bank, then to such

39

Lenders and such Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse an Issuing Bank for any payment made by such Issuing Bank (other than the funding of a Revolving Loan, Swing Line Loan or Special Agent Advance as contemplated above) shall not constitute a Loan and shall not relieve the applicable Borrower of its obligation to reimburse such Issuing Bank for such payment.

           (h) Obligations Absolute . The obligations of Borrowers to pay each Letter of Credit Obligation, and the obligations of Lenders to make payments to Agent for the account of Issuing Bank with respect to Letters of Credit shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances, whatsoever, notwithstanding the occurrence or continuance of any Default, Event of Default, the failure to satisfy any other condition set forth in Section 4 hereof or any other event or circumstance, and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by an Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, a Borrower’s obligations hereunder. None of Agent, Lenders or the Issuing Banks, or any of their Affiliates, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of an Issuing Bank; provided , that , the foregoing shall not be construed to excuse an Issuing Bank from liability to the applicable Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by each Borrower to the extent permitted by applicable law) suffered by a Borrower that are caused by an Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of an Issuing Bank (as determined pursuant to a final, non-appealable order of a court of competent jurisdiction), such Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, an Issuing Bank may, in its discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

           (i) Disbursement Procedures . The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall promptly notify Agent and the applicable Borrower (or Administrative Borrower) by telephone (confirmed by facsimile or otherwise as Administrative Borrower and Issuing Bank may agree) of such demand for payment and whether such Issuing Bank has made or will make any payment in respect thereof; provided , that , any failure to give or delay in giving such notice shall not relieve the applicable Borrower of its obligation to reimburse such Issuing Bank and Lenders with respect to any such payment.

40

           (j) Interim Interest . If an Issuing Bank shall make any payment in respect of a Letter of Credit, or otherwise be owed any amounts in respect thereof, then, unless the applicable Borrower shall reimburse Issuing Bank for such payment or other amount in full on the date such payment is made or amount due, the unpaid amount thereof shall bear interest, for each day from and including the date such payment is made or amount due but excluding the date that the applicable Borrower reimburses such payment or other amount, at the rate per annum then applicable to Base Rate Loans. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Bank; except , that , interest accrued on and after the date of payment by Agent or any Lender pursuant to Section 2.3(f) above to reimburse such Issuing Bank shall be for the account of Agent or such Lender to the extent of such payment, and shall be payable on demand or, if no demand has been made, on the date on which the applicable Borrower reimburses the applicable payment in full.

           (k) Indemnification . Borrowers and Guarantors shall indemnify and hold Agent and Lenders harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Agent or any Lender may suffer or incur in connection with any Letter of Credit and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by an Issuing Bank or correspondent with respect to any Letter of Credit, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or willful misconduct of Agent or any Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction. Each Borrower and Guarantor assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit or any documents, drafts or acceptances thereunder. Each Borrower and Guarantor hereby releases and holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions with respect to or relating to any Letter of Credit, except for the gross negligence or willful misconduct of Agent or any Lender as determined pursuant to a final, non-appealable order of a court of competent jurisdiction. Notwithstanding anything to the contrary herein, neither Innophos Canada nor any other Borrower or Guarantor that is a Foreign Entity shall be liable for or required to pay any obligations of Innophos or any Domestic Entity arising under this Section 2.3(k). The provisions of this Section 2.3(k) shall survive the payment of Obligations and the termination of this Agreement.

           (l) Account Party . Each Borrower and Guarantor hereby irrevocably authorizes and directs each Issuing Bank to name such Borrower or Guarantor as the account party therein and to deliver to Agent all instruments, documents and other writings and property received by such Issuing Bank pursuant to the Letter of Credit and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit or the Letter of Credit Documents with respect thereto. Nothing contained herein shall be deemed or construed to grant any Borrower or Guarantor any right or authority to pledge the credit of Agent or any Lender in any manner. Agent and Lenders shall have no liability of any kind with respect to any Letter of Credit provided by Issuing Bank unless Agent has duly executed and delivered to Issuing Bank the application or a guarantee or indemnification in writing with respect to such Letter of Credit. Borrowers and Guarantors shall be bound by any reasonable interpretation made in good faith by Agent, or an Issuing Bank under or in connection with any Letter of Credit or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of any Borrower or Guarantor. In connection with Inventory purchased pursuant to any Letter of Credit, Borrowers and Guarantors shall, at Agent’s prior written request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest that upon Agent’s prior written request, such items are to be delivered to Agent and/or subject to Agent’s order, and if they shall come into such Borrower’s or Guarantor’s possession, to deliver them, upon Agent’s prior written request, to Agent in their original form. Except as otherwise provided herein, Agent shall not exercise such right to request such items so long as no Default or Event

41

of Default shall exist or have occurred and be continuing. Except as Agent may otherwise specify, Borrowers and Guarantors shall designate the Issuing Bank with respect to a Letter of Credit as the consignee on all bills of lading and other negotiable and non-negotiable documents under such Letter of Credit.

           (m) Any rights, remedies, duties or obligations granted or undertaken by any Borrower to Issuing Bank in any application for any Letter of Credit, or any other agreement in favor of Issuing Bank relating to any Letter of Credit, shall be deemed to have been granted or undertaken by such Borrower to Agent. Any duties or obligations undertaken by Agent to Issuing Bank in any application for any Letter of Credit, or any other agreement by Agent in favor of Issuing Bank relating to any Letter of Credit, shall be deemed to have been undertaken by Borrowers to Agent and to apply in all respects to Borrowers.

