-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CrGBLMgRSD+ESWHC0S0YzIwKw8w6+TFAgBxUTf7XlO3lIZkj3WnYNHqscRjSjrXT kYBsrPvHJ4EZd+vb7m5qbQ== 0001157523-06-011394.txt : 20061115 0001157523-06-011394.hdr.sgml : 20061115 20061115123335 ACCESSION NUMBER: 0001157523-06-011394 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20061109 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061115 DATE AS OF CHANGE: 20061115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUAKER FABRIC CORP /DE/ CENTRAL INDEX KEY: 0000103341 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILS, MAN MADE FIBER & SILK [2221] IRS NUMBER: 041933106 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07023 FILM NUMBER: 061218852 BUSINESS ADDRESS: STREET 1: 941 GRINNELL ST. CITY: FALL RIVER STATE: MA ZIP: 02721 BUSINESS PHONE: 5086781951 MAIL ADDRESS: STREET 1: 941 GRINNELL ST CITY: FALL RIVER STATE: MA ZIP: 02721 FORMER COMPANY: FORMER CONFORMED NAME: VERTIPILE INC DATE OF NAME CHANGE: 19870811 8-K 1 a5274680.txt QUAKER FABRIC CORP. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 NOVEMBER 9, 2006 Date of Report (Date of earliest event reported) QUAKER FABRIC CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 1-7023 04-1933106 (State of incorporation) (Commission File Number) (I.R.S. Employer Identification No.) 941 GRINNELL STREET, FALL RIVER, MASSACHUSETTS 02721 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (508) 678-1951 (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT On November 9, 2006, Quaker Fabric Corporation of Fall River ("Quaker"), a wholly-owned subsidiary of Quaker Fabric Corporation (the "Company"), entered into a $25.0 million amended and restated senior secured revolving credit agreement with Bank of America, N.A. (the "Bank") and two other lenders (the "2006 Revolving Credit Agreement"). Quaker's obligations to the revolving credit lenders are secured by all of the Company's assets, with a junior interest in Quaker's real estate and machinery and equipment. Simultaneously, Quaker entered into two (2) senior secured term loans in the aggregate amount of $24.6 million, with GB Merchant Partners, LLC as Agent for the term loan lenders (the "2006 Term Loan Agreement"). The two term loans consist of a $12.5 million real estate loan and a $12.1 million equipment loan (the "Real Estate Term Loan" and the "Equipment Term Loan", respectively, and together, the "Term Loans"). The Term Loans are secured by all of the Company's assets, with a first priority security interest in the Company's machinery and equipment and real estate. The proceeds of the Term Loans were used to: (i) repay, in full, all outstanding obligations under the term loan previously provided by the Bank pursuant to the terms of Quaker's May 18, 2005 senior secured credit facility with the Bank (the "2005 Credit Agreement"), (ii) reduce Quaker's obligations to the Bank under the revolving credit portion of the 2005 Credit Agreement by approximately $8.9 million, (iii) fund a $1.0 million environmental escrow account required by the Term Loan Lenders to cover certain environmental site assessment and remediation expenses potentially arising out of Environmental Conditions at the various parcels of real estate serving as collateral for Quaker's obligations to the Term Loan Lenders, and (iv) pay for approximately $2.6 million of transaction and related costs required by the Bank and the Term Loan Lenders to be paid at the Closing, including fees to the various lenders of approximately $1.5 million and professional and consulting fees of approximately $1.1 million. Both the 2006 Revolving Credit Agreement and the 2006 Term Loan Agreement have maturity dates of May 17, 2010. Advances to Quaker under the 2006 Revolving Credit Facility are limited to a formula based on Quaker's accounts receivable and inventory minus an "Availability Reserve" (and such other reserves as the Bank may establish from time to time in its reasonable credit judgment.) Pursuant to the terms of the 2006 Term Loan Agreement, mandatory prepayments of the Real Estate and Equipment Term Loans are required as Quaker sells the assets securing those loans pursuant to the terms of the restructuring plan Quaker has in place (the "Restructuring Plan"). Following the sale in 2008 of the last parcel of real estate contemplated by the Restructuring Plan, amortization of the Real Estate Term Loan would be at the rate of $1.1 million per year, payable at the rate of $100,000 per month in each month other than July. In addition, in the event sales of certain parcels of real estate are not consummated on or before the dates assumed for such sales in the Restructuring Plan, Quaker would be responsible for making Late Sale Amortization Payments (as defined in the 2006 Term Loan Agreement) at the rate of $150,000 per month until such payments equal 92.5% of the net proceeds the Term Loan Lenders would have received on the sale of such real estate. Mandatory prepayments of the Equipment Term Loan and the Real Estate Term Loan are also required in the event of Equipment Appraisal and/or Real Property Appraisal Shortfalls, respectively (as defined in the 2006 Term Loan Agreement). In addition, both the 2006 Revolving Credit Agreement and the 2006 Term Loan Agreement contain a "springing" Fixed Charge Coverage Ratio covenant with which Quaker would need to comply in the event Quaker's "Excess Availability" under the 2006 Revolving Credit Agreements were to fall below certain levels. Both Loan Agreements also include customary reporting obligations and certain affirmative and negative covenants including, but not limited to, restrictions on dividend payments, capital expenditures, indebtedness, liens and acquisitions and investments. As of November 10, 2006, there were $13.6 million of loans outstanding under the 2006 Revolving Credit Agreement, including approximately $4.5 million of letters of credit and unused availability of $5.3 million, net of the Availability Reserve. In addition, as of the same date, Quaker's outstanding obligations under the Term Loans were approximately $24.6 million. The foregoing descriptions of the 2006 Revolving Credit Agreement, the 2006 Term Loan Agreement, the Security Agreements, the Guaranties, the Intercreditor Agreement and the Environmental Indemnity Agreements are qualified in their entirety by reference to the 2006 Revolving Credit Agreement, the 2006 Term Loan Agreement, the Security Agreements, the Guaranties, the Intercreditor Agreement and the Environmental Indemnity Agreements which are filed as Exhibits 10.37 through and 10.44 to this Form 8-K and are incorporated by reference herein. 2 ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 10.37 Amended and Restated Revolving Credit Agreement (dated as of November 9, 2006) by and among Quaker Fabric Corporation of Fall River, as Borrower; Bank of America, N.A. and the Other Lending Institutions which are or may become parties thereto (the "Revolving Credit Lenders"); and Bank of America, N.A., as Administrative Agent for the Revolving Credit Lenders, Issuing Bank and Cash Management Bank (the "2006 Revolving Credit Agreement"). 10.38 Amendment and Reaffirmation of Loan Documents (dated as of November 9, 2006) among Quaker Fabric Corporation of Fall River, as Borrower; Quaker Textile Corporation, Quaker Fabric Mexico, S.A. de C.V., and Quaker Fabric Corporation, as Guarantors; and Bank of America, N.A., as Administrative Agent on behalf of the Revolving Credit Lenders. 10.39 Environmental Indemnity Agreement (dated as of November 9, 2006) by and among Quaker Fabric Corporation of Fall River, Quaker Textile Corporation, Quaker Fabric Mexico, S.A. de C.V. and Quaker Fabric Corporation, as Indemnitors, and the Revolving Credit Lenders and Bank of America, N.A., as Administrative Agent for the Revolving Credit Lenders, as Indemnitees. 10.40 Term Loan Agreement (dated as of November 9, 2006) by and among Quaker Fabric Corporation of Fall River, as Borrower; 1903 Debt Fund, LP, and the Other Lending Institutions which are or may become parties thereto (the "Term Loan Lenders") and GB Merchant Partners, LLC, as Administrative Agent for the Term Loan Lenders (the "2006 Term Loan Agreement"). 10.41 Security Agreement (dated as of November 9, 2006) among Quaker Fabric Corporation of Fall River, as Borrower; Quaker Textile Corporation, Quaker Fabric Mexico, S.A. de C.V., and Quaker Fabric Corporation, as Guarantors; and GB Merchant Partners, LLC, as Administrative Agent on behalf of the Term Loan Lenders. 10.42 Guaranty Agreement (dated as of November 9, 2006) by Quaker Fabric Corporation, Quaker Textile Corporation and Quaker Fabric Mexico, S.A. de C.V., as Guarantors, in favor of 1903 Debt Fund, LP and the Other Lending Institutions which are or may become parties to the 2006 Term Loan Agreement. 10.43 Environmental Indemnity Agreement (dated as of November 9, 2006) by and among Quaker Fabric Corporation of Fall River, Quaker Textile Corporation, Quaker Fabric Mexico, S.A. de C.V. and Quaker Fabric Corporation, as Indemnitors, and 1903 Debt Fund, LP, the Other Lending Institutions which are or may become parties to the 2006 Term Loan Agreement and GB Merchant Partners, LLC, as Administrative Agent for the Term Loan Lenders, as Indemnitees. 10.44 Intercreditor Agreement (dated as of November 9, 2006) by and among Bank of America, N.A., as Administrative Agent for the Revolving Credit Lenders, GB Merchant Partners, LLC, as Administrative Agent for the Term Loan Lenders, Quaker Fabric Corporation of Fall River, as Borrower, Quaker Fabric Corporation, Parent, and the other Credit Parties named on the signature pages of the Agreement. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. QUAKER FABRIC CORPORATION (Registrant) Date: November 15, 2006 /S/ PAUL J. KELLY -------------------------------------------------- Paul J. Kelly Vice President - Finance and Treasurer EXHIBIT INDEX 10.37 Amended and Restated Revolving Credit Agreement (dated as of November 9, 2006) by and among Quaker Fabric Corporation of Fall River, as Borrower; Bank of America, N.A. and the Other Lending Institutions which are or may become parties thereto (the "Revolving Credit Lenders"); and Bank of America, N.A., as Administrative Agent for the Revolving Credit Lenders, Issuing Bank and Cash Management Bank (the "2006 Revolving Credit Agreement"). 10.38 Amendment and Reaffirmation of Loan Documents (dated as of November 9, 2006) among Quaker Fabric Corporation of Fall River, as Borrower; Quaker Textile Corporation, Quaker Fabric Mexico, S.A. de C.V., and Quaker Fabric Corporation, as Guarantors; and Bank of America, N.A., as Administrative Agent on behalf of the Revolving Credit Lenders. 10.39 Environmental Indemnity Agreement (dated as of November 9, 2006) by and among Quaker Fabric Corporation of Fall River, Quaker Textile Corporation, Quaker Fabric Mexico, S.A. de C.V. and Quaker Fabric Corporation, as Indemnitors, and the Revolving Credit Lenders and Bank of America, N.A., as Administrative Agent for the Revolving Credit Lenders, as Indemnitees. 10.40 Term Loan Agreement (dated as of November 9, 2006) by and among Quaker Fabric Corporation of Fall River, as Borrower; 1903 Debt Fund, LP, and the Other Lending Institutions which are or may become parties thereto (the "Term Loan Lenders") and GB Merchant Partners, LLC, as Administrative Agent for the Term Loan Lenders (the "2006 Term Loan Agreement"). 10.41 Security Agreement (dated as of November 9, 2006) among Quaker Fabric Corporation of Fall River, as Borrower; Quaker Textile Corporation, Quaker Fabric Mexico, S.A. de C.V., and Quaker Fabric Corporation, as Guarantors; and GB Merchant Partners, LLC, as Administrative Agent on behalf of the Term Loan Lenders. 10.42 Guaranty Agreement (dated as of November 9, 2006) by Quaker Fabric Corporation, Quaker Textile Corporation and Quaker Fabric Mexico, S.A. de C.V., as Guarantors, in favor of 1903 Debt Fund, LP and the Other Lending Institutions which are or may become parties to the 2006 Term Loan Agreement. 10.43 Environmental Indemnity Agreement (dated as of November 9, 2006) by and among Quaker Fabric Corporation of Fall River, Quaker Textile Corporation, Quaker Fabric Mexico, S.A. de C.V. and Quaker Fabric Corporation, as Indemnitors, and 1903 Debt Fund, LP, the Other Lending Institutions which are or may become parties to the 2006 Term Loan Agreement and GB Merchant Partners, LLC, as Administrative Agent for the Term Loan Lenders, as Indemnitees. 10.44 Intercreditor Agreement (dated as of November 9, 2006) by and among Bank of America, N.A., as Administrative Agent for the Revolving Credit Lenders, GB Merchant Partners, LLC, as Administrative Agent for the Term Loan Lenders, Quaker Fabric Corporation of Fall River, as Borrower, Quaker Fabric Corporation, Parent, and the other Credit Parties named on the signature pages of the Agreement. EX-10.37 2 a5274680ex1037.txt EXHIBIT 10.37 EXHIBIT 10.37 AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT DATED AS OF NOVEMBER 9, 2006 AMONG QUAKER FABRIC CORPORATION OF FALL RIVER AS BORROWER, BANK OF AMERICA, N.A., AND THE OTHER LENDING INSTITUTIONS LISTED ON SCHEDULE 1 HERETO, AND BANK OF AMERICA, N.A. AS ADMINISTRATIVE AGENT, ISSUING BANK AND CASH MANAGEMENT BANK TABLE OF CONTENTS
1. DEFINITIONS AND RULES OF INTERPRETATION.................................................................1 1.1. Definitions....................................................................................1 1.2. Rules of Interpretation.......................................................................22 2. REVOLVING LOANS........................................................................................23 2.1. Revolving Loans...............................................................................23 2.2. Commitment Fee................................................................................23 2.3. Reduction of Commitments......................................................................23 2.4. The Revolving Notes...........................................................................24 2.5. Interest on Revolving Loans...................................................................24 2.6. Requests for Revolving Loans..................................................................25 2.6.1. General..............................................................................25 2.6.2. Swing Line...........................................................................25 2.7. Conversion Options............................................................................25 2.7.1. Conversion to Different Type of Revolving Loan.......................................25 2.7.2. Continuation of Type of Revolving Loan...............................................26 2.7.3. LIBOR Rate Loans.....................................................................26 2.8. Funds for Revolving Loans.....................................................................26 2.8.1. Funding Procedures for Revolving Loans...............................................26 2.8.2. Advances by Administrative Agent for Revolving Loans.................................26 2.9. Change in Borrowing Base......................................................................27 2.10. Settlements...................................................................................27 2.10.1. General..............................................................................27 2.10.2. Failure to Make Funds Available......................................................27 2.10.3. No Effect on Other Lenders...........................................................28 2.11. Repayments of Revolving Loans Prior to Event of Default.......................................28 2.11.1. Credit for Funds Received in Concentration Account...................................28 2.11.2. Application of Payments Prior to Event of Default....................................29 2.12. Repayments of Loans After Event of Default....................................................29 2.13. [Intentionally Omitted].......................................................................30 2.14. [Intentionally Omitted].......................................................................30 2.15. [Intentionally Omitted].......................................................................30 2.16. Administrative Agent Advances.................................................................30 3. REPAYMENT OF LOANS.....................................................................................30 3.1. Revolving Loans...............................................................................30 3.1.1. Maturity.............................................................................30 3.1.2. Mandatory Repayments of Revolving Loans..............................................30 3.1.3. Optional Repayments of Revolving Loans...............................................31 3.2. Mandatory Prepayments.........................................................................31 3.2.1. Additional Mandatory Prepayments of Revolving Loans..................................31 4. LETTERS OF CREDIT......................................................................................32 4.1. Letter of Credit Commitments..................................................................32 4.1.1. Commitment to Issue Letters of Credit................................................32 4.1.2. Letter of Credit Applications........................................................32 4.1.3. Terms of Letters of Credit...........................................................32 4.1.4. Reimbursement Obligations of Lenders.................................................33 4.1.5. Participations of Lenders............................................................33 4.2. Reimbursement Obligation of the Borrower......................................................33 4.3. Letter of Credit Payments.....................................................................34 4.4. Obligations Absolute..........................................................................35 4.5. Reliance by Issuer............................................................................35 4.6. Letter of Credit Fee..........................................................................35 4.7. Existing Letters of Credit....................................................................36
5. CERTAIN GENERAL PROVISIONS.............................................................................36 5.1. Fees..........................................................................................36 5.1.1. Administrative Agent's Fee...........................................................36 5.1.2. Closing Fee..........................................................................36 5.1.3. Other Fees...........................................................................36 5.2. Funds for Payments............................................................................36 5.2.1. Payments to Administrative Agent.....................................................36 5.2.2. No Offset, etc.......................................................................36 5.2.3. Non-U.S. Lenders.....................................................................37 5.3. Computations..................................................................................37 5.4. Interest Limitation...........................................................................38 5.5. Inability to Determine LIBOR Rate.............................................................38 5.6. Illegality....................................................................................38 5.7. Additional Costs, etc.........................................................................38 5.8. Capital Adequacy..............................................................................40 5.9. Certificate...................................................................................40 5.10. Indemnity.....................................................................................40 5.11. Interest After Default........................................................................40 5.12. Collateral Security and Guaranties............................................................41 6. REPRESENTATIONS AND WARRANTIES.........................................................................41 6.1. Corporate Authority, Etc......................................................................41 6.1.1. Existence, Good Standing.............................................................41 6.1.2. Authorization........................................................................41 6.1.3. Delivery.............................................................................42 6.1.4. Enforceability.......................................................................42 6.2. Financial Statements; Projections.............................................................42 6.3. Solvency......................................................................................43 6.4. No Material Adverse Changes, etc.............................................................43 6.5. Absence of Mortgages and Liens................................................................43 6.6. Franchises, Patents, Copyrights, etc..........................................................44 6.7. Litigation....................................................................................44 6.8. No Materially Adverse Contracts, etc..........................................................44 6.9. Compliance with Other Instruments, Laws, etc..................................................44 6.10. Tax Status....................................................................................44 6.11. No Default or Event of Default................................................................44 6.12. Holding Company and Investment Company Acts...................................................45 6.13. Employee Benefit Plans........................................................................45 6.13.1. In General...........................................................................45 6.13.2. Terminability of Welfare Plans.......................................................45 6.13.3. Guaranteed Pension Plans.............................................................45 6.13.4. Multiemployer Plans..................................................................45 6.14. Regulations U and X...........................................................................46 6.15. True Copies of Governing Documents............................................................46 6.16. Fiscal Year...................................................................................46 6.17. Perfection of Security Interest...............................................................46 6.18. Subsidiaries, etc.............................................................................46 6.19. Environmental Compliance......................................................................46 6.20. Bank Accounts.................................................................................48 6.21. Labor Contracts...............................................................................48 6.22. Disclosure....................................................................................48 6.23. Title to Properties; Leases...................................................................48 6.24. Certain Transactions..........................................................................49 6.25. Foreign Assets Control Regulations, Etc.......................................................49 6.26. Compliance....................................................................................49 6.27. Contracts.....................................................................................50 6.28. Utilities and Public Access...................................................................50 6.29. Physical Condition............................................................................50
7. AFFIRMATIVE COVENANTS OF THE PARENT AND THE BORROWER...................................................50 7.1. Punctual Payment..............................................................................50 7.2. Maintenance of Office.........................................................................50 7.3. Records and Accounts..........................................................................51 7.4. Financial Statements, Certificates and Information............................................51 7.5. Notices.......................................................................................53 7.5.1. Defaults.............................................................................53 7.5.2. Notice of Litigation and Judgments...................................................53 7.5.3. Notification of Claim Against Collateral.............................................54 7.5.4. Notices Concerning Inventory Collateral..............................................54 7.5.5. Notification of Additional Intellectual Property Rights..............................54 7.5.6. Environmental Events.................................................................54 7.5.7. Notification Regarding the Real Property.............................................54 7.6. Legal Existence; Maintenance of Properties....................................................55 7.7. Insurance.....................................................................................55 7.8. Taxes.........................................................................................55 7.9. Compliance with Laws, Contracts, Licenses, and Permits........................................56 7.10. Employee Benefit Plans........................................................................56 7.11. Use of Proceeds...............................................................................56 7.12. Certain Changes...............................................................................56 7.13. Conduct of Business...........................................................................56 7.14. Further Assurances............................................................................56 7.15. Inspection of Properties and Books, etc.......................................................57 7.15.1. General..............................................................................57 7.15.2. Appraisals...........................................................................57 7.15.3. Communications with Accountants......................................................57 7.15.4. Environmental Assessments............................................................57 7.16. Additional Mortgaged Property.................................................................58 7.17. Bank Accounts.................................................................................58 7.17.1. General..............................................................................58 7.18. Domestic Subsidiaries.........................................................................59 7.19. [Intentionally Omitted].......................................................................59 7.20. Financial Consultant..........................................................................59
8. NEGATIVE COVENANTS OF THE PARENT AND THE BORROWER......................................................59 8.1. Investments...................................................................................59 8.2. Restrictions on Indebtedness..................................................................60 8.3. Restrictions on Liens.........................................................................61 8.3.1. Permitted Liens......................................................................61 8.3.2. Restrictions on Negative Pledges and Upstream Limitations............................62 8.4. Restricted Payments...........................................................................62 8.5. Merger, Consolidation and Disposition of Assets...............................................62 8.5.1. Mergers and Acquisitions.............................................................62 8.5.2. Disposition of Assets................................................................62 8.6. Sale and Leaseback............................................................................63 8.7. Change of Fiscal Year.........................................................................63 8.8. Employee Benefit Plans........................................................................63 8.9. Compliance with Environmental Laws............................................................63 8.10. Change in Terms of Governing Documents........................................................63 8.11. Creation of Subsidiaries......................................................................63 8.12. Transactions with Affiliates..................................................................64 8.13. Agency Account................................................................................64 8.14. Business Activities...........................................................................65 8.15. Changes Relating to Term Loan Documents.......................................................65 9. FINANCIAL COVENANTS OF THE PARENT AND THE BORROWER.....................................................65 9.1. Fixed Charge Coverage Ratio...................................................................65 9.2. [Intentionally Omitted].......................................................................65 9.3. Capital Expenditures..........................................................................65 10. CLOSING CONDITIONS.....................................................................................65 10.1. Loan Documents................................................................................66 10.2. Certified Copies of Governing Documents.......................................................66 10.3. Corporate or Other Action.....................................................................66 10.4. Incumbency Certificate........................................................................66 10.5. Validity of Liens.............................................................................66 10.6. Perfection Certificates and UCC Search Results................................................66 10.7. Certificates of Insurance.....................................................................66 10.8. Agency Account Agreements.....................................................................66 10.9. Borrowing Base and Collateral Update Certificates.............................................67 10.10. Accounts Receivable Aging Report..............................................................67 10.11. Payment of Closing Fees.......................................................................67 10.12. Existing Credit Agreement.....................................................................67 10.13. Intercreditor Agreement; Term Loan Documents..................................................67 10.14. Opinions of Counsel...........................................................................67 10.15. [Intentionally Omitted].......................................................................67 10.16. [Intentionally Omitted].......................................................................67 10.17. [Intentionally Omitted].......................................................................67 10.18. [Intentionally Omitted].......................................................................67 10.19. No Material Adverse Change....................................................................68 10.20. Landlord Waivers..............................................................................68 10.21. Landlord Consents.............................................................................68 10.22. Collateral Examinations/Appraisals............................................................68 10.23. Financial Statement and Projections...........................................................68
11. CONDITIONS TO ALL BORROWINGS...........................................................................68 11.1. Representations True; No Default or Event of Default..........................................68 11.2. No Legal Impediment...........................................................................68 11.3. Governmental Regulation.......................................................................68 11.4. Proceedings and Documents.....................................................................69 11.5. Payment of Fees...............................................................................69 11.6. Exchange Limitations..........................................................................69 11.7. Validity of Liens.............................................................................69 11.8. Financial Covenants...........................................................................69 12. EVENTS OF DEFAULT; ACCELERATION; ETC...................................................................69 12.1. Events of Default and Acceleration............................................................69 12.2. Termination of Commitments....................................................................72 12.3. Remedies......................................................................................72 12.4. Distribution of Collateral Proceeds...........................................................73 13. SETOFF.................................................................................................74 14. THE ADMINISTRATIVE AGENT...............................................................................74 14.1. Authorization.................................................................................74 14.2. Employees and Administrative Agents...........................................................75 14.3. No Liability..................................................................................75 14.4. No Representations............................................................................75 14.4.1. General..............................................................................75 14.4.2. Closing Documentation, etc...........................................................76 14.5. Payments......................................................................................76 14.5.1. Payments to Administrative Agent.....................................................76 14.5.2. Distribution by Administrative Agent.................................................76 14.5.3. Delinquent Lenders...................................................................76 14.6. Holders of Letters of Credit Participation....................................................77 14.7. Indemnity.....................................................................................77 14.8. Administrative Agent as Lender................................................................77 14.9. Resignation...................................................................................77 14.10. Notification of Defaults and Events of Default................................................78 14.11. Duties in the Case of Enforcement.............................................................78 14.12. Administrative Agent May File Proofs of Claim.................................................78
15. EXPENSES...............................................................................................79 16. INDEMNIFICATION........................................................................................80 17. SURVIVAL OF COVENANTS, ETC.............................................................................80 18. ASSIGNMENT AND PARTICIPATION...........................................................................81 18.1. General Conditions............................................................................81 18.2. Assignments...................................................................................81 18.3. Register......................................................................................82 18.4. Participations................................................................................82 18.5. Payments to Participants......................................................................82 18.6. Miscellaneous Assignment Provisions...........................................................82 18.7. Assignee or Participant Affiliated with the Parent............................................83 18.8. New Notes.....................................................................................83 18.9. Special Purpose Funding Vehicle...............................................................83 19. NOTICES, ETC...........................................................................................84 20. GOVERNING LAW..........................................................................................85 21. HEADINGS...............................................................................................85 22. COUNTERPARTS...........................................................................................85 23. ENTIRE AGREEMENT, ETC..................................................................................85 24. WAIVER OF JURY TRIAL...................................................................................85 25. CONSENTS, AMENDMENTS, WAIVERS, ETC.....................................................................86 26. SEVERABILITY...........................................................................................87 27. CONFIDENTIALITY........................................................................................87 28. USA PATRIOT ACT........................................................................................89 29. DESIGNATION OF PERMITTED LIENS.........................................................................89 30. TRANSITIONAL ARRANGEMENTS..............................................................................89