2.4 Requests for Borrowings .

           (a) To request a Revolving Loan or Swing Line Loan, the applicable Borrower (or Administrative Borrower on behalf of such Borrower) shall notify Agent of such request by telephone (i) in the case of a LMIR Loan, not later than 11:00 a.m., three (3) Business Days before the date of the proposed LMIR Loan or (ii) in the case of a Base Rate Loan (including a Swing Line Loan), not later than 1:00 p.m. on the same Business Day as the date of the proposed Base Rate Loan. Each such telephonic request shall be irrevocable and to the extent required by Agent, shall be confirmed promptly by hand delivery or facsimile to Agent of a written request in a form approved by Agent and signed by or on behalf of Borrowers. Each such telephonic and written request shall specify the following information:

                (A) the Borrower requesting such Revolving Loan or Swing Line Loan;

                    (B) whether such Loan is a Revolving Loan or Swing Line Loan;

                (C) the aggregate amount of such Revolving Loan or Swing Line Loan;

                (D) the date of such Revolving Loan or Swing Line Loan, which shall be a Business Day;

                (E) if such Loan is to be a Revolving Loan, whether such Revolving Loan is to be a Base Rate Loan or a LMIR Loan; and

                (F) the deposit account of the applicable Borrower specified on Schedule 8.10 of the Information Certificate or any other account with Agent (or one of its Affiliates) that shall be specified in a written notice signed by an officer of such Borrower and delivered to and approved by Agent (such approval not to be unreasonably withheld).

           (b) If no election as to whether a Revolving Loan is to be a Base Rate Loan or LMIR Loan is specified in the applicable request, then the requested Revolving Loan shall be a Base Rate Loan. Promptly following receipt of a request for a Revolving Loan in accordance with this Section, Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Revolving Loan to be made as part of the request.

           (c) All Loans and Letters of Credit under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, any Borrower or Guarantor

42

when deposited to the credit of any Borrower or Guarantor or otherwise disbursed or established in accordance with the instructions of any Borrower or Guarantor or in accordance with the terms and conditions of this Agreement.

           (d) Except in Agent’s discretion and with the consent of all Lenders, or as otherwise provided herein, the aggregate amount of the Revolving Loans, Swing Line Loans and the Letter of Credit Obligations outstanding at any time shall not exceed the lesser of the Maximum Credit or the Borrowing Base.

     2.5 Prepayments .

           (a) Borrowers may prepay without penalty or premium the principal of any Revolving Loan or Swing Line Loan, in whole or in part, subject to Section 6.7 hereof.

           (b) In the event that (i) the aggregate amount of the Loans and the Letter of Credit Obligations outstanding at any time exceeds the lesser of the Borrowing Base or the Maximum Credit, or (ii) the aggregate principal amount of Loans and Letter of Credit Obligations outstanding at any time to a Borrower exceeds the Borrowing Base of such Borrower, or (iii) the principal amount of any Loans and Letter of Credit Obligations outstanding at any time to Innophos Canada and all other Borrowers that are Foreign Entities, in the aggregate, exceeds the US Dollar Equivalent of $10,000,000, or (iv) the aggregate principal amount of Loans and Letter of Credit Obligations outstanding at any time to a Borrower exceeds the Loan Limit of such Borrower, or (v) the aggregate amount of the Loans and Letters of Credit Obligations outstanding at any time based upon Eligible Inventory exceeds the Inventory Loan Limit, or (vi) the aggregate principal amount of the Loans outstanding at any time to Borrowers based on the Eligible Foreign Accounts exceeds the US Dollar Equivalent of $5,000,000 or (vii) the outstanding amount of the Swing Line Loans exceeds the Swing Line Loan Limit, such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrowers shall, upon demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded.

     2.6 Joint and Several Liability of Borrowers .

          (a) Notwithstanding anything in this Agreement or any other Loan Documents to the contrary, but subject to Section 5.3(b) hereof, each Borrower, jointly and severally, in consideration of the financial accommodations to be provided by Agent and Lenders under this Agreement and the other Loan Documents, for the mutual benefit, directly and indirectly, of each Borrower and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations, it being the intention of the parties hereto that all of the Obligations shall be the joint and several obligations of each Borrower without preferences or distinction among them. Borrowers shall be liable for all amounts due to Agent and Lenders under this Agreement, regardless of which Borrower actually receives the Loans or Letter of Credit Obligations hereunder or the amount of such Revolving Loans received or the manner in which Agent or any Lender accounts for such Loans, Letter of Credit Obligations or other extensions of credit on its books and records. The Obligations of Borrowers with respect to Revolving Loans made to one of them, and the Obligations arising as a result of the joint and several liability of one of the Borrowers hereunder with respect to Revolving Loans made to the other of the Borrowers hereunder, shall be separate and distinct obligations, but all such other Obligations shall be primary obligations of all Borrowers.

43

           (b) Subject to Section 5.3(b) hereof, if and to the extent that any Borrower shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event, the other Borrowers will make such payment with respect to, or perform, such Obligation.