SCHEDULES AND EXHIBITS Schedule 1 Lenders, Commitment Percentages, Lending Offices Schedule 1.1(a) Mortgaged Properties Schedule 1.2 Certain Account Debtors Schedule 4.7 Existing Letters of Credit Schedule 6.6 Intellectual Property Schedule 6.7 Litigation Schedule 6.8 Material Adverse Contracts Schedule 6.10 Municipal Taxes Schedule 6.13.1 Employment Matters Schedule 6.18 Subsidiaries Schedule 6.19(a) Environmental Notices Schedule 6.19(b) Material Environmental Notices Schedule 6.19(e) Material Environmental Reports Schedule 6.20 Bank Accounts Schedule 6.21 Labor Contracts Schedule 6.23 Title to Properties Schedule 8.1 Existing Investments Schedule 8.2 Existing Indebtedness Schedule 8.3.1 Existing Liens Schedule 10.20(a) Landlord Waivers Exhibit A Form of Loan Request Exhibit B Form of Compliance Certificate Exhibit C Form of Assignment and Acceptance Exhibit D-1 Form of Borrowing Base Certificate Exhibit D-2 Form of Collateral Update Certificate Exhibit D-3 Form of Accounts Receivable/Loan Reconciliation Report Exhibit E Form of Revolving Note AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT THIS AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated as of November 9, 2006 is by and among Quaker Fabric Corporation of Fall River, a Massachusetts corporation (the "Borrower"), Quaker Fabric Corporation, a Delaware corporation (the "Parent"), Bank of America, N.A. and the other Lenders from time to time party hereto and Bank of America, N.A., as Administrative Agent, Issuing Bank and Cash Management Bank. WHEREAS, the Borrower, the Parent, the Lenders, the Administrative Agent, the Issuing Bank and the Cash Management Bank are parties to that Existing Credit Agreement (as hereinafter defined), pursuant to which the Lenders have made loans and other extensions of credit to the Borrower. WHEREAS, the Lenders are willing to amend and restate the Existing Credit Agreement, and the Lenders are willing to make loans and other extensions of credit to the Borrower, all on the terms and conditions set forth herein. NOW THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged (these recitals being an integral part of this Credit Agreement) the Borrower, the Parent, the Administrative Agent, the Lenders, the Issuing Bank and the Cash Management Bank hereby agree that, as of the Closing Date (as defined below), the Existing Credit Agreement shall be amended and restated in its entirety and shall remain in full force and effect only as set forth herein and the parties hereto hereby agree as follows: The parties hereto agree as follows: 1. DEFINITIONS AND RULES OF INTERPRETATION. 1.1. DEFINITIONS. The following terms shall have the meanings set forth in this ss.1 or elsewhere in the provisions of this Credit Agreement referred to below: ACCOUNTS RECEIVABLE. All rights of a Person to payment for goods sold, leased or otherwise marketed in the ordinary course of business and all rights of a Person to payment for services rendered in the ordinary course of business and all sums of money or other proceeds due thereon pursuant to transactions with account debtors recorded on books of account in accordance with GAAP. ACCOUNTS RECEIVABLE/LOAN RECONCILIATION REPORT. A certificate signed by the senior financial officer (or another officer designated by such senior financial officer) of the Borrower in substantially the form of EXHIBIT D-3 hereto. ADMINISTRATIVE AGENT. Bank of America, acting as administrative agent for the Lenders, and each other person appointed as the successor Administrative Agent in accordance with ss.14.9. ADMINISTRATIVE QUESTIONNAIRE. An Administrative Questionnaire in a form supplied by the Administrative Agent. ADMINISTRATIVE AGENTS ADVANCES. See ss.2.16. ADMINISTRATIVE AGENT'S FEE. See ss.5.1.1. ADMINISTRATIVE AGENT'S OFFICE. The Administrative Agent's office located at One Federal Street, Boston, Massachusetts 02110, or at such other location as the Administrative Agent may designate from time to time. ADMINISTRATIVE AGENT'S SPECIAL COUNSEL. Bingham McCutchen LLP of Boston, Massachusetts or such other counsel as may be approved by the Administrative Agent. AFFILIATE. With respect to any Person, any other Person which directly or indirectly, controls, is controlled by or is under common control with such Person. "Control" means the power, directly or indirectly, (a) to vote ten percent (10%) or more of the Capital Stock (on a fully diluted basis) of a Person having ordinary voting power for the election of directors, managing members or general partners (as applicable); or (b) to direct or cause the direction of the management and policies of a Person (whether by contract or otherwise). AGENCY ACCOUNT AGREEMENT. See ss.7.17.1. AMENDMENT AND REAFFIRMATION OF LOAN DOCUMENTS. The Amendment and Reaffirmation of Loan Documents, dated as of the Closing Date, among the Borrower, the Guarantors and the Administrative Agent, in form and substance satisfactory to the Administrative Agent. APPLICABLE MARGIN. With respect to (a) Base Rate Loans, 1.25%, and (b), with respect to LIBOR Rate Loans, 2.75%. APPLICABLE PENSION LEGISLATION. At any time, any pension or retirement benefits legislation (be it national, federal, provincial, territorial or otherwise) then applicable to the Parent or any of its Subsidiaries. APPROVED FUND. Any Fund that is administered or managed 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. ARRANGER. Banc of America Securities LLC. ASSET SALE. Any one or series of related transactions in which the Parent or any of its Subsidiaries conveys, sells, leases, licenses or otherwise disposes of, directly or indirectly, any of its properties, businesses or assets (including the sale or issuance of Capital Stock of any Subsidiary other than to the Parent) whether owned on the Closing Date or thereafter acquired. ASSIGNMENT AND ACCEPTANCE. An assignment and acceptance entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by ss.18.2), and accepted by the Administrative Agent, in substantially the form of EXHIBIT C or any other form approved by the Administrative Agent. AVAILABILITY RESERVE. The sum of (a) $4,250,000 PLUS (b) $0.75 for every $1.00 released from the Environmental Escrow Funds (as defined in the Term Loan Agreement as in effect on the date hereof), other than amounts released to fund Remediation Costs (as defined in the Term Loan Agreement as in effect on the date hereof). BALANCE SHEET DATE. September 30, 2006. BANK OF AMERICA. Bank of America, N.A and its successors and assigns. BASE RATE. The higher of (i) the variable annual rate of interest so designated from time to time by Bank of America as its "prime rate", such rate being a reference rate and not necessarily representing the lowest or best rate being charged to any customer, and (ii) one-half of one percent (0.5%) above the Federal Funds Effective Rate. For the purposes of this definition, "FEDERAL FUNDS EFFECTIVE RATE" shall mean for any day, the rate per annum equal 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 so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three funds brokers of recognized standing selected by the Administrative Agent. Changes in the Base Rate resulting from any changes in Bank of America's "PRIME RATE" shall take place immediately without notice or demand of any kind. BASE RATE LOANS. All or any portion of the Revolving Loans bearing interest calculated by reference to the Base Rate. BORROWER. As defined in the preamble hereto. BORROWING BASE. As of any date of determination, an amount equal to the result of the following: (a) eighty-five percent (85%) of the net amount of Eligible Accounts Receivable of the Borrower outstanding at such date; PLUS (b) the lesser of (i) $12,500,000 and (ii) the sum of (A) the lesser of (x) 65% of the Net Book Value of Eligible Finished Goods Inventory of the Borrower, determined in accordance with GAAP and (y) 85% of the Net Orderly Liquidation Value of Eligible Finished Goods Inventory of the Borrower; PLUS (B) the lesser of (x) 35% of the Net Book Value of Eligible Raw Materials Inventory of the Borrower, in each case, determined in accordance with GAAP and (y) 85% of the Net Orderly Liquidation Value of Eligible Raw Materials Inventory of the Borrower; MINUS (c) the Availability Reserve; MINUS (d) Reserves. The Administrative Agent may, from time to time in its sole discretion (not to be exercised unreasonably), (x) reduce the lending formula with respect to Eligible Accounts Receivable of the Borrower to the extent that the Administrative Agent determines that: (i) the dilution with respect of the Accounts Receivable of the Borrower for any period has increased in any material respect or may be reasonably anticipated to increase in any material respect above historical levels, or (ii) the general creditworthiness of account debtors or other obligors of the Borrower has declined or (y) reduce the lending formula(s) with respect to Eligible Inventory of the Borrower to the extent that the Administrative Agent determines that: (i) the number of days of the turnover of the inventory of the Borrower for any period has changed in any material adverse respect, (ii) the liquidation value of the Eligible Inventory of the Borrower, or any category thereof, has decreased, or (iii) the nature and quality of the inventory of the Borrower has deteriorated in any material respect or the mix of such inventory has changed materially. In determining whether to reduce the lending formula(s), the Administrative Agent may consider events, conditions, contingencies or risks which are also considered in determining Eligible Accounts Receivable of the Borrower, Eligible Inventory of the Borrower or in establishing the Reserves. BORROWING BASE CERTIFICATE. A certificate signed by the senior financial officer (or another officer designated by such senior financial officer) of the Borrower demonstrating calculation of the Borrowing Base in the form of EXHIBIT D-1 hereto. BUSINESS DAY. Any day on which commercial banking institutions in Boston, Massachusetts, are open for the transaction of banking business and, in the case of LIBOR Rate Loans, also a day which is a LIBOR Business Day. BUSINESS PLAN. The "Quaker Fabric Bank Presentation" by Alvarez and Marsal, dated May 19, 2006, as supplemented on September 29, 2006, October 30, 2006 and November 9, 2006, as the same may be updated from time to time. CAPITAL ASSETS. Fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises and goodwill); PROVIDED that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with GAAP. CAPITAL EXPENDITURES. Amounts paid or Indebtedness incurred by the Parent or any Subsidiary of the Parent in connection with (i) the purchase or lease by the Parent or such Subsidiary of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with GAAP or (ii) the lease of any assets by the Parent or such Subsidiary as lessee under any Synthetic Lease to the extent that such assets would have been Capital Assets had the Synthetic Lease been treated for accounting purposes as a Capitalized Lease. CAPITALIZED LEASES. Leases under which the Parent or any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP. CAPITAL STOCK. Any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing (including convertible debt instruments). CASH MANAGEMENT BANK. Bank of America, in its capacity as the provider of cash management services to the Parent and its Subsidiaries. CASH MANAGEMENT OBLIGATIONS. All present and future liabilities, obligations and Indebtedness of the Parent and its Subsidiaries owing to any Lender, the Administrative Agent, the Cash Management Bank or any Affiliate thereof under or in connection with any cash management or related services or products provided by any Lender, the Administrative Agent, the Cash Management Bank or any Affiliate thereof to or for the account of the Parent or any Subsidiary of the Parent, including, without limitation, liabilities, obligations or Indebtedness in respect of automated clearing house and other fund transfers, checks, money orders, drafts, instruments, funds, payments and other items and forms of remittances paid, deposited or otherwise credited to any deposit, disbursement or other account of the Parent or any Subsidiary of the Parent, any overdraft or other extension of credit made to cover any funds transfer, check, draft, instrument or amount paid for the account or benefit of the Parent or any Subsidiary of the Parent, and all fees, charges, indemnities, expenses and other amounts from time to time owing to any Lender, the Administrative Agent, the Cash Management Bank or any Affiliate thereof in connection therewith (all whether accruing before or after the commencement of any bankruptcy proceeding by or against the Parent or any Subsidiary of the Parent and regardless of whether allowed as a claim in any such proceeding). CASUALTY EVENT. With respect to any property (including any interest in property) of the Parent or any Subsidiary of the Parent, any loss of, damage to, or condemnation or other taking of, such property for which the Parent or such Subsidiary receives insurance proceeds, proceeds of a condemnation award or other compensation. CHANGE OF CONTROL. An event or series of events by which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than Nortex Holdings, Inc. or any Affiliate thereof, becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire (such right, an "OPTION RIGHT"), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 30% or more of the equity securities of the Parent entitled to vote for members of the board of directors or equivalent governing body of the Parent on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right); (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Parent ceases to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or (c) any Person, other than Nortex Holdings, Inc. or any Affiliate thereof, or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Parent, or control over the equity securities of the Parent entitled to vote for members of the board of directors or equivalent governing body of the Parent on a fully-diluted basis (and taking into account all such securities that such Person or group has the right to acquire pursuant to any option right) representing 30% or more of the combined voting power of such securities. CLOSING DATE. The first date on which the conditions set forth in ss.ss.10 and 11 have been satisfied and any Loans are to be made or any Letters of Credit are to be issued hereunder. CLOSING FEE. See ss.5.1.2. CODE. The Internal Revenue Code of 1986. COLLATERAL. All of the property, rights and interests of (a) the Borrower, (b) the Parent, (c) each Subsidiary of the Parent, and (d) all other Guarantors from time to time party to the Guaranties, that are or are intended to be subject to the Liens created by the Security Documents. COLLATERAL UPDATE CERTIFICATE. A certificate signed by the senior financial officer (or another officer designated by such senior financial officer) of the Borrower in substantially the form of EXHIBIT D-2 hereto. COMMITMENT. With respect to each Lender, (a) the Dollar amount set forth on SCHEDULE 1 hereto as the amount of such Lender's commitment (i) to make Revolving Loans to the Borrower and (ii) to participate in the issuance, extension and renewal of Letters of Credit issued for the account of the Borrower or Quaker Textile, as the same may be reduced from time to time; or (b) if such commitment is terminated pursuant to the provisions hereof, zero. COMMITMENT FEE. See ss.2.2. COMMITMENT PERCENTAGE. With respect to each Lender, the percentage set forth on SCHEDULE 1 hereto reflecting such Lender's commitment to make Revolving Loans and to participate in the issuance, extension and renewal of Letters of Credit issued for the account of the Borrower or Quaker Textile. COMPLIANCE CERTIFICATE. See ss.7.4(d). CONCENTRATION ACCOUNT. See ss.7.17.1. CONSOLIDATED OR CONSOLIDATED. With reference to any term defined herein, shall mean that term as applied to the accounts of the Parent and its Subsidiaries, consolidated in accordance with GAAP. CONSOLIDATED EBITDA. For any period, (a) the net income (or deficit) of the Parent and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP) for such period, PLUS (b) to the extent deducted in calculating net income (i) income taxes accrued during such period, (ii) interest and fees in respect of Indebtedness (including amounts accrued or paid in respect of Derivative Agreements) during such period (whether or not actually paid in cash during such period), (iii) depreciation, amortization and other non-cash charges (including asset impairment charges) accrued for such period, (iv) extraordinary losses during such period, (v) costs and expenses incurred by the Parent and its Subsidiaries in connection with the Parent's retention of the Financial Consultant (as defined in ss.7.20), (vi) severance charges incurred by the Parent and its Subsidiaries, (vii) up to $300,000 per month of plant consolidation expenses specifically identified to the satisfaction of the Administrative Agent, and (viii) transaction costs incurred during such period in connection with the transactions contemplated hereby and in the Term Loan Agreement not to exceed $2,600,000 in the aggregate, MINUS (c) to the extent such items were added in calculating net income (i) extraordinary gains during such period and (ii) proceeds received during such period in respect of Casualty Events and dispositions of any property (other than dispositions in the ordinary course of business on ordinary business terms). CONSOLIDATED INTEREST EXPENSE. For any period, the sum, without duplication, for the Parent and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) all interest in respect of Indebtedness required to be paid or accrued during such period (whether or not actually paid during such period), but excluding capitalized debt acquisition costs (including fees and expenses related to this Credit Agreement and the Term Loan Agreement) PLUS (b) the net amounts payable (or MINUS the net amounts receivable) in respect of Derivative Agreements accrued during such period (whether or not actually paid or received during such period) excluding reimbursement of legal fees and other similar transaction costs and further excluding payments required by reason of the early termination of Derivative Agreements in effect on the date hereof PLUS (c) all fees, including letter of credit fees and expenses (but excluding reimbursement of legal fees and any early termination fee paid by the Borrower pursuant to ss.2.3 of the Existing Credit Agreement in connection with the Borrower's reduction of the Total Commitment (as defined in the Existing Credit Agreement) effective as of February 3, 2006) incurred hereunder during such period. CONVERSION REQUEST. A notice given by the Borrower to the Administrative Agent of the Borrower's election to convert or continue a Loan in accordance with ss.2.7. COPYRIGHT MORTGAGE. The Memorandum of Grant of Security Interest in Copyrights, dated as of the Original Closing Date, made by the Borrower and the Guarantors in favor of the Administrative Agent, in form and substance satisfactory to the Administrative Agent. CREDIT AGREEMENT. This Amended and Restated Revolving Credit Agreement, including the Schedules and Exhibits hereto. DEFAULT. See ss.12.1. DEFAULT RATE. (a) When used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate PLUS (ii) the Applicable Margin applicable to the Base Rate Loans PLUS (iii) 2% per annum; PROVIDED, HOWEVER, that with respect to a LIBOR Rate Loan, the Default Rate shall be an interest rate equal to the LIBOR Rate PLUS the Applicable Margin applicable to such Loan PLUS 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Margin applicable to Revolving Loans bearing interest at the LIBOR Rate PLUS 2% per annum, in all cases to the fullest extent permitted by applicable laws. DELINQUENT LENDER. See ss.14.5.3. DERIVATIVE AGREEMENT. Any forward contract, futures contract, swap, option or other similar agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices (including foreign exchange lines). DISTRIBUTION. The declaration or payment of any dividend on or in respect of any shares of any class of Capital Stock of the Parent or any Subsidiary of the Parent, other than dividends payable solely in shares of common stock of the Parent or such Subsidiary; the payment or prepayment of principal of, premium, if any, or interest on, or purchase, redemption, defeasance, retirement or other acquisition of with respect to any shares of any class of Capital Stock of the Parent or any Subsidiary of the Parent, directly or indirectly through a Subsidiary of such Person or otherwise (including the setting apart of assets for a sinking or other analogous fund to be used for such purpose); the return of capital by the Parent or any Subsidiary of the Parent to its shareholders as such; or any other distribution on or in respect of any shares of any class of Capital Stock of the Parent or any Subsidiary of the Parent. DOLLARS OR $. Dollars in lawful currency of the United States of America. DOMESTIC LENDING OFFICE. Initially, the office of each Lender designated as such in SCHEDULE 1 hereto; thereafter, such other office of such Lender, if any, located within the United States that will be making or maintaining Base Rate Loans. DOMESTIC SUBSIDIARY. Any Subsidiary that is organized under the laws of the United States of America, any state or territory thereof or the District of Columbia. DRAWDOWN DATE. The date on which any Revolving Loan is made or is to be made, and the date on which any Revolving Loan is converted or continued in accordance with ss.2.7. ELIGIBLE ACCOUNTS RECEIVABLE. With respect to the Borrower, the aggregate of the unpaid portions of Accounts Receivable (net of any contra accounts, credits, rebates, offsets, holdbacks or other adjustments or commissions payable to third parties that are adjustments to such Accounts Receivable) of the Borrower, except any Account Receivable to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Accounts Receivable from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Closing Date, to adjust any of the criteria set forth below and to establish new criteria, in its reasonable credit judgment, reflecting changes in the collectibility or realization values of such Accounts Receivable arising or discovered by the Administrative Agent after the Closing Date, subject to the approval of the Required Lenders in the case of adjustments or new criteria which have the effect of making additional credit available hereunder. Eligible Accounts Receivable shall not include any Account Receivable if: (i) it is unpaid for more than sixty (60) days after the original due date shown on the invoice; or (ii) (x) with respect to Accounts Receivable from account debtors listed on SCHEDULE 1.2 (as such schedule may be updated from time to time by the Borrower with the prior written consent of the Administrative Agent) arising from sample book orders from such account debtors, such Account Receivable is due and unpaid more than one hundred and twenty (120) days after the original invoice date and (y) with respect to all other Accounts Receivable, such Account Receivable is due and unpaid more than ninety (90) days after the original invoice date; or (iii) 50% or more of the Accounts Receivable from the account debtor are not deemed Eligible Accounts Receivable; or (iv) the total unpaid Accounts Receivable of the account debtor exceed 25% of the net amount of all Eligible Accounts Receivable, to the extent of such excess; or (v) any material covenant, representation or warranty contained in the agreement with respect to such Account Receivable has been breached by the Borrower; or (vi) the account debtor is also the Borrower's creditor or supplier, or the account debtor has disputed liability with respect to such Account Receivable, or the account debtor has made any claim with respect to any other Account Receivable due from such account debtor to the Borrower, or the Account Receivable otherwise is or may become subject to any right of setoff by the account debtor; PROVIDED that, only the portion of the Account Receivable equal to the amount of such dispute, claim or setoff shall not be an Eligible Account Receivable pursuant to this clause (vi); or (vii) the account debtor has commenced a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or other insolvency, reorganization or adjustment laws of any other jurisdiction, or made an assignment for the benefit of creditors, or a decree or order for relief has been entered by a court having jurisdiction in the premises in respect of the account debtor in an involuntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or other insolvency, reorganization or adjustment laws of any other jurisdiction, or any other petition or other application for relief under the federal bankruptcy laws or other insolvency, reorganization or adjustment laws of any other jurisdiction has been filed against the account debtor, or if the account debtor has failed, suspended business, ceased to be solvent, or consented to or suffered a receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its assets or affairs; or (viii) it arises from a sale to an account debtor outside the United States and Canada or is denominated in a currency other than Dollars, unless, in each case, the sale is covered by credit insurance or on letter of credit, guaranty or acceptance terms, in each case acceptable to Administrative Agent in its sole discretion; or (ix) it arises from a sale to the account debtor on a bill and hold, guaranteed sale, sale or return, sale on approval, consignment or any other repurchase or return basis; or (x) the account debtor is the United States of America or any state located therein or any department, agency or instrumentality thereof, unless the Borrower assigns its right to payment of such Account Receivable to the Administrative Agent, in a manner satisfactory to the Administrative Agent, so as to comply with the Assignment of Claims Act of 1940 (31 U.S.C. ss.203 ET SEQ.), as amended or any equivalent state law; or (xi) it is not at all times subject to the Administrative Agent's duly perfected, first priority security interest and no other Lien except a Permitted Lien; or (xii) the goods giving rise to such Account Receivable have not been delivered to and accepted by the account debtor or the services giving rise to such Account Receivable have not been performed by the Borrower and accepted by the account debtor or the Account Receivable otherwise does not represent a final sale; or (xiii) the Account Receivable is evidenced by chattel paper or an instrument of any kind, or has been reduced to judgment; or (xiv) the Borrower has made any agreement with the account debtor for any deduction therefrom, except for discounts or allowances which are made in the ordinary course of business for prompt payment or quality credits related to such Account Receivable; or (xv) the Borrower has made an agreement with the account debtor to extend the time of payment thereof; or (xvi) it arises out of a sale made by the Borrower to a Subsidiary of the Borrower or an Affiliate of the Borrower or to a Person controlled by an Affiliate of the Borrower. ELIGIBLE ASSIGNEE. Any of (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent and (ii) unless a Default or an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed). ELIGIBLE FINISHED GOODS INVENTORY. That portion of Eligible Inventory consisting of finished goods. ELIGIBLE INVENTORY. With respect to the Borrower, all of the inventory owned by the Borrower shall be "Eligible Inventory" for purposes of this Credit Agreement, excluding any inventory to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Inventory from time to time in its reasonable credit judgment. In addition, the Administrative Agent reserves the right, at any time and from time to time after the Closing Date, to adjust the criteria set forth below and to establish new criteria, in its reasonable credit judgment, reflecting changes in the saleability or realization values of inventory arising or discovered by the Administrative Agent after the Closing Date, subject to the approval of the Required Lenders in the case of adjustments or new criteria which have the effect of making additional credit available hereunder. Eligible Inventory shall not include any inventory if: (i) it is not readily marketable in its current form; or (ii) it is not in good, new and saleable condition; or (iii) it is slow moving, obsolete, defective or unmerchantable; or (iv) it consists of supplies, packing materials, shipping materials or work-in-process; or (v) it does not meet all standards imposed by any governmental agency or authority, including, without limitation, the Fair Labor Standards Act; or (vi) it does not conform in all respects to the warranties and representations set forth in this Credit Agreement; or (vii) it is not at all times subject to the Administrative Agent's duly perfected, first priority security interest and no other Lien except a Permitted Lien; or (viii) it is not situated at a location in compliance with this Credit Agreement or is in transit; or (ix) it is not located in the United States of America; or (x) it is held on consignment, or not otherwise owned by the Borrower; or (xi) it has been shipped to a customer, regardless of whether such shipment is on a consignment basis; or (xii) it is held at a location leased by the Borrower, unless the Administrative Agent has received a waiver from the lessor (and any sublessor) of such property, in form and substance satisfactory to the Administrative Agent; or (xiii) it has been returned by a customer and has not been qualified by the Borrower within thirty (30) days as being Eligible Inventory; or (xiv) it is not in the possession of the Borrower, unless the Administrative Agent has received a waiver from the party in possession of such inventory in form and substance satisfactory to the Administrative Agent; or (xv) it is subject to a third party's trademark or other proprietary right unless the Administrative Agent determines that such inventory could be sold pursuant to the exercise of remedies by the Administrative Agent hereunder or under applicable law on terms satisfactory to the Administrative Agent in its sole discretion; or (xvi) it is subject to capitalized variances. ELIGIBLE RAW MATERIALS INVENTORY. That portion of Eligible Inventory consisting of raw materials. EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of ss.3(3) of ERISA maintained or contributed to by the Parent, the Borrower or any ERISA Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan. ERISA. The Employee Retirement Income Security Act of 1974. ERISA AFFILIATE. Any Person which is treated as a single employer with the Parent or any Subsidiary of the Parent under ss.414 of the Code. ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed Pension Plan within the meaning of ss.4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. EUROCURRENCY RESERVE RATE. For any day, the maximum rate (expressed as a decimal) at which any bank subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "EUROCURRENCY LIABILITIES" (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. EVENT OF DEFAULT. See ss.12.1. EXCESS AVAILABILITY. As of any date of determination thereof, the difference between (a) the lesser of (i) the Total Commitment at such time and (ii) the Borrowing Base at such time, and (b) the Revolving Exposure at such time. EXCLUDED TAXES. With respect to the Administrative Agent, any Lender, the Issuing Bank, the Cash Management Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located, (c) in the case of a Non-U.S. Lender, any withholding tax that is imposed on amounts payable to such Non-U.S. Lender at the time such Non-U.S. Lender becomes a party hereto and (d) any taxes imposed on a Lender as a result of such Lender's failure to comply with ss.5.2.3. EXISTING CREDIT AGREEMENT. The Revolving Credit and Term Loan Agreement, dated as of May 18, 2005 (as amended as of July 27, 2005, October 25, 2005, December 30, 2005, March 22, 2006 and May 6, 2006), among the Parent, the Borrower, the Lenders, the Administrative Agent, the Issuing Bank and the Cash Management Bank. EXISTING LETTERS OF CREDIT. See ss.4.7 hereof. FEE LETTER. The fee letter, dated as November 9, 2006, among the Borrower and Bank of America. FEES. Collectively, the Commitment Fee, the Letter of Credit Fees, the Administrative Agent's Fee and the Closing Fee. FISCAL QUARTER(S). The thirteen (13) or fourteen (14) week periods, the first of which shall commence on the first day of each Fiscal Year, and each of which shall be referred to as "FQ1", "FQ2", "FQ3" and "FQ4", respectively. FISCAL YEAR. The fifty-two (52) or fifty-three (53) week period ending on the Saturday closest to January 1 of each calendar year. FIXED ASSET COLLATERAL. All of the Real Estate, Equipment (as defined in the UCC) and Fixtures (as defined in the UCC) of the Borrower, the Parent, each Subsidiary of the Parent, and all other Guarantors from time to time party to the Guaranties, which is subject to a mortgage, lien or security interest pursuant to the Term Loan Documents, together with all identifiable proceeds of the foregoing. FIXED CHARGE COVERAGE RATIO. As at any date of determination, the ratio of (a) (i) Consolidated EBITDA for the four Fiscal Quarter period ending on such date of determination MINUS (ii) the aggregate amount of all Non-Financed Capital Expenditures made during such period MINUS (iii) the aggregate amount paid, or required to be paid (without duplication), in cash in respect of the current portion of all income taxes for such period MINUS (iv) the aggregate amount of dividends and distributions permitted to be paid by the Parent under ss.8.4 (if any) and actually paid in cash during such period PLUS (v) tax refunds received in cash during such period to (b) the sum for the Parent and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of (i) the aggregate amount of Consolidated Interest Expense for such period and (ii) the aggregate amount of regularly scheduled payments of principal in respect of Indebtedness for borrowed money (including the principal component of any payments in respect of Capitalized Leases) paid or required to be paid during such period (excluding payments made pursuant to 3.1.3, 3.1.4, 3.1.5 and 3.1.6 of the Term Loan Agreement as in effect on the date hereof). FOREIGN SUBSIDIARY. Any Subsidiary that is not a Domestic Subsidiary. FUND. Any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. GAAP. (i) When used in ss.9, whether directly or indirectly through reference to a capitalized term used therein, means (A) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the Fiscal Year ended on December 31, 2005, and (B) to the extent consistent with such principles, the accounting practice of the Parent and its Subsidiaries reflected in the Parent's financial statements for the period ended on the Balance Sheet Date, and (ii) when used in general, other than as provided above, means principles that are (A) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (B) consistently applied with past financial statements of the Parent and its Subsidiaries adopting the same principles, provided that in each case referred to in this definition of "GAAP" a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than qualifications regarding changes in GAAP and as to normal year-end adjustments) as to financial statements in which such principles have been properly applied. GOVERNING DOCUMENTS. With respect to any Person, its certificate or articles of incorporation, certificate of formation, or, as the case may be, certificate of limited partnership, its by-laws, operating agreement or, as the case may be, partnership agreement or other constitutive documents and all shareholder agreements, voting trusts and similar arrangements applicable to any of its Capital Stock. GOVERNMENTAL AUTHORITY. Any foreign, federal, state, provincial, regional, local municipal or other government, or any department, commission, board, bureau, agency, public authority or instrumentality thereof, or any court or arbitrator. GUARANTEED PENSION PLAN. Any employee pension benefit plan within the meaning of ss.3(2) of ERISA maintained or contributed to by the Parent, the Borrower or any ERISA Affiliate, the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. GROSS AVAILABILITY. At any time, the lesser of (a) the Borrowing Base at such time and (b) the Total Commitment at such time. GUARANTIES. The Guaranties made by each Guarantor in favor of the Lenders and the Administrative Agent pursuant to which such Guarantor guaranties to the Lenders and the Administrative Agent the payment and performance in full of the Obligations. GUARANTORS. Collectively, (i) the Parent, Quaker Mexico and Quaker Textile and (ii) any direct or indirect Domestic Subsidiary of the Parent. INDEBTEDNESS. As to any Person and whether recourse is secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication: (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses, (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances, or similar facilities issued for the account of such Person, (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), (e) every obligation of such Person under any Capitalized Lease, (f) every obligation of such Person under any Synthetic Lease, (g) all sales by such Person of (i) accounts or