           (c) Except as otherwise expressly provided herein, to the extent permitted by law, each Borrower (in its capacity as a joint and several obligor in respect of the obligations of the other Borrower) hereby waives notice of acceptance of its joint and several liability, notice of occurrence of any Event of Default (except to the extent notice is expressly required to be given pursuant to the terms of this Agreement), or of any demand for any payment under this Agreement or the other Loan Documents, notice of any action at any time taken or omitted by Agent or any Lender under or in respect of any of the obligations hereunder, any requirement of diligence and, generally, all demands, notices and other formalities of every kind in connection with this Agreement and the other Loan Documents. Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Agent or any Lender at any time or times in respect of any default by the other Borrowers in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Agent or any Lender in respect of any of the obligations hereunder, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of such obligations or the addition, substitution or release, in whole or in part, of the other Borrowers. Without limiting the generality of the foregoing, each Borrower (in its capacity as a joint and several obligor in respect of the obligations of the other Borrowers) assents to any other action or delay in acting or any failure to act on the part of Agent or any Lender, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder which might, but for the provisions of this Section 2.6 hereof, afford grounds for terminating, discharging or relieving such Borrower, in whole or in part, from any of its obligations under this Section 2.6, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the obligations of such Borrower under this Section 2.6 shall not be discharged except by performance and then only to the extent of such performance. The obligations of each Borrower under this Section 2.6 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Borrower. The joint and several liability of the Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any Borrower or any of the Lenders.

          (d) The provisions of this Section 2.6 hereof are made for the benefit of the Lenders and their successors and assigns, and subject to Sections 5.3(b) and 14.3 hereof, may be enforced by them from time to time against any Borrower as often as occasion therefor may arise and without requirement on the part of Agent or any Lender first to marshal any of its claims or to exercise any of its rights against the other Borrowers or to exhaust any remedies available to it against the other Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 2.6 shall remain in effect until all the Obligations shall have been paid in full or otherwise fully satisfied (other than indemnities and contingent Obligations which have not yet accrued). If at any time, any payment, or any part thereof, made in respect of any of the Obligations is rescinded or must otherwise be restored or returned by Agent or any Lender upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of this Section 2.6 hereof will forthwith be reinstated and in effect as though such payment had not been made.

44

           (e) Notwithstanding any provision to the contrary contained herein or in any of the other Loan Documents, to the extent the obligations of a Borrower shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state, provincial, territorial or federal law relating to fraudulent conveyances or transfers) then the obligations of such Borrower hereunder shall be limited to the maximum amount that is permissible under applicable law (whether federal, state, provincial or territorial and including, without limitation, the Bankruptcy Code of the United States or Bankruptcy and Insolvency Act (Canada)).

          (f) With respect to the Obligations arising as a result of the joint and several liability of Borrowers hereunder with respect to Loans, Letter of Credit Obligations or other extensions of credit made to the other Borrowers hereunder, each Borrower waives, until the Obligations shall have been paid in full (other than indemnities and contingent Obligations which have not yet accrued) and this Agreement shall have been terminated, any right to enforce any right of subrogation or any remedy which Agent or any Lender now has or may hereafter have against any Borrower, any endorser or any guarantor of all or any part of the Obligations, and any benefit of, and any right to participate in, any security or collateral given to Agent or any Lender. Any claim which any Borrower may have against any other Borrower with respect to any payments to Agent or Lenders hereunder or under any of the other Loan Documents are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations. Upon the occurrence of any Event of Default and for so long as the same is continuing, Agent and Lenders may proceed directly and at once, without notice (to the extent notice is waivable under applicable law), against (i) with respect to Obligations of Borrowers, either or both of them or (ii) with respect to Obligations of any Borrower, to collect and recover the full amount, or any portion of the applicable Obligations, without first proceeding against the other applicable Borrowers or any other Person, or against any security or collateral for the Obligations. Each Borrower consents and agrees that Agent and Lenders shall be under no obligation to marshal any assets in favor of Borrower(s) or against or in payment of any or all of the Obligations.

      2.7 Commitments . The aggregate amount of each Lender’s Pro Rata Share of the Revolving Loans, Swing Line Loans and Letter of Credit Obligations shall not exceed the amount of such Lender’s Commitment, as the same may from time to time be amended in accordance with the provisions hereof.

SECTION 3. INTEREST AND FEES

     3.1 Interest .

           (a) Borrowers shall pay to Agent, for the benefit of Lenders, interest on the outstanding principal amount of the Loans at the Interest Rate. All interest accruing hereunder on and after the date of any Event of Default or termination hereof shall be payable on demand.

           (b) Each Borrower (or Administrative Borrower on behalf of such Borrower) may from time to time request LMIR Loans or may request that Base Rate Loans be converted to LMIR Loans. Such request from a Borrower (or Administrative Borrower on behalf of such Borrower) shall specify the amount of the LMIR Loans or the amount of the Base Rate Loans to be converted to LMIR Loans. Subject to the terms and conditions contained herein, three (3) Business Days after receipt by Agent of such a request from a Borrower (or Administrative Borrower on behalf of such Borrower), which may be telephonic (and followed by a confirmation in writing if requested by Agent) such LMIR Loans shall be made or Base Rate Loans shall be converted to LMIR Loans; provided , that , (i) no Default or Event of Default shall exist or have occurred and be continuing, (ii) no Borrower (or Administrative Borrower on behalf of any Borrower) shall have sent any notice of termination of this Agreement, and (iii) such Borrower (or Administrative Borrower on behalf of such Borrower) shall have complied with

45

such customary procedures as are established by Agent and specified by Agent to Borrowers from time to time for requests by Borrowers for LMIR Loans. Any request by or on behalf of a Borrower for LMIR Loans or to convert Base Rate Loans to LMIR Loans shall be irrevocable.

           (c) Any LMIR Loans shall, at Agent’s option, upon notice by Agent to Administrative Borrower, be subsequently converted to Base Rate Loans in the event that this Agreement shall terminate or not be renewed. Borrowers shall pay to Agent, for the benefit of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan account of any Borrower) any amounts required to compensate any Lender or Participant for any loss (including loss of anticipated profits), cost or expense incurred by such person, as a result of the conversion of LMIR Loans to Base Rate Loans pursuant to any of the foregoing.

           (d) Interest shall be payable by Borrowers to Agent, for the account of Lenders, monthly in arrears not later than the first day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed, other than for Base Rate Loans, which shall be calculated on the basis of a three hundred sixty-five (365) or three hundred sixty-six (366) day year, as applicable, and actual days elapsed. The interest rate on non-contingent Obligations (other than LMIR Loans) shall increase or decrease by an amount equal to each increase or decrease in the Base Rate effective on the date any change in such Base Rate is effective. In no event shall charges constituting interest payable by Borrowers to Agent and Lenders exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.

           (e) For purposes of disclosure under the Interest Act (Canada), where interest is calculated pursuant thereto at a rate based upon a year of 360, 365 or 366 days, as the case may be (the “First Rate”), the rate or percentage of interest on a yearly basis is equivalent to such First Rate multiplied by the actual number of days in the year divided by 360, 365 or 366, as the case may be.

           (f) If any provision of this Agreement or any of the other Loan Documents would obligate a Guarantor or other Person to make any payment of interest or other amount payable to the Agent or a Lender in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by the Agent or such Lender of interest at a criminal rate (as construed under the Criminal Code (Canada)), if applicable thereto, then notwithstanding that provision, that amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or result in a receipt by the Agent or such Lender of interest at a criminal rate, the adjustment to be effected, to the extent necessary, as follows:

                (i) first, by reducing the amount or rate of interest required to be paid to the Agent or applicable Lender under this Section 3.1(f)(i); and

               (ii) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to the Agent or the applicable Lender which would constitute interest for purposes of the Criminal Code (Canada).

46

                (iii) Notwithstanding Section 3.1(f)(i), and after giving effect to all adjustments contemplated thereby, if the Agent or any Lender shall have received an amount in excess of the maximum permitted by the Criminal Code (Canada), then the Borrowers or Guarantor, as applicable, shall be entitled, by notice in writing to the Agent or the affected Lender, as the case may be, to obtain reimbursement from the Agent or such Lender, as the case may be, in an amount equal to the excess, and pending reimbursement, the amount of the excess shall be deemed to be an amount payable by the Agent or such Lender, as the case may be, to the Borrowers.

                (iv) Any amount or rate of interest referred to in this Section 3.1(f) shall be determined in accordance with generally accepted actuarial practices and principles as an effective annual rate of interest over the term that any Obligation remains outstanding on the assumption that any charges, fees or expenses that fall within the meaning of “interest” (as defined in the Criminal Code (Canada)) shall, if they relate to a specific period of time, be pro-rated over that period of time and otherwise be prorated over the period from the date of the incurrence of the Obligation to its relevant maturity date and, in the event of a dispute, a certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Agent shall be conclusive for the purposes of that determination.

     3.2 Fees .

           (a) Borrowers shall pay to Agent, for the account of Lenders, monthly an unused line fee at a rate equal to the applicable rate (on a per annum basis) determined as provided below calculated upon the amount by which the Maximum Credit exceeds the average daily principal balance of the outstanding Revolving Loans and Letters of Credit during the immediately preceding month (or part thereof) so long as any Obligations are outstanding and this Agreement has not been terminated. Such fees shall be payable on the first Business Day of each month in arrears and calculated based on a three hundred sixty (360) day year and actual days elapsed. The applicable rate payable with respect to (i) amounts up to $32,500,000 by which the Maximum Credit exceeds the average daily principal balance of the outstanding Revolving Loans and Letters of Credit during the immediately preceding month (or part thereof) so long as any Obligations are outstanding, shall be five-eighths (5/8%) percent per annum and (ii) amounts greater than $32,500,000 up to and including $65,000,000 by which the Maximum Credit exceeds the average daily principal balance of the outstanding Revolving Loans and Letters of Credit during the immediately preceding month (or part thereof) so long as any Obligations are outstanding, shall be three-eighths (3/8%) percent per annum.