general intangibles for money due or to become due, (ii) chattel paper, instruments or documents creating or evidencing a right to payment of money or (iii) other receivables (collectively "RECEIVABLES"), whether pursuant to a purchase facility or otherwise, other than in connection with the disposition of the business operations of such Person relating thereto or a disposition of defaulted receivables for collection (or as a sale of claims in bankruptcy) and not as a financing arrangement, and together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith, (h) every obligation of such Person (an "EQUITY RELATED PURCHASE OBLIGATION") to purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock issued by such Person or any rights measured by the value of such Capital Stock, (i) every obligation of such Person under any Derivative Agreement, (j) every obligation in respect of Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor and such terms are enforceable under applicable law, and (k) every obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guarantying or otherwise acting as surety for, any obligation of a type described in any of clauses (a) through (j) (the "PRIMARY obligation") of another Person (the "PRIMARY OBLIGOR"), in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase of) any security for the payment of such primary obligation, (ii) to purchase property, securities or services for the purpose of assuring the payment of such primary obligation, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such primary obligation. The "AMOUNT" or "PRINCIPAL AMOUNT" of any Indebtedness at any time of determination represented by (1) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with GAAP, (2) any Capitalized Lease shall be the present value of the aggregate of the rentals obligation under such Capitalized Lease payable over the term thereof that is not subject to termination by the lessee, (3) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than the Parent or any of its wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or interest earned on such investment, (4) any Synthetic Lease shall be the stipulated loss value, termination value or other equivalent amounts, (5) any derivative contract shall be the maximum amount of any termination or loss payment required to be paid by such Person if such derivative contract were, at the time of determination, to be terminated by reason of any event of default or early termination event thereunder, whether or not such event of default or early termination event has in fact occurred, (6) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or purchase price and (7) any guaranty or other contingent liability referred to in clause (k) shall be an amount equal to the stated or determinable amount of the primary obligation in respect of which such guaranty or other contingent obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. INTERCREDITOR AGREEMENT. That certain Intercreditor Agreement, dated as of the date hereof, among the Borrower, the Guarantors the Term Loan Agent and the Administrative Agent, in form and substance satisfactory to the Administrative Agent. INTEREST PAYMENT DATE. (i) As to any Base Rate Loan, the first day of each calendar month (including the month which includes the Drawdown Date thereof) and the Maturity Date and (ii) as to any LIBOR Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; PROVIDED, HOWEVER, that if any Interest Period for a LIBOR Rate Loan exceeds three (3) months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates. INTEREST PERIOD. With respect to each Revolving Loan, (i) initially, the period commencing on the Drawdown Date of such Loan and ending on the last day of one of the periods set forth below, as selected by the Borrower in a Loan Request or as otherwise required by the terms of this Credit Agreement (A) for any Base Rate Loan, the last day of the calendar month and (B) for any LIBOR Rate Loan 1, 2, 3, or 6 months, and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Revolving Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; PROVIDED that all of the foregoing provisions relating to Interest Periods are subject to the following: (a) if any Interest Period with respect to a LIBOR Rate Loan would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; (b) if any Interest Period with respect to a Base Rate Loan would end on a day that is not a Business Day, that Interest Period shall end on the next succeeding Business Day; (c) if the Borrower fails to give notice as provided in ss.2.7, the Borrower shall be deemed to have requested a conversion of the affected LIBOR Rate Loan to a Base Rate Loan and the continuance of all Base Rate Loans as Base Rate Loans on the last day of the then current Interest Period with respect thereto; (d) any Interest Period relating to any LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and 0 (e) any Interest Period relating to any LIBOR Rate Loan that would otherwise extend beyond the Maturity Date shall end on the Maturity Date. INVESTMENTS. All loans, advances (other than commission, travel and similar advances to officers, directors and employees made in the ordinary course of business), extensions of credit (other than accounts receivable arising in the ordinary course of business provided that in no event shall such extension of credit exceed 180 days in accordance with its terms), deposit account or contribution of capital to any Person or any investment in, or purchase or other acquisition of, the Capital Stock of, or in respect of any guaranty of the obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (i) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (ii) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (iii) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (iv) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (ii) may be deducted when paid; and (v) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. ISSUING BANK. Bank of America. LC GUARANTY. A guaranty or indemnity in form and substance satisfactory to the Administrative Agent and the Issuing Bank pursuant to which the Administrative Agent shall guaranty the payment or performance by the Borrower of its reimbursement obligations in respect of Letters of Credit. LENDER OR LENDERS. Bank of America and the other lending institutions listed on SCHEDULE 1 hereto and any other person who becomes an assignee of any rights and obligations of a Lender pursuant to ss.18 and, unless the context otherwise requires, the Issuing Bank and the Cash Management Bank. LETTER OF CREDIT. See ss.4.1. LETTER OF CREDIT APPLICATION. With respect to any Letter of Credit issued for the account of the Borrower or Quaker Textile hereunder, an application for such Letter of Credit made to the Issuing Bank on its customary form. LETTER OF CREDIT FEE. See ss.4.6. LIBOR BUSINESS DAY. Any day on which commercial banks are open for international business (including dealings in U.S. dollar deposits) in London. LIBOR LENDING OFFICE. Initially, the office of each Lender designated as such by notice to the Borrower; thereafter, such other office of such Lender, if any, that shall be making or maintaining LIBOR Rate Loans. LIBOR RATE. For any Interest Period with respect to a LIBOR Rate Loan, the rate of interest equal to (i) the rate determined by the Administrative Agent at which Dollar deposits for such Interest Period are offered based on information presented on Page 3750 of the Dow Jones Market Service (formerly known as the Telerate Service) or such other commercially available source providing such information and designated by the Administrative Agent, as of 11:00 a.m. London time on the second LIBOR Business Day prior to the first day of such Interest Period, divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate. If the rate described above does not appear on the Dow Jones Market Service or such other commercially available source providing such information and designated by the Administrative Agent on any applicable interest determination date, the LIBOR Rate shall be the rate (rounded upward, if necessary, to the nearest one hundred-thousandth of a percentage point), determined on the basis of the offered rates for deposits in Dollars for a period of time comparable to such LIBOR Rate Loan which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the second LIBOR Business Day prior to the first day of such Interest Period as selected by the Administrative Agent. The principal London office of each of the four major London banks will be requested to provide a quotation of its Dollar deposit offered rate. If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in Dollars to leading European banks for a period of time comparable to such Interest Period offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the second LIBOR Business Day prior to the first day of such Interest Period. In the event that the Administrative Agent is unable to obtain any such quotation as provided above, it will be considered that LIBOR Rate pursuant to a LIBOR Rate Loan cannot be determined. LIBOR RATE LOANS. All or any portion of the Revolving Loans bearing interest calculated by reference to the LIBOR Rate. LICENSES. See ss.6.26. LIENS. Any encumbrance, mortgage, deed of trust, assignment, attachment, deposit arrangement, lien (statutory, judgment or otherwise), pledge, hypothecation, charge, restriction or other security interest, security agreement, or any interest of any kind securing any obligation of any entity or person, whether such interest is based on common law, civil law, statute or contract. LOAN DOCUMENTS. This Credit Agreement, the Notes, the Letter of Credit Applications, the Letters of Credit, the Guaranties, the Security Documents, the LC Guaranty, the Fee Letter, the Intercreditor Agreement, the Amendment and Reaffirmation of Loan Documents and any other agreement between the Borrower and/or any Guarantor and the Administrative Agent and/or any Lender relating to fee arrangements. LOAN REQUEST. See ss.2.6.1. LOANS. The Revolving Loans. MATURITY DATE. May 18, 2010. MAXIMUM DRAWING AMOUNT. The maximum aggregate amount that the beneficiaries may at any time draw under outstanding Letters of Credit issued for the account of the Borrower or Quaker Textile, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit issued for the account of the Borrower or Quaker Textile. MORTGAGED PROPERTY. Any Real Estate which is subject to any Mortgage. MORTGAGES. (a) The mortgage(s) and, if applicable, deed(s) of trust, dated on or prior to the Closing Date, from the Borrower to the Administrative Agent with respect to the fee and, if applicable, leasehold interests of the Borrower in the properties listed on SCHEDULE 1.1(A) hereto and (b) any other deeds of mortgage, deeds of trust, or deeds of leasehold mortgage executed and delivered to the Administrative Agent after the Closing Date pursuant to ss.7.16 hereof, in each case, in form and substance satisfactory to the Administrative Agent. MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of ss.3(37) of ERISA maintained or contributed to by the Parent, the Borrower or any ERISA Affiliate. NET BOOK VALUE. At the relevant time of reference thereto, the net book value of Eligible Inventory determined on a first-in first-out basis at lower of cost or market as expressed on the Borrower's perpetual inventory report. NET ORDERLY LIQUIDATION VALUE. With respect to any inventory, the net appraised orderly liquidation value of such inventory, as determined from time to time by the Administrative Agent by reference to the most recent appraisal of the inventory of the Borrower performed by an appraisal firm acceptable to the Administrative Agent. NON-FINANCED CAPITAL EXPENDITURES Capital Expenditures paid in cash and not financed with Indebtedness for borrowed money; PROVIDED that Capital Expenditures financed with the proceeds of Revolving Loans shall be deemed to constitute "Non-Financed Capital Expenditures" for purposes of this Agreement. NON-U.S. LENDER. See ss.5.2.3. NOTES. The Revolving Notes. OBLIGATIONS. All indebtedness, obligations and liabilities of the Parent and its Subsidiaries to any of the Lenders, the Issuing Bank, the Administrative Agent, the Cash Management Bank or any of their Affiliates, individually or collectively, existing on the date of this Credit Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Credit Agreement or any of the other Loan Documents or any Derivative Agreement or in respect of any of the Loans made, or any obligations under Derivative Agreements or Cash Management Obligations or Reimbursement Obligations incurred or any of the Letter of Credit Applications, Letters of Credit or other instruments at any time evidencing any thereof. ORIGINAL CLOSING DATE. May 18, 2005. OUTSTANDING or OUTSTANDING. With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination. PARENT. As defined in the preamble hereto. PATENT AGREEMENT. The Patent Collateral Assignment and Security Agreement, dated as of the Original Closing Date, made by the Borrower and the Guarantors in favor of the Administrative Agent, in form and substance satisfactory to the Administrative Agent. PBGC. The Pension Benefit Guaranty Corporation created by ss.4002 of ERISA and any successor entity or entities having similar responsibilities. PERFECTION CERTIFICATES. The Perfection Certificates, dated as of the Closing Date, in each case, in form and substance satisfactory to the Administrative Agent. PERMITTED LIENS. Liens permitted by ss.8.3 hereof. PERSON. Any individual, corporation, limited liability company, partnership, limited partnership, trust, unincorporated association, business, or other legal entity, or any Governmental Authority. PLEDGE AGREEMENT. The Pledge Agreement, executed by the Parent and the Borrower in favor of the Administrative Agent, in form and substance satisfactory to the Administrative Agent. PROJECTIONS. Those certain treasury cash flow forecasts of receipts and disbursements delivered to the Administrative Agent pursuant to Section 3(e) of the Fifth Amendment (as defined in the Existing Credit Agreement), as such forecasts may be updated from time to time pursuant to Section 7.4(n). QUAKER MEXICO. Quaker Fabric Mexico, S.A. de C.V., a corporation organized under the laws of Mexico. QUAKER TEXTILE Quaker Textile Corporation, a Massachusetts corporation. REAL ESTATE. All real property at any time owned or leased (as lessee or sublessee) by the Parent or any Subsidiary of the Parent. RECORD. The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Lender with respect to any Loan referred to in such Note. REGISTER. See ss.18.3. REIMBURSEMENT OBLIGATION. The Borrower's obligation to reimburse the Administrative Agent and the Lenders on account of any drawing under any Letter of Credit issued for the account of the Borrower or Quaker Textile as provided in ss.4.2. RELATED PARTIES. With respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. REQUIRED LENDERS. As of any date, any combination of two or more Lenders, excluding Delinquent Lenders, holding Loans and participating interests in the risks relating to Letters of Credit constituting at least fifty-one percent (51%) of the outstanding Loans and Letters of Credit; or, if no Loans or Letters of Credit are then outstanding, any combination of two or more Lenders, excluding Delinquent Lenders, having at least fifty-one percent (51%) of the Total Commitment. RESERVES. As determined by the Administrative Agent in the exercise of its reasonable discretion and upon written notice to the Borrower, such amounts as the Administrative Agent may from time to time establish and revise (a) to reflect (i) any Default or Event of Default or (ii) events, conditions, contingencies or risks which do or may have a material adverse effect on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent and its Subsidiaries to fulfill their obligations under this Credit Agreement or the other Loan Documents or (b) to reflect the belief of the Administrative Agent that any Borrowing Base Certificate or other collateral report or financial information furnished by or on behalf of the Parent and the Borrower to the Administrative Agent or any of the Lenders is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect events, conditions, contingencies or risks which would reasonably be expected to have a material adverse effect on the value of the Collateral, taken as a whole, or the value of the security interests and other rights of the Administrative Agent and the Lenders in the Collateral (including the enforceability, perfection or priority thereof) or (d) to reflect any costs and expenses (or anticipated costs and expenses) determined by the Administrative Agent in order to realize on the Collateral or (e) in respect of any Derivative Agreements or cash management or similar arrangements. RESTRICTED PAYMENT. In relation to the Parent and any Subsidiary of the Parent, any (a) Distribution or (b) any payment made to any Affiliates of the Parent or a Subsidiary of the Parent in respect of management, consulting or other similar services provided to the Parent or a Subsidiary of the Parent. REVOLVING EXPOSURE. At any time, the sum of the outstanding amount of all Revolving Loans PLUS the Maximum Drawing Amount and all Unpaid Reimbursement Obligations. REVOLVING LOANS. The revolving credit loans to be made by the Lenders to the Borrower (including Swing Line Loans) pursuant to ss.2. REVOLVING NOTES. See ss.2.4. SARBANES-OXLEY ACT. The Sarbanes-Oxley Act of 2002. SECURITY AGREEMENT. The Security Agreement, dated as of the Original Closing Date, among the Parent, the Borrower, Quaker Textile, Quaker Mexico and the Administrative Agent. SECURITY DOCUMENTS. The Guaranties, the Security Agreement, the Copyright Mortgage, the Patent Agreement, the Pledge Agreement, the Mortgages, the Trademark Agreement, and all other instruments and documents, including without limitation Uniform Commercial Code financing statements and other equivalent registration documents, control agreements and the like, required to be executed or delivered pursuant to, or in connection with, this Credit Agreement or any other Loan Document. SENIOR MANAGEMENT. The chairman, president, chief executive officer, chief financial officer, any executive vice president, any senior vice president, the vice-president - legal and environmental, the treasurer, the controller, or the general counsel of the Parent or a Subsidiary of the Parent. SETTLEMENT. With respect to any Swing Line Loans, the making or receiving of payments, in immediately available funds, by the Lenders, to the extent necessary to cause each Lender's actual share of the outstanding amount of Revolving Loans (after giving effect to any Loan Request) to be equal to such Lender's Commitment Percentage of the outstanding amount of such Revolving Loans (after giving effect to any Loan Request), in any case where, prior to such event or action, the actual