           (b) Borrowers shall pay to Agent, for the benefit of Lenders, in the case of Standby LCs, monthly a fee at the Standby LC Fee Rate determined as provided below (on a per annum basis) on the average daily outstanding balance of Standby Letters of Credit, and in the case of Commercial LCs, monthly a fee at the Commercial LC Fee Rate determined as provided below (on a per annum basis, on the average daily outstanding balance of Trade LCs, in each case for the immediately preceding month (or part thereof), payable in arrears as of the first day of each month, computed for each day from the date of issuance to the date of expiration; provided , that , Borrowers shall, at Agent’s option or at the written direction of the Required Lenders, pay such fees at a rate two (2%) percent greater than the highest rate above on such average daily maximum amount for: (i) the period from and after the date of termination or non-renewal hereof until Lenders have received full and final payment of all Obligations (notwithstanding entry of a judgment against any Borrower or Guarantor) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Agent. Such letter of credit fees shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrowers to pay such fee shall survive the termination or non-renewal of this Agreement. In addition to the letter of credit fees provided above, Borrowers shall pay to Issuing Bank for its own account (without sharing with Lenders) the letter of credit fronting fee of one-eighth (0.125%) percent per annum and the other customary charges from time

47

to time of Issuing Bank with respect to the issuance, amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit.

           (c) Borrowers shall pay to Agent and Wachovia the other fees and amounts set forth in the Fee Letter in the amounts and at the times specified therein or as has otherwise been agreed by or on behalf of Borrowers. To the extent payment in full of the applicable fee is received by Agent from Borrowers on or about the date hereof, Agent shall pay to each Lender its share of such fees in accordance with the terms of the arrangements of Agent with such Lender.

      3.3 Inability to Determine Applicable Interest Rate . If Agent shall determine in good faith (which determination shall, absent manifest error, be final and conclusive and binding on all partier hereto) that on any date by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to LMIR Loans, Agent shall on such date give notice to Administrative Borrower and each Lender of such determination. Upon such date no Loans may be made as, or converted to, LMIR Loans until such time as Agent notifies Administrative Borrower and Lenders that the circumstances giving rise to such notice no longer exist and any request for LMIR Loans received by Agent shall be deemed to be a request, or a continuation or conversion, for or into Base Rate Loans.

      3.4 Illegality . Notwithstanding anything to the contrary contained herein, if (a) any change in any law or interpretation thereof by any Governmental Authority makes it unlawful for a Lender to make or maintain a LMIR Loan or to maintain any Commitment with respect to a LMIR Loan or (b) a Lender determines in good faith (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) has become impracticable as a result of a circumstance that adversely affects the London interbank market or the position of such Lender in such market, then such Lender shall give notice thereof to Agent and Administrative Borrower and may (i) declare that LMIR Loans will not thereafter be made by such Lender, such that any request for a LMIR Loans from such Lender shall be deemed to be a request for a Base Rate Loan unless such Lender’s declaration has been withdrawn (and it shall be withdrawn promptly upon the cessation of the circumstances described in clause (a) or (b) above and (ii) require that all outstanding LMIR Loans made by such Lender be converted to Base Rate Loans immediately, in which event all outstanding LMIR Loans of such Lender shall be so converted. Borrowers shall jointly and severally indemnify Agent and Lenders and hold Agent and Lenders harmless from any loss or expense which Agent or any Lender may sustain or incur as a consequence of a default by any Borrower in making a borrowing of or conversion into LMIR Loans after any Borrower has given a notice requesting the same in accordance with the provisions of this Agreement. This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations.

      3.5 Increased Costs . If any Change in Law shall: (a) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender or the Issuing Bank; (b) subject any Lender or the Issuing Bank to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any LMIR Loan made by it, or change the basis of taxation of payments to such Lender or the Issuing Bank in respect thereof (except for Taxes or Other Taxes covered by Section 6.8 and the imposition of, or any change in the rate of, any taxes payable by such Lender or the Issuing Bank described in Sections 6.8); or (c) impose on any Lender or the Issuing Bank or the London interbank market any other condition, cost or expense affecting this Agreement or LMIR Loans made by such Lender or any Letter of Credit or participation therein, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any LMIR Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any

48

sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the Issuing Bank, Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

      3.6 Capital Requirements . If any Lender or the Issuing Bank determines that any Change in Law affecting such Lender or the Issuing Bank or any lending office of such Lender or such Lender’s or the Issuing Bank’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

      3.7 Certificates for Reimbursement . A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in Sections 3.5 or 3.6 and delivered to Administrative Borrower shall be conclusive absent manifest error. Borrowers shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within fifteen (15) days after receipt thereof.

      3.8 Delay in Requests . Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to Sections 3.5 or 3.6 shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided , that , Borrowers shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs incurred or reductions occurring more than one hundred eighty (180) days prior to the date that such Lender or the Issuing Bank, as the case may be, becomes aware of the event giving rise to such Lender’s or Issuing Bank’s claim for compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the one hundred eighty (180) day period referred to above shall be extended to include the period of retroactive effect thereof).

     3.9 Mitigation; Replacement of Lenders .

           (a) If any Lender requests compensation under Sections 3.4, 3.5 or Section 3.6, or Borrowers are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 6.8, then such Lender shall, if requested by Administrative Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate a different lending office for funding or booking its Loans hereunder, to assign its rights and obligations hereunder to another of its offices, branches or affiliates or to take such other actions as such Lender or Agent determines, if, in the judgment of such Lender, such designation, assignment or other action (i) would eliminate or reduce amounts payable pursuant to such Sections in the future and (ii) would not subject Agent or such Lender to any unreimbursed cost or expense and Agent or such Lender would not suffer any economic, legal or regulatory disadvantage. Nothing in this Section 3.9 shall affect or postpone any of the obligations of Borrowers or the rights of Agent or such Lender pursuant to this

49

Section 3.9. Borrowers hereby agree to pay on demand all reasonable costs and expenses incurred by Agent or any Lender in connection with any such designation or assignment.

           (b) If any Lender requests compensation under Sections 3.4, 3.5 or 3.6, if Borrowers are required to pay any additional amount to any Lender or Governmental Authority pursuant to Section 6.8, then within sixty (60) days thereafter, Administrative Borrower may, at its sole expense and effort, upon notice to such Lender and Agent, replace such Lender by requiring such Lender to assign and delegate (and such Lender shall be obligated to assign and delegate), without recourse (in accordance with and subject to the restrictions contained in Section 15.7), all of its interests, rights and obligations under this Agreement to an Eligible Transferee that shall assume such obligations; provided , that , (i) Administrative Borrower has received the prior written consent of Agent and each Issuing Bank, (ii) such Lender shall have received payment of an amount equal to the outstanding principal amount of its Loans and participations in Letter of Credit Obligations and Swing Line Loans that it has funded, if any, accrued interest thereon, accrued fees and other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal) and Administrative Borrower (in the case of accrued interest, fees and other amounts, including amounts under Section 3.10), (iii) such assignment will result in a reduction in such compensation and payments, and (iv) such assignment does not conflict with applicable laws or regulations. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Administrative Borrower to require such assignment and delegation cease to apply. Nothing in this Section 3.9 shall impair any rights that any Borrower or Agent may have against any Lender that is a Defaulting Lender.

      3.10 Funding Losses . Borrowers shall pay to Agent its customary administrative charge and to each Lender all losses, expenses and liabilities (including any interest paid by such Lender to Lenders of funds borrowed by it to make or carry its LMIR Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or redeployment of such) that it sustains (a) if for any reason (other than a default by such Lender) a borrowing of any LMIR Loan does not occur on a date specified therefor in a request for borrowing, or a conversion to, any LMIR Loan does not occur on a date specific therefor in a request for conversion or continuation, (b) if any prepayment or other principal payment of any of its LMIR Loans occurs on a date prior to the last day of an Interest Period applicable to such Loan, or (c) if any prepayment of any of its LMIR Loans is not made on any date specified in a notice of prepayment given by a Borrower (or on its behalf by Administrative Borrower). This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations.

      3.11 Maximum Interest . Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, in no event whatsoever shall the aggregate of all amounts that are contracted for, charged or received by Agent or any Lender pursuant to the terms of this Agreement or any of the other Loan Documents and that are deemed interest under applicable law exceed the Maximum Interest Rate (including, to the extent applicable, the provisions of Section 5197 of the Revised Statutes of the United States of America as amended, 12 U.S.C. Section 85, as amended). In no event shall any Borrower or Guarantor be obligated to pay interest or such amounts as may be deemed interest under applicable law in amounts which exceed the Maximum Interest Rate. In the event any Interest is charged or received in excess of the Maximum Interest Rate (“Excess”), each Borrower and Guarantor acknowledges and stipulates that any such charge or receipt shall be the result of an accident and bona fide error, and that any Excess received by Agent or any Lender shall be applied, first, to the payment of the then outstanding and unpaid principal hereunder; second to the payment of the other Obligations then outstanding and unpaid; and third, returned to such Borrower or Guarantor. All monies paid to Agent or any Lender hereunder or under any of the other Loan Documents, whether at maturity or by prepayment, shall be subject to any rebate of unearned interest as and to the extent required by applicable law. For the purpose of determining whether or not any Excess has been contracted for, charged or received by Agent or any Lender, all interest at any time contracted for, charged or received

50

from any Borrower or Guarantor in connection with this Agreement or any of the other Loan Documents shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread during the entire term of this Agreement in accordance with the amounts outstanding from time to time hereunder and the Maximum Interest Rate from time to time in effect in order to lawfully charge the maximum amount of interest permitted under applicable laws. The provisions of this Section 3.11 shall be deemed to be incorporated into each of the other Loan Documents (whether or not any provision of this Section is referred to therein).

      3.12 No Requirement of Match Funding . Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to acquire US Dollar deposits in the London interbank market or any other offshore US Dollar market to fund any LMIR Loan or to otherwise match fund any Obligations as to which interest accrues based on the LIBOR Market Index Rate. All of the provisions of this Section 3 shall be deemed to apply as if Agent, each Lender or any Participant had acquired such deposits to fund any LMIR Loan or any other Obligation as to which interest is accruing at the LIBOR Market Index Rate by acquiring such US Dollar deposits in the amount of the LMIR Loans or other applicable Obligations.