share is not so equal. SETTLEMENT AMOUNT. See ss.2.10.1. SETTLEMENT DATE. (a) Friday of each week, or if a Friday is not a Business Day, the Business Day immediately following such Friday, (b) at the option of the Administrative Agent, on any Business Day following a day on which the account officers of the Administrative Agent active upon the Borrower's account become aware of the existence of an Event of Default, (c) the Business Day immediately following any day on which the Administrative Agent gives written notice to the Lenders to effect a Settlement, (d) the Maturity Date and (e) on the third (3rd) Business Day following any date on which the Borrower requests a conversion of a Swing Line Loan to a LIBOR Rate Loan. SETTLING LENDER. See ss.2.10.1. SUBSIDIARY. Any corporation, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock. SWING LINE LOANS. See ss.2.6.2. SYNTHETIC LEASE. Any lease of goods or other property, whether real or personal, which is treated as an operating lease under GAAP and as a loan or financing for U.S. income tax purposes. TAXES. All present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto. TERM LOANS. The "Term Loans" as defined in the Term Loan Agreement as in effect on the date hereof. TERM LOAN AGENT. GB Merchant Partners, LLC, a Delaware limited liability company. TERM LOAN AGREEMENT. The Term Loan Agreement, dated as of the date hereof, by and among the Credit Parties, certain financial institutions party thereto and the Term Loan Agent, as agent for such financial institutions. TERM LOAN DOCUMENTS. The "Loan Documents" as defined in the Term Loan Agreement. TERM LOAN OBLIGATIONS. The "Obligations" as defined in the Term Loan Agreement as in effect on the date hereof. TOTAL COMMITMENT. The sum of the Commitments of the Lenders, as in effect from time to time. TRADEMARK AGREEMENT. The Trademark Collateral Security and Pledge Agreement, dated as of the Original Closing Date, made by the Borrower and the Guarantors in favor of the Administrative Agent and the Assignments of Trademarks executed in connection therewith, in form and substance satisfactory to the Administrative Agent. TYPE. As to any Revolving Loan, its nature as a Base Rate Loan or LIBOR Rate Loan. UCC. The Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the Commonwealth of Massachusetts; PROVIDED, that to the extent that the UCC is used to define any term herein or in any other Loan Document and such term is defined differently in different Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern; PROVIDED FURTHER, that if, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to the Administrative Agent's Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the Commonwealth of Massachusetts, the term "UCC" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. UNPAID REIMBURSEMENT OBLIGATION. The Reimbursement Obligations for which the Borrower does not reimburse the Administrative Agent and the Lenders on the date specified in, and in accordance with, ss.4.3. VOTING STOCK. Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency. 1.2. RULES OF INTERPRETATION. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement. (b) The singular includes the plural and the plural includes the singular. (c) Unless otherwise expressly indicated, a reference to any law or regulation includes any amendment or modification to such law or regulation. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by GAAP applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, have the meanings assigned to them therein, with the term "instrument" being that defined under Article 9 of the Uniform Commercial Code. (h) Reference to a particular "ss." refers to that section of this Credit Agreement unless otherwise indicated. (i) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement. (j) Unless otherwise expressly indicated, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including," the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including." (k) This Credit Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are, however, cumulative and are to be performed in accordance with the terms thereof. (l) This Credit Agreement and the other Loan Documents are the result of negotiation among, and have been reviewed by counsel to, among others, the Administrative Agent, the Parent and the Borrower and are the product of discussions and negotiations among all parties. Accordingly, this Credit Agreement and the other Loan Documents are not intended to be construed against the Administrative Agent or any of the Lenders merely on account of the Administrative Agent's or any Lender's involvement in the preparation of such documents. (m) If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Credit Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. 2. REVOLVING LOANS. 2.1. REVOLVING LOANS. Subject to the terms and conditions set forth in this Credit Agreement, each of the Lenders severally agrees to lend to the Borrower and the Borrower may borrow, repay, and reborrow from time to time from the Closing Date up to but not including the Maturity Date upon notice by the Borrower to the Administrative Agent given in accordance with ss.2.6, such sums as are requested by the Borrower up to a maximum aggregate amount outstanding (after giving effect to all amounts requested) at any one time equal to such Lender's Commitment MINUS such Lender's Commitment Percentage of the sum of (a) the Maximum Drawing Amount and all Unpaid Reimbursement Obligations and (b) the outstanding Swing Line Loans; PROVIDED that the Revolving Exposure (after giving effect to all amounts requested) shall not at any time exceed the Gross Availability. The Revolving Loans shall be made PRO RATA in accordance with each such Lender's Commitment Percentage. Each request for a Revolving Loan hereunder shall constitute a representation and warranty by the Borrower that the conditions set forth in ss.10 and ss.11, in the case of the initial Revolving Loans to be made on the Closing Date, and ss.11, in the case of all other Revolving Loans, have been satisfied on the date of such request. 2.2. COMMITMENT FEE. The Borrower agrees to pay to the Administrative Agent for the accounts of the Lenders in accordance with their respective Commitment Percentages a commitment fee (the "Commitment Fee") calculated at the rate of 0.50% per annum on the average daily amount during each calendar month or portion thereof from the date hereof to the Maturity Date by which the Total Commitment MINUS the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the outstanding amount of Revolving Loans (excluding Swing Line Loans) during such calendar month. The Commitment Fee shall be payable monthly in arrears on the first day of each calendar month for the immediately preceding calendar month commencing on the first such date following the date hereof, with a final payment on the Maturity Date or any earlier date on which the Commitments shall terminate. 2.3. REDUCTION OF COMMITMENTS. The Borrower shall have the right at any time and from time to time upon five (5) Business Days prior written notice to the Administrative Agent to reduce by $5,000,000 or an integral multiple of $1,000,000 in excess thereof or to terminate entirely the Total Commitment in excess of the Revolving Exposure at such time, whereupon the Commitments of the Lenders shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated. Promptly after receiving any notice of the Borrower delivered pursuant to this ss.2.3, the Administrative Agent will notify the Lenders of the substance thereof. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Administrative Agent for the respective accounts of such Lenders the full amount of any Commitment Fee then accrued on the amount of the reduction. No reduction or termination of the Commitments may be reinstated. If the Total Commitment is terminated or reduced by the Borrower in whole or in part on or prior to the second anniversary of the Closing Date, the Borrower shall pay to the Administrative Agent for the benefit of the Lenders an early termination fee in an amount calculated as follows: (a) if such termination or reduction is concluded on or prior to the second anniversary of the Original Closing Date, an amount equal to one-half of one percent (0.5%) of the Total Commitment immediately prior to such termination or in the case of a partial reduction, one-half of one percent (0.5%) of the amount of such reduction; or (b) if such termination or reduction is concluded after the second anniversary of the Original Closing Date, the Borrower will not be required to pay an early termination fee. For greater clarity, the Borrower acknowledges and agrees that as a direct and proximate result of such termination under the aforesaid circumstances, the Lenders will suffer a loss in an amount which is difficult to calculate and determine with certainty and, therefore, as a result of the Borrower's and each Lender's reasonable endeavour to ascertain and agree in advance to the amount necessary to compensate the Lenders for said loss, the Borrower has agreed to pay the aforesaid early termination fees described in this ss.2.3 in the circumstances described. 2.4. THE REVOLVING NOTES. The Revolving Loans shall be evidenced by separate promissory notes of the Borrower in substantially the form of EXHIBIT E hereto (each a "Revolving Note"), dated as of the Closing Date (or such other date on which a Lender may become a party hereto in accordance with ss.18 hereof) and completed with appropriate insertions. One Revolving Note shall be payable to the order of each Lender in a principal amount equal to such Lender's Commitment Percentage of the Total Commitment or, if less, the outstanding amount of all Revolving Loans made by such Lender, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each such Lender to make or cause to be made, at or about the time of the Drawdown Date of any Revolving Loan or at the time of receipt of any payment of principal on such Lender's Revolving Note, an appropriate notation on such Lender's Revolving Note Record reflecting the making of such Revolving Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Loans set forth on such Lender's Revolving Note Record shall be PRIMA FACIE evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender's Revolving Note Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Revolving Note to make payments of principal of or interest on any Revolving Note when due. 2.5. INTEREST ON REVOLVING LOANS. Except as otherwise provided in ss.5.11, (a) Each Revolving Loan which is a Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate per annum equal to the Base Rate PLUS the Applicable Margin as in effect from time to time applicable to Revolving Loans bearing interest at the Base Rate. (b) Each Revolving Loan which is a LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate per annum equal to the LIBOR Rate determined for such Interest Period PLUS the Applicable Margin as in effect from time to time applicable to Revolving Loans bearing interest at the LIBOR Rate. The Borrower promises to pay interest on each Revolving Loan in arrears on each Interest Payment Date with respect thereto. 0 2.6. REQUESTS FOR REVOLVING LOANS. 2.6.1. GENERAL. The Borrower shall give to the Administrative Agent written notice in the form of EXHIBIT A hereto of each Revolving Loan requested hereunder (a "Loan Request") no less than (a) one (1) Business Day prior to the proposed Drawdown Date of any Base Rate Loan and (b) three (3) Business Days prior to the proposed Drawdown Date of any LIBOR Rate Loan. Each such notice shall specify (i) the principal amount of the Revolving Loan requested, (ii) the proposed Drawdown Date of such Revolving Loan, (iii) the Interest Period for such Revolving Loan and (iv) the Type of such Revolving Loan. Promptly upon receipt of any such notice, the Administrative Agent shall notify each of the Lenders thereof. Each Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Revolving Loan requested from such Lenders on the proposed Drawdown Date. Each Loan Request with respect to a Base Rate Loan shall be in a minimum aggregate amount of $500,000 or an integral multiple of $100,000 in excess thereof and each Loan Request with respect to a LIBOR Rate Loan shall be in a minimum aggregate amount of $1,000,000 or an integral multiple of $100,000 in excess thereof. 2.6.2. SWING LINE. Notwithstanding the notice and minimum amount requirements set forth in ss.2.6.1 but otherwise in accordance with the terms and conditions of this Credit Agreement, the Administrative Agent may, in its sole discretion and without conferring with the Lenders, make Revolving Loans to the Borrower (a) by entry of credits to the Borrower's operating account (No. 51191331) (the "Operating Account") with the Cash Management Bank to cover checks or other charges which the Borrower has drawn or made against such account or (b) in an amount as otherwise requested by the Borrower; provided that the maximum outstanding amount of advances made by the Administrative Agent pursuant to this ss.2.6.2 (each a "Swing Line Loan") shall not, at any time, exceed $5,000,000. The Borrower hereby requests and authorizes the Administrative Agent to make from time to time the Swing Line Loans by means of appropriate entries of such credits sufficient to cover checks and other charges then presented for payment from the Operating Account or as otherwise so requested. The Borrower acknowledges and agrees that the making of the Swing Line Loans shall, in each case, be subject in all respects to the provisions of this Credit Agreement as if they were Revolving Loans covered by a Loan Request including, without limitation, the limitations set forth in ss.2.1 and the requirements that the applicable provisions of ss.10 (in the case of Swing Line Loans made on the Closing Date) and ss.11 be satisfied. Swing Line Loans made pursuant to this ss.2.6.2 shall be Base Rate Loans until converted in accordance with the provisions of this Credit Agreement and, prior to a Settlement, such interest shall be for the account of the Administrative Agent. 2.7. CONVERSION OPTIONS. 2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING LOAN. The Borrower may elect from time to time to convert any outstanding Revolving Loan to a Revolving Loan of another Type, provided that (a) with respect to any such conversion of a LIBOR Rate Loan to a Base Rate Loan, the Borrower shall give the Administrative Agent at least three (3) Business Days prior written notice of such election; (b) with respect to any such conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrower shall give the Administrative Agent at least three (3) Business Days prior written notice of such election; (c) with respect to any such conversion of a LIBOR Rate Loan into a Base Rate Loan, such conversion shall only be made on the last day of the Interest Period with respect thereto and (d) no Revolving Loan may be converted into, or continued as, a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing. Promptly upon the receipt of any such election, the Administrative Agent shall notify the Lenders thereof. On the date on which such conversion is being made, each Lender shall take such action as is necessary to transfer its Commitment Percentage of such Revolving Loans to its Domestic Lending Office or its LIBOR Lending Office, as the case may be. All or any part of outstanding Revolving Loans of any Type may be converted into a Revolving Loan of another Type as PROVIDED herein, provided that any partial conversion with respect to -------- Revolving Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple of $100,000 in excess thereof. Each Conversion Request relating to the conversion of a Revolving Loan to a LIBOR Rate Loan shall be irrevocable by the Borrower. 1 2.7.2. CONTINUATION OF TYPE OF REVOLVING LOAN. Any Revolving Loan of any Type may be continued as a Revolving Loan of the same Type upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the notice provisions contained in ss.2.7.1; PROVIDED that no LIBOR Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of any Default or Event of Default of which officers of the Administrative Agent active upon the Borrower's account have actual knowledge. In the event that the Borrower fails to provide any such notice with respect to the continuation of any LIBOR Rate Loan, then such LIBOR Rate Loan shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto. The Administrative Agent shall notify the Lenders thereof promptly when any such automatic conversion contemplated by this ss.2.7 is scheduled to occur. 2.7.3. LIBOR RATE LOANS. Any conversion to or from LIBOR Rate Loans shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of all LIBOR Rate Loans having the same Interest Period shall not be less than $1,000,000 or a whole multiple of $100,000 in excess thereof. No more than ten (10) LIBOR Rate Loans having different Interest Periods may be outstanding at any time. 2.8. FUNDS FOR REVOLVING LOANS. 2.8.1. FUNDING PROCEDURES FOR REVOLVING LOANS. Not later than 2 p.m. (Boston time) on the proposed Drawdown Date of any Revolving Loans, each of the Lenders will make available to the Administrative Agent, at the Administrative Agent's Office, in immediately available funds, the amount of such Lender's Commitment Percentage of the amount of the requested Revolving Loans. Upon receipt from such Lender of such amount, and upon receipt of the documents required by ss.ss.10 and 11 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Administrative Agent will make available to the Borrower the aggregate amount of such Revolving Loans made available to the Administrative Agent by such Lenders. The failure or refusal of any such Lender to make available to the Administrative Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Revolving Loans shall not relieve any other Lender of its several obligation hereunder to make available to the Administrative Agent the amount of such other Lender's Commitment Percentage of any requested Revolving Loans. 