SECTION 4. CONDITIONS PRECEDENT

      4.1 Conditions Precedent to Initial Loans and Letters of Credit . The obligation of Lenders to make the initial Loans or of Issuing Bank to provide for the initial Letters of Credit hereunder is subject to the satisfaction of, or waiver of, immediately prior to or concurrently with the making of such Loan or the issuance of such Letter of Credit of each of the following conditions precedent:

           (a) Agent shall have received, in form and substance satisfactory to Agent, all releases, terminations and such other documents as Agent may request to evidence and effectuate the termination and release of any interest in and to any assets and properties of each Borrower and Guarantor that is not a Permitted Lien, duly authorized, executed and delivered by it or each of them, including, but not limited to, (i) UCC termination statements or amendments, as applicable, for all UCC financing statements previously filed with respect to any such interests that do not constitute Permitted Liens, filed against any Borrower or Guarantor, as debtor; (ii) PPSA terminations or discharges for all PPSA financing statements previously filed with respect to any such interests that do not constitute Permitted Liens, filed against any Borrower or Guarantor, as debtor; and (iii) satisfactions and discharges of any mortgages, deeds of trust or deeds to secure debt by any Borrower or Guarantor that do not constitute Permitted Liens, in form acceptable for recording with the appropriate Governmental Authority;

           (b) all requisite corporate action and proceedings in connection with this Agreement and the other Loan Documents shall be reasonably satisfactory in form and substance to Agent, and Agent shall have received all information and copies of all documents, including records of requisite corporate action and proceedings which Agent may have reasonably requested in connection therewith, such documents where requested by Agent or its counsel to be certified by appropriate corporate officers or Governmental Authority (and including a copy of the certificate of incorporation of each Borrower and Guarantor certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth the same complete corporate name of such Borrower or Guarantor as is set forth herein and such document as shall set forth the organizational identification number of each Borrower or Guarantor, if one is issued in its jurisdiction of incorporation);

51

           (c) no material adverse change shall have occurred in the assets, business or prospects of Borrowers and Guarantors (taken as a whole) since the later of (i) the date of the most recent financial statements of Borrowers delivered to Agent and (ii) the date of Lender’s latest field examination (not including for this purpose the field review referred to in clause (f) below) and no change or event shall have occurred which would impair the ability of any Borrower or Guarantor to perform its obligations hereunder or under any of the other Loan Documents to which it is a party or of Lender to enforce the Obligations or realize upon the Collateral;

           (d) no material pending or threatened in writing, litigation, proceeding, bankruptcy or insolvency, injunction, order or claim with respect to Borrowers and Guarantors shall exist;

           (e) no default or event of default under the Opco Notes or in respect of any other material Indebtedness of any Borrower or Guarantor shall exist;

           (f) Agent shall have completed a field review of the Records and such other information with respect to the Collateral as Agent may require to determine the amount of Loans available to Borrowers (including, without limitation, current perpetual inventory records and/or roll-forwards of Accounts and Inventory through the date of closing and test counts of the Inventory in a manner satisfactory to Agent, together with such supporting documentation as may be necessary or appropriate, and other documents and information that will enable Agent to accurately identify and verify the Collateral), the results of which in each case shall be satisfactory to Agent, not more than three (3) Business Days prior to the date hereof or such earlier date as Agent may agree;

           (g) Agent shall have received, in form and substance satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent has reasonably requested and may reasonably deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Loan Documents, including, without limitation, Collateral Access Agreements;

           (h) Agent shall have received, in form and substance reasonably satisfactory to Agent, Deposit Account Control Agreements by and among Agent, each Borrower and Guarantor, as the case may be and each bank where such Borrower (or Guarantor) has a deposit account as contemplated by Section 6.6 hereof, in each case, duly authorized, executed and delivered by such bank and Borrower or Guarantor, as the case may be (or Agent shall be the bank’s customer with respect to such deposit account as Agent may specify);

           (i) Agent shall have received an officer’s certificate prepared by the chief financial officer, vice president of finance, treasurer or controller of Borrowers as to the financial condition, solvency and related matters of Borrowers after giving effect to the initial borrowings under the Loan Documents, in substantially the form of Exhibit D hereto (the “Solvency Certificate”);

           (j) Excess Availability, on or about the date hereof, shall be not less than $50,000,000 after giving effect to the initial Loans made or to be made and Letters of Credit issued or to be issued in connection with the initial transactions hereunder;

           (k) Agent shall have received evidence, in form and substance satisfactory to Agent, that Agent (i) has, as of the execution and delivery hereof, a valid perfected first priority security interest in all of the Collateral, except as to (A) Intellectual Property as to which filings with the United States Patent and Trademark Office or United States Copyright Office or Canadian Intellectual Property Office (or similar office of Canada) are required to be made for the perfection thereof (B) priority, subject to the

52

liens permitted under clauses (b), (c), (i) and (j) of Section 10.2 hereof, to the extent that such liens have priority over the liens of Agent under applicable law); and (c) Intellectual Property issued, registered, applied for or subsisting outside of the United States of America and Canada); and (ii) will have, upon the making of the necessary filings with the United States Patent and Trademark Office or United States Copyright Office or Canadian Intellectual Property Office (or similar office of Canada) in a timely manner, a valid and perfected first priority security interest in all of the Intellectual Property of each Borrower and Guarantor included in the Collateral existing as of the date hereof (if and to the extent that a valid perfected first priority security interest can be achieved under applicable laws by the timely filing of the applicable Loan Document with, as applicable, the Canadian Intellectual Property Office (or similar office or agency of Canada) and/or the United States Copyright Office and/or the United States Patent and Trademark Office and/or filing of UCC Financing Statements);