2.8.2. ADVANCES BY ADMINISTRATIVE AGENT FOR REVOLVING LOANS. The Administrative Agent may, unless notified to the contrary by any Lender prior to a Drawdown Date, assume that such Lender has made available to the Administrative Agent on such Drawdown Date the amount of such Lender's Commitment Percentage of the Revolving Loans to be made on such Drawdown Date, and the Administrative Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If any such Lender makes available to the Administrative Agent such amount on a date after such Drawdown Date, such Lender shall pay to the Administrative Agent on demand an amount equal to the product of (a) the average computed for the period referred to in clause (c) below, of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times (b) the amount of such Lender's Commitment Percentage of such Revolving Loans, times (c) a fraction, the numerator of which is the number of days that elapse from and including such Drawdown Date to the date on which the amount of such Lender's Commitment Percentage of such Revolving Loans shall become immediately available to the Administrative Agent, and the denominator of which is 360. A statement of the Administrative Agent submitted to such Lender with respect to any amounts owing under this paragraph shall be prima facie evidence of the amount due and owing to the Administrative Agent by such Lender. If the amount of such Lender's Commitment Percentage of such Revolving Loans is not made available to the Administrative Agent by such Lender within three (3) Business Days following such Drawdown Date, the Administrative Agent shall be entitled to recover such amount from the Borrower on demand, with interest thereon at the rate per annum applicable to the Revolving Loans made on such Drawdown Date. 2 2.9. CHANGE IN BORROWING BASE. The Borrowing Base shall be determined weekly (or at such other interval as may be specified pursuant to ss.7.4(f)) by the Administrative Agent by reference to the Borrowing Base Certificate delivered to the Lenders and the Administrative Agent pursuant to ss.7.4(f) and other information obtained by or provided to the Administrative Agent. The Administrative Agent shall give to the Borrower written notice of any change in the Borrowing Base determined by the Administrative Agent, which notice shall be effective upon its receipt by the Borrower. 2.10. SETTLEMENTS. 2.10.1. GENERAL. On each Settlement Date, the Administrative Agent shall, not later than 11:00 a.m. (Boston time), give telephonic or facsimile notice (a) to the Lenders and the Borrower of the respective outstanding amount of Swing Line Loans made by the Administrative Agent on behalf of the Lenders from the immediately preceding Settlement Date through the close of business on the prior day and (b) to such Lenders of the amount (a "Settlement Amount") that each such Lender (a "Settling Lender") shall pay to effect a Settlement of any Swing Line Loan. A statement of the Administrative Agent submitted to such Lenders and the Borrower or to the Lenders with respect to any amounts owing under this ss.2.10 shall be PRIMA FACIE evidence of the amount due and owing. Each Settling Lender shall, not later than 2:00 p.m. (Boston time) on such Settlement Date, effect a wire transfer of immediately available funds to the Administrative Agent in the amount of the Settlement Amount for such Settling Lender. All funds advanced by such Lender as a Settling Lender pursuant to this ss.2.10 shall for all purposes be treated as a Revolving Loan made by such Settling Lender to the Borrower and all funds received by such Lender pursuant to this ss.2.10 shall for all purposes be treated as repayment of amounts owed with respect to Revolving Loans made by such Lender. In the event that any bankruptcy, reorganization, liquidation, receivership or similar cases or proceedings in which the Borrower is a debtor prevent a Settling Lender from making any Revolving Loan to effect a Settlement as contemplated hereby, such Settling Lender will make such dispositions and arrangements with the other Lenders with respect to such Revolving Loans, either by way of purchase of participations, distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender's share of the outstanding Revolving Loans being equal, as nearly as may be, to such Lender's Commitment Percentage of the outstanding amount of the Revolving Loans. 2.10.2. FAILURE TO MAKE FUNDS AVAILABLE. The Administrative Agent may, unless notified to the contrary by any Settling Lender prior to a Settlement Date, assume that such Settling Lender has made or will make available to the Administrative Agent on such Settlement Date the amount of such Settling Lender's Settlement Amount, and, if applicable, the Administrative Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If any Settling Lender makes available to the Administrative Agent such amount on a date after such Settlement Date, such Settling Lender shall pay to the Administrative Agent on demand an amount equal to the product of (a) the average computed for the period referred to in clause (c) below, of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times (b) the amount of such Settlement Amount, times (c) a fraction, the numerator of which is the number of days that elapse from and including such Settlement Date to the date on which the amount of such Settlement Amount shall become immediately available to the Administrative Agent, and the denominator of which is 360. A statement of the Administrative Agent submitted to such Settling Lender with respect to any amounts owing under this ss.2.10.2 shall be prima facie evidence of the amount due and owing to the Administrative Agent by such Settling Lender. If such Settling Lender's Settlement Amount is not made available to the Administrative Agent by such Settling Lender within three (3) Business Days following such Settlement Date, the Administrative Agent shall be entitled to recover such amount from the Borrower on demand, with interest thereon at the rate per annum applicable to the Revolving Loans as of such Settlement Date. 3 2.10.3. NO EFFECT ON OTHER LENDERS. The failure or refusal of any Settling Lender to make available to the Administrative Agent at the aforesaid time and place on any Settlement Date the amount of such Settling Lender's Settlement Amount shall not (a) relieve any other Settling Lender from its several obligations hereunder to make available to the Administrative Agent the amount of such other Settling Lender's Settlement Amount or (b) impose upon any Lender, other than the Settling Lender so failing or refusing, any liability with respect to such failure or refusal or otherwise increase the Commitment of such other Lender. 2.11. REPAYMENTS OF REVOLVING LOANS PRIOR TO EVENT OF DEFAULT. 2.11.1. CREDIT FOR FUNDS RECEIVED IN CONCENTRATION ACCOUNT. Prior to the occurrence of an Event of Default as to which the account officers of the Administrative Agent active upon the Borrower's account have actual knowledge, (a) all funds and cash proceeds in the form of money, checks and like items received in the Concentration Account (as defined in and as contemplated by ss.7.17.1) shall be credited to the Borrower, on the same Business Day on which the Administrative Agent determines that good collected funds have been received, and, prior to the receipt of good collected funds, on a provisional basis until final receipt of good collected funds, (b) all funds and cash proceeds in the form of a wire transfer received in the Concentration Account as contemplated by ss.7.17 shall be credited to the Borrower on the same Business Day as the Cash Management Bank's receipt of such amounts in good collected funds, (c) all funds and cash proceeds in the form of an automated clearing house transfer received in the Concentration Account as contemplated by ss.7.17 shall be credited to the Borrower, on the next Business Day following the Cash Management Bank's receipt of such amounts in good collected funds. For purposes of the foregoing provisions of this ss.2.11.1, the Cash Management Bank shall not be deemed to have received any such funds or cash proceeds on any day unless received by the Cash Management Bank before 2:30 p.m. (Boston time) on such day. The Borrower further acknowledges and agrees that any such provisional credits or credits in respect of wire or automatic clearing house funds transfers shall be subject to reversal if final collection in good funds of the related item is not received by, or final settlement of the funds transfer is not made in favor of, the Cash Management Bank in accordance with Cash Management Bank's customary procedures and practices for collecting provisional items or receiving settlement of funds transfers. 4 2.11.2. APPLICATION OF PAYMENTS PRIOR TO EVENT OF DEFAULT. (a) [Intentionally Omitted]. (b) Prior to the occurrence of an Event of Default of which the account officers of the Administrative Agent active on the Borrower's account have knowledge, all funds transferred to the Concentration Account and for which the Borrower has received credits shall, subject to the Intercreditor Agreement, be applied to the Obligations of the Borrowers as follows: (i) first, to pay amounts then due and payable by the Borrower under this Credit Agreement, the Notes and the other Loan Documents and in respect of any other Obligations of the Borrower; (ii) second, to repay Swing Line Loans made by the Administrative Agent pursuant to ss.2.6.2 and for which Settlement has not then been made; (iii) third, to repay Revolving Loans which are Base Rate Loans; (iv) fourth, to repay Revolving Loans which are LIBOR Rate Loans; and (v) fifth, except as otherwise required by ss.ss.4.2(b) and (c), to the Operating Account. (c) All prepayments of LIBOR Rate Loans prior to the end of an Interest Period shall obligate the Borrower to pay any breakage costs associated with such LIBOR Rate Loans in accordance with ss.5.10. Prior to the occurrence of an Event of Default, the Borrower may elect to avoid such breakage costs by providing to the Administrative Agent cash in an amount sufficient to cash collateralize such LIBOR Rate Loans, but in no event shall the Borrower be deemed to have paid such LIBOR Rate Loans until such cash has been paid to the Administrative Agent and has been applied to such LIBOR Rate Loans. Until such application, the Administrative Agent may elect to cause such cash collateral to be deposited into either (i) a cash collateral account pursuant to the terms of a cash collateral agreement executed by the Borrower and the Administrative Agent and in form and substance satisfactory to the Administrative Agent or (ii) the Operating Account with appropriate instructions prohibiting the Borrower's withdrawal of such funds so long as they remain cash collateral. In each such case, the Borrower agrees to execute and deliver to the Administrative Agent such instruments and documents, including Uniform Commercial Code or other financing statements and agreements with any third party depository banks, as the Administrative Agent may request. (d) All prepayments of the Revolving Loans pursuant to this ss.2.11.2 shall be allocated among the Lenders making such Revolving Loans, in proportion, as nearly as practicable, to the respective unpaid principal amount of such Revolving Loans outstanding, with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion. Prior to any Settlement Date, however, all prepayments of the Revolving Loans shall be applied in accordance with this ss.2.11.2, first to outstanding Revolving Loans of the Administrative Agent. 2.12. REPAYMENTS OF LOANS AFTER EVENT OF DEFAULT. Following the occurrence and during the continuance of an Event of Default of which the account officers of the Administrative Agent active on the Borrower's account have knowledge, all funds transferred to the Concentration Account and for which the Borrower has received credits shall be, subject to the Intercreditor Agreement, applied to the Obligations in accordance with ss.12.4. 2.13. [INTENTIONALLY OMITTED]. 2.14. [INTENTIONALLY OMITTED]. 2.15. [INTENTIONALLY OMITTED]. 2.16. ADMINISTRATIVE AGENT ADVANCES. Notwithstanding anything to the contrary contained herein (including, without limitation, the borrowing limitations set forth in ss.2.1 hereof), but subject to the limitations set forth in the proviso contained in this ss.2.16, the Administrative Agent is hereby authorized by the Borrower and the Lenders, from time to time at the request of the Borrower but in the Administrative Agent's sole discretion, (a) after the occurrence and during the continuance of a Default or an Event of Default, or (b) at any time that any of the other applicable conditions precedent set forth in ss.11 have not been satisfied, to make Revolving Loans to the Borrower on behalf of the Lenders which the Administrative Agent, in its reasonable business judgment, deems necessary or desirable (i) to preserve or protect the Collateral, or any portion thereof, (ii) to enhance the likelihood of, or maximize the amount of, repayment of the Loans and other Obligations (other than amounts in respect of Cash Management Obligations), or (iii) to pay any other amount chargeable to the Borrower pursuant to the terms of this Agreement (other than amounts in respect of Cash Management Obligations), including, without limitation, costs, fees and expenses as described in ss.15 (any of the advances described in this ss.2.16 being hereinafter referred to as "Administrative Agent Advances"); PROVIDED, that (w) the Administrative Agent Advances shall be due and payable on the earlier of (1) demand by the Administrative Agent and (2) sixty (60) days after the making thereof, (x) the aggregate outstanding principal amount of all Administrative Agent Advances shall not exceed $2,500,000 and (y) the Administrative Agent shall not make any Administrative Agent Advance to the Borrower if the amount thereof would cause the Revolving Exposure to exceed the Total Commitment. The Administrative Agent Advances shall be repayable on demand and secured by the Collateral, shall constitute Revolving Loans and Obligations hereunder, and shall bear interest at the rate applicable to Base Rate Loans which are Revolving Loans from time to time. The Administrative Agent shall notify each Lender and the Borrower in writing of each such Administrative Agent Advance promptly following the making thereof, which notice shall include a description of the purpose of such Administrative Agent Advance. Each Lender irrevocably agrees to purchase from the Administrative Agent, upon demand, its pro rata share (in accordance with its Commitment Percentage) of the amount of the outstanding Administrative Agent Advances. Until such purchase, all payments in respect of the Administrative Agent Advances shall be for the account of the Administrative Agent. 3. REPAYMENT OF LOANS. 3.1. REVOLVING LOANS. 3.1.1. MATURITY. The Borrower promises to pay on the Maturity Date, and there shall become absolutely due and payable on the Maturity Date, all of the Revolving Loans outstanding on such date, together with any and all accrued and unpaid interest thereon and all other fees and other amounts then accrued and outstanding with respect thereto. 3.1.2. MANDATORY REPAYMENTS OF REVOLVING LOANS. If at any time the sum of the Revolving Exposure exceeds the Gross Availability, then the Borrower shall immediately pay the amount of such excess to the Administrative Agent for the respective accounts of the Lenders for application: first, to any Swing Line Loans outstanding, second, to any Unpaid Reimbursement Obligations; third, to all Revolving Loans advanced to the Borrower; and fourth, to provide to the Administrative Agent cash collateral for Reimbursement Obligations as contemplated by ss.4.2(b) and (c). Each payment of any Unpaid Reimbursement Obligation or prepayment of Revolving Loans shall be allocated among the Lenders, in proportion, as nearly as practicable, to each Reimbursement Obligation or (as the case may be) the respective unpaid principal amount of each Lender's Revolving Note or loan account (as the case may be) with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion. In addition, the Borrower shall repay the Revolving Loans in accordance with ss.3.2.1(d). 3.1.3. OPTIONAL REPAYMENTS OF REVOLVING LOANS. The Borrower shall have the right, at their election, to repay the outstanding amount of the Revolving Loans, as a whole or in part, at any time without penalty or premium, provided that any full or partial prepayment of the outstanding amount of any LIBOR Rate Loans pursuant to this ss.3.1.3 may be made only on the last day of the Interest Period relating thereto (unless breakage costs are paid by the Borrower pursuant to ss.5.10 or cash collateral is provided in accordance with ss.2.11.2(c)) . The Borrower shall provide to the Administrative Agent, no later than 10:00 a.m., Boston time, at least three (3) Business Days prior written notice of any proposed prepayment pursuant to this ss.3.1.3, specifying the proposed date of prepayment of any LIBOR Rate Loans and the principal amount to be prepaid. Each such partial prepayment of the Revolving Loans shall be accompanied by the payment of accrued interest on the principal prepaid to the date of prepayment and shall be applied, in the absence of instruction by the Borrower, first to the principal of Base Rate Loans which are Revolving Loans and second to the principal of LIBOR Rate Loans which are Revolving Loans. Each partial prepayment shall be allocated among the Lenders, in proportion, as nearly as practicable, to the respective unpaid principal amount of each such Lender's Revolving Note or loan account, as the case may be, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion. 3.2. MANDATORY PREPAYMENTS. 3.2.1. ADDITIONAL MANDATORY PREPAYMENTS OF REVOLVING LOANS. (a) [Intentionally Omitted]. (b) [Intentionally Omitted]. (c) Concurrently with the receipt by the Parent or any Subsidiary of the Parent of: (i) net cash proceeds from any Asset Sales by the Parent or such Subsidiary (other than the sale, lease, license or other disposition of assets in the ordinary course of business consistent with past practices); (ii) net cash proceeds from the issuance by the Parent or such Subsidiary of any debt (other than debt permitted under ss.8.2) or equity securities (other than equity securities issued in connection with any compensatory employee benefit or option plan); or (iii) net cash proceeds received by the Parent or such Subsidiary from Casualty Events which have not been utilized by the Parent or such Subsidiary to repair or replace the property so damaged, destroyed or taken within one hundred and eighty (180) days of receipt of such proceeds; 0 the Borrower shall pay to the Administrative Agent for the respective accounts of the Lenders an amount equal to one hundred percent (100%) of such proceeds, to be applied in the manner set forth in ss.3.2.1(d); PROVIDED that (A) to the extent that any such amounts received as a result of any Asset Sale of, or any Casualty Event related to, Fixed Asset Collateral, are applied to prepay the Term Loans, such amounts shall not be required to be applied to prepay the Loans pursuant to this ss.3.2.1(c) and (B) the Borrower shall only be required to apply 50% pursuant to this ss.3.2.1(c) of the net cash proceeds from the issuance by the Parent or any Subsidiary of any debt or equity securities so long as 50% of such proceeds are applied to prepay the Term Loans. Notwithstanding the foregoing, the provisions of this ss.3.2.1(c) shall not impair any restrictions set forth in the Loan Documents with respect to the incurrence of Indebtedness or Asset Sales by the Parent or any of its Subsidiaries. (d) All payments made pursuant to ss.3.2.1(c) shall be applied to repay the outstanding principal amount of the Revolving Loans, with a permanent reduction of the Total Commitment in the amount of such Revolving Loan prepayment required under this ss.3.2.1 and corresponding permanent reductions of each Lender's Commitment. Such mandatory prepayments shall be allocated among the Lenders in proportion, as nearly as practicable, to the respective outstanding amounts of each such Lender's Notes or loan accounts, as the case may be, with adjustments to the extent practicable to equalize any prior prepayments not exactly in proportion. 4. LETTERS OF CREDIT. 4.1. LETTER OF CREDIT COMMITMENTS. 4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and conditions hereof and the execution and delivery by the Borrower of a letter of credit application on the Issuing Bank's customary form (a "Letter of Credit Application"), the Administrative Agent on behalf of the Lenders and in reliance upon the agreement of such Lenders set forth in ss.4.1.4 and upon the representations and warranties of the Borrower contained herein, agrees to (a) cause the Issuing Bank to issue, extend and renew for the account of the Borrower or Quaker Textile one or more standby or documentary letters of credit (each individually, a "Letter of Credit"), in such form as may be requested from time to time by the Borrower and agreed to by the Administrative Agent and the Issuing Bank and (b) enter into an LC Guaranty to support the reimbursement obligations of the Borrower with respect to Letters of Credit requested by the Borrower; PROVIDED, HOWEVER, that after giving effect to such request, (i) the sum of the aggregate Maximum Drawing Amount on all Letters of Credit and all Unpaid Reimbursement Obligations shall not exceed $7,500,000 at any one time and (ii) the Revolving Exposure shall not exceed the Gross Availability at such time. 4.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit Application shall be completed to the satisfaction of the Administrative Agent and the Issuing Bank. In the event that any provision of any Letter of Credit Application shall be inconsistent with any provision of this Credit Agreement, then the provisions of this Credit Agreement shall, to the extent of any such inconsistency, govern. 4.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued, extended or renewed hereunder shall, among other things, (a) provide for the payment of sight drafts for honor thereunder when presented in accordance with the terms thereof and when accompanied by the documents described therein, and (b) have an expiry date no later than the date which is fourteen (14) days (or, if the Letter of Credit is confirmed by a confirmer or otherwise provides for one or more nominated persons, forty-five (45) days) prior to the Maturity Date. Subject to clause (b) above, each Letter of Credit shall expire (without giving effect to any extension thereof by reason of an interruption of business) at or prior to the close of business 365 days, in the case of standby Letters of Credit, or 180 days, in the case of documentary Letters of Credit, after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, 365 days or 180 days, as applicable, after such renewal or extension) provided that the Issuing Bank may, in its sole and absolute discretion, agree to issue any such standby Letter of Credit providing for automatic extensions thereof to a date not later than 365 days beyond its current expiration date; PROVIDED that any such automatic extension Letter of Credit must permit the Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Each Letter of Credit so issued, extended or renewed shall be subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 or any successor version thereto adopted by the Issuing Bank in the ordinary course of its business as a letter of credit issuer and in effect at the time of issuance of such Letter of Credit (the "Uniform Customs") or, in the case of a standby Letter of Credit, either the Uniform Customs or the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590, or any successor code of standby letter of credit practices among banks adopted by the Issuing Bank in the ordinary course of its business as a standby letter of credit issuer and in effect at the time of issuance of such Letter of Credit. 1 4.1.4. REIMBURSEMENT OBLIGATIONS OF LENDERS. Each Lender severally agrees that it shall be absolutely liable, without regard to the occurrence of any Default or Event of Default or any other condition precedent whatsoever, to the extent of such Lender's Commitment Percentage, to reimburse the Administrative Agent on demand for the amount of each draft paid by the Issuing Bank under each Letter of Credit issued for the account of the Borrower or Quaker Textile and each payment made by the Administrative Agent to the Issuing Bank under the LC Guaranty relating to any Letter of Credit issued for the account of the Borrower or Quaker Textile to the extent that such amount is not reimbursed by the Borrower pursuant to ss.4.2 (such agreement by a Lender being called herein the "Letter of Credit Participation" of such Lender). 4.1.5. PARTICIPATIONS OF LENDERS. Each such payment made by a Lender shall, unless the applicable Reimbursement Obligation has been otherwise funded as a Revolving Loan bearing interest at the Base Rate pursuant to ss.4.2, be treated as the purchase by such Lender of a participating interest in the Borrower's Reimbursement Obligation under ss.4.2 in an amount equal to such payment. To that extent, each Lender shall share in accordance with its participating interest in any interest which accrues pursuant to ss.4.2. 4.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce the Administrative Agent to cause the Issuing Bank to issue, extend and renew each Letter of Credit for the account of the Borrower or Quaker Textile, the Borrower agrees to reimburse or pay to the Administrative Agent, for the account of the Administrative Agent and/or the Issuing Bank or (as the case may be) the Lenders, with respect to each Letter of Credit issued, extended or renewed for the Borrower's or Quaker Textile's account, (a) except as otherwise expressly provided in ss.ss.4.2(b) and (c), on each date that any draft presented under such Letter of Credit is honored by the Issuing Bank, or the Issuing Bank or the Administrative Agent otherwise makes a payment with respect thereto or the Administrative Agent makes any payment under the LC Guaranty, (i) the amount paid by the Issuing Bank or the Administrative Agent under or with respect to such Letter of Credit, and (ii) the amount of any taxes, fees, charges or other costs and expenses whatsoever incurred by the Issuing Bank or Administrative Agent or any Lender in connection with any payment made by the Issuing Bank, Administrative Agent or any Lender under, or with respect to, such Letter of Credit; PROVIDED that, subject to the conditions to borrowing set forth herein, payment of each Reimbursement Obligation by the Borrower under this ss.4.2(a) shall be made through the automatic funding of a Revolving Loan bearing interest at the Base Rate applicable to Revolving Loans in an amount equal to the amount of such Reimbursement Obligation, and the Borrower hereby irrevocably authorizes and directs the Administrative Agent and Issuing Bank to take such actions as may be necessary to effectuate such automatic funding of any such Base Rate Loans; 2 (b) upon the reduction (but not termination) of the Total Commitment to an amount less than the Maximum Drawing Amount, an amount equal to such difference, which amount shall be held by the Administrative Agent for the benefit of the Lenders and the Administrative Agent as cash collateral for all Reimbursement Obligations, and (c) upon the termination of the Total Commitment, or the acceleration of the Reimbursement Obligations with respect to all Letters of Credit issued for the account of the Borrower or Quaker Textile in accordance with ss.12, an amount equal to the then Maximum Drawing Amount on all Letters of Credit issued for the account of the Borrower or Quaker Textile, which amount shall be held by the Administrative Agent for the benefit of the Lenders and the Administrative Agent as cash collateral for all Reimbursement Obligations. Each such payment shall be made to the Administrative Agent at the Administrative Agent's Office in immediately available funds. Interest on any and all amounts remaining unpaid by the Borrower under this ss.4.2 at any time from the date such amounts become due and payable (whether as stated in this ss.4.2, by acceleration or otherwise) until payment in full (whether before or after judgment) shall be payable to the Administrative Agent on demand at the Default Rate. 4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Administrative Agent shall notify the Borrower of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment. If the Borrower fails to reimburse the Administrative Agent as provided in ss.4.2 on or before the date that such draft is paid or other payment is made by the Issuing Bank or the Administrative Agent or, as a result of the applicable borrowing limits described therein being exceeded such Reimbursement Obligations are not satisfied by the making of a Revolving Loan bearing interest at the Base Rate applicable to Revolving Loans, the Administrative Agent may at any time thereafter notify the Lenders of the amount of any such Unpaid Reimbursement Obligation. No later than 2:00 p.m. (Boston time) on the Business Day next following the receipt of such notice, each such Lender shall make available to the Administrative Agent, at the Administrative Agent's Office, in immediately available funds, such Lender's Commitment Percentage of such Unpaid Reimbursement Obligation, together with an amount equal to the product of (a) the average, computed for the period referred to in clause (c) below, of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times (b) the amount equal to such Lender's Commitment Percentage of such Unpaid Reimbursement Obligation, times (c) a fraction, the numerator of which is the number of days that elapse from and including the date the Issuing Bank or the Administrative Agent paid the draft presented for honor or otherwise made payment to the date on which such Lender's Commitment Percentage of such Unpaid Reimbursement Obligation, shall become immediately available to the Administrative Agent, and the denominator of which is 360. The responsibility of the Issuing Bank and the Administrative Agent to the Borrower and the Lenders shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. 3 4.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this ss.4 shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim or defense to payment which the Borrower or Quaker Textile may have or have had against the Issuing Bank or the Administrative Agent, any Lender or any beneficiary of a Letter of Credit. The Borrower further agrees with the Administrative Agent and the Lenders that none of the Issuing Bank, the Administrative Agent and the Lenders shall be responsible for, and the Borrower's Reimbursement Obligations under ss.4.2 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower or Quaker Textile, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrower or Quaker Textile against the beneficiary of any Letter of Credit or any such transferee. None of the Issuing Bank, the Administrative Agent and the Lenders shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. The Borrower agrees that any action taken or omitted by the Issuing Bank, the Administrative Agent or any Lender under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith and in the absence of gross negligence, shall be binding upon the Borrower and Quaker Textile and shall not result in any liability on the part of the Issuing Bank, the Administrative Agent or any Lender to the Borrower or Quaker Textile. 4.5. RELIANCE BY ISSUER. To the extent not inconsistent with ss.4.4, the Issuing Bank and the Administrative Agent shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by such Person to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the Issuing Bank or the Administrative Agent. Each of the Issuing Bank and the Administrative Agent shall be fully justified in failing or refusing to take any action under this Credit Agreement unless it shall first have received such advice or concurrence of the Required Lenders as they reasonably deem appropriate or it shall first be indemnified to its reasonable satisfaction by the other Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Issuing Bank and the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Credit Agreement in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and all future holders of the Revolving Notes or of a Letter of Credit Participation. 4.6. LETTER OF CREDIT FEE. The Borrower shall pay a fee (in each case, a "Letter of Credit Fee") to the Administrative Agent, in respect of each Letter of Credit issued for the account of the Borrower or Quaker Textile, (a) in an amount equal to the Applicable Margin per annum with respect to LIBOR Rate Loans that are Revolving Loans on the available amount of each such Letter of Credit, which Letter of Credit Fee shall be for the accounts of the Lenders in accordance with their respective Commitment Percentages and (b) in an amount equal to one-eighth of one percent (0.125%) per annum on the available amount of each such Letter of Credit, which amount shall be for the account of the Administrative Agent or the Issuing Bank as a fronting fee. The Letter of Credit Fee shall be paid monthly in arrears on the first Business Day of each month for the immediately preceding calendar month. In respect of each Letter of Credit issued for the account of the Borrower or Quaker Textile, the Borrower shall also pay to the Administrative Agent for the Issuing Bank's or the Administrative Agent's own account, at such other time or times as such charges are customarily made by the Issuing Bank or the Administrative Agent, the Issuing Bank's and/or the Administrative Agent's customary issuance, amendment, negotiation, payment or document examination and other administrative fees as in effect from time to time. 4 4.7. EXISTING LETTERS OF CREDIT. SCHEDULE 4.7 contains a list of certain letters of credit issued prior to the Closing Date for the account of the Borrower or Quaker Textile under the Existing Credit Agreement (the "Existing Letters of Credit"). On the Closing Date, (a) the Existing Letters of Credit shall be deemed to be Letters of Credit issued pursuant to this ss.4 and shall be subject to all of the provisions applicable to Letters of Credit under this Credit Agreement and (b) all liabilities of the Borrower with respect to the Existing Letters of Credit shall constitute Obligations of the Borrower with respect to Letters of Credit in accordance with this Credit Agreement and the other Loan Documents as though the Borrower had delivered a Letter of Credit Application under this Credit Agreement. The letter of credit fees owing with respect to the Existing Letters of Credit under ss.4.6 of the Existing Credit Agreement shall be calculated as of the Closing Date and shall be paid in full at the time Letter of Credit Fees under ss.4.6 are required to be paid. From and after the Closing Date, the Borrower shall pay Letter of Credit Fees and such other fees as provided in ss.4.6, in each case when due pursuant to ss.4.6, with respect to each of the Existing Letters of Credit. 5. CERTAIN GENERAL PROVISIONS. 5.1. FEES. 5.1.1. ADMINISTRATIVE AGENT'S FEE. The Borrower shall pay to the Administrative Agent, for its own account, an administrative agent's fee as set forth in the Fee Letter (the "Administrative Agent's Fee"), in the amounts and at the times referred to therein. 5.1.2. CLOSING FEE. The Borrower shall pay to the Administrative Agent on the Closing Date, for the pro rata account of the Lenders, a closing fee in the amount of $437,500 (the "Closing Fee"). 5.1.3. OTHER FEES. The Borrower shall pay to the Administrative Agent on the Closing Date any additional fees set forth in the Fee Letter, in the amounts and at the times referred to therein. 5.2. FUNDS FOR PAYMENTS. 5.2.1. PAYMENTS TO ADMINISTRATIVE AGENT. All payments of principal and interest on Loans and all Reimbursement Obligations, Fees and any other amounts due hereunder or under any of the other Loan Documents (unless the provisions of this Credit Agreement require otherwise) shall be made on the due date thereof to the Administrative Agent in Dollars for the respective accounts of the Lenders and the Administrative Agent, at the Administrative Agent's Office or at such other place that the Administrative Agent may from time to time designate, in each case no later than 12:00 noon (Boston, Massachusetts, time or other local time at the place of payment) and in immediately available funds. 5.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without recoupment, setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein (other than Excluded Taxes) unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Administrative Agent, for the account of the Lenders or (as the case may be) the Administrative Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Lenders or the Administrative Agent to receive the same net amount which the Lenders or the Administrative Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Administrative Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document. 5.2.3. NON-U.S. LENDERS. Each Lender and the Administrative Agent that is not a U.S. Person as defined in Section 7701(a)(30) of the Code for federal income tax purposes (a "Non-U.S. Lender") hereby agrees that, if and to the extent it is legally able to do so, it shall, prior to the date on which it becomes a Lender hereunder, deliver to the Borrower and the Administrative Agent, as applicable, such certificates, documents or other evidence, as and when required by the Code or Treasury Regulations issued pursuant thereto, including (a) in the case of a Non-U.S. Lender that is a "bank" for purposes of Section 881(c)(3)(A) of the Code, two (2) duly completed copies of Internal Revenue Service Form W-8BEN or Form W-8ECI and any other certificate or statement of exemption required by Treasury Regulations, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Lender or the Administrative Agent establishing that with respect to payments of principal, interest or fees hereunder it is (i) not subject to United States federal withholding tax under the Code because such payment is effectively connected with the conduct by such Lender or Administrative Agent of a trade or business in the United States or (ii) totally exempt from United States federal withholding tax under a provision of an applicable tax treaty and (b) in the case of a Non-U.S. Lender that is not a "bank" for purposes of Section 881(c)(3)(A) of the Code, a certificate in form and substance reasonably satisfactory to the Administrative Agent and the Borrower and to the effect that (i) such Non-U.S. Lender is not