           (l) Agent shall have received and reviewed lien and judgment search results for the location of each Borrower and Guarantor (determined in accordance with the Uniform Commercial Code of the applicable jurisdiction and any other applicable law) and all counties, provinces and territories in which assets of Borrowers and Guarantors are located, which search results shall be in form and substance satisfactory to Agent;

           (m) Agent shall have received a borrowing request and a Borrowing Base Certificate setting forth the Loans and Letters of Credit available to Borrowers as of the date hereof as completed in a manner reasonably satisfactory to Agent and duly authorized, executed and delivered on behalf of Borrowers;

           (n) Agent shall have received (i) projected monthly consolidating and consolidated (including only Borrowers and Guarantors) balance sheets, income statements, statements of cash flows and availability of Borrowers and Guarantors for the period through the end of the 2009 fiscal year of Borrowers and Guarantors, (ii) projected annual consolidating and consolidated (including only Borrowers and Guarantors) balance sheets, income statements, statements of cash flows and availability of Borrowers and Guarantors through the end of the 2011 fiscal year of Borrowers and Guarantors, in each case as to the projections described in clauses (i) and (ii), with the results and assumptions set forth in all of such projections in form and substance reasonably satisfactory to Agent and a pro-forma balance sheet of Parent and Subsidiaries reflecting the initial transactions contemplated hereunder, including, but not limited to Loans and Letter of Credit Obligations outstanding on the date hereof and the use of the proceeds of the initial Loans as provided herein, accompanied by a certificate, dated of even date herewith, of Parent stating that such pro-forma balance sheet was prepared in good faith by an authorized officer of Parent and based on assumptions that are reasonable in light of all facts and circumstances known to Parent at such time, (iii) any updates or modifications to the projected financial statements of Borrowers and Guarantors previously received by Agent, in each case in form and substance satisfactory to Agent;

           (o) Agent shall have received evidence of insurance and loss payee endorsements required hereunder and under the other Loan Documents, in form and substance reasonably satisfactory to Agent, and, for such insurance policies, certificates of insurance policies and/or endorsements naming Agent as loss payee;

          (p) Agent shall have received, in form and substance reasonably satisfactory to Agent, such opinion letters of counsel to Borrowers and Guarantors with respect to the Loan Documents and such other matters as Agent may reasonably request; and

53

           (q) the other Loan Documents and all instruments and documents hereunder and thereunder shall have been duly executed and delivered to Agent, in form and substance satisfactory to Agent.

           (r) without limiting the generality of the provisions of Section 14.2 for purposes of determining compliance with the conditions specified in this Section 4.1, each Lender that has signed this Agreement shall be deemed to have consented to approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless Agent shall have received notice from such Lender prior to the date hereof specifying its objection thereto.

      4.2 Conditions Precedent to All Loans and Letters of Credit . The obligation of Lenders to make the Loans, including the initial Loans, or of Issuing Bank to issue any Letter of Credit, including the initial Letters of Credit, is subject to the further satisfaction of, or waiver of, immediately prior to or concurrently with the making of each such Loan or the issuance of such Letter of Credit of each of the following conditions precedent:

           (a) all representations and warranties contained herein and in the other Loan Documents shall be true and correct with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Loan or providing each such Letter of Credit and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date);

           (b) no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or providing the Letters of Credit, or (B) the consummation of the transactions contemplated pursuant to the terms hereof or the other Loan Documents or (ii) has or has a reasonable likelihood of having a Material Adverse Effect;

           (c) no Default or Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Loan or providing each such Letter of Credit and after giving effect thereto, and

           (d) With respect to borrowings by the Innophos Canada only, no requirement from the Minister of National Revenue for payment pursuant to Section 224 or any successor section of the Income Tax Act (Canada) or Section 317 or any successor section of the Excise Tax Act (Canada) or any comparable provision of similar legislation shall have been received by Agent or Innophos Canada or any other Person in respect of Innophos Canada or otherwise issued in respect of any Lender to Innophos Canada involving an amount in excess of the US Dollar Equivalent of $1,000,000.

SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST

      5.1 Grant of Security Interest . To secure payment and performance of all Obligations, each Borrower (other than Innophos Canada) and Guarantor hereby grants to Agent, for itself and the benefit of Secured Parties, a continuing security interest in, a lien upon, and a right of set off against, and an assignment to Agent, for itself and the benefit of Secured Parties, as security, and Innophos Canada, to secure payment and performance of its Obligations, hereby grants to Agent a continuing security interest in, a lien upon and right of setoff against, and an assignment to Agent, for itself and the benefit of Secured Parties, as security, the following items and types of personal property of each such Borrower and

54

Guarantor, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Lender, collectively, the “Collateral”), including all of each such Borrower’s and Guarantor’s right, title and interest in and to the following:

          (a) all Accounts;

          (b) all general intangibles, including, without limitation, all Intellectual Property;

          (c) all Inventory

           (d) all chattel paper, including, without limitation, all tangible and electronic chattel paper;

          (e) all instruments, including, without limitation, all promissory notes; (f) all documents; (g) all deposit accounts;

           (h) all letters of credit, banker’s acceptances and similar instruments and including all letter-of-credit rights;

          (i) all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, related to the Collateral, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors;

           (j) all (i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) and (ii) monies, credit balances, deposits and other property of any Borrower or Guarantor now or hereafter held or received by or in transit to Agent, any Lender or its Affiliates or at any other depository or other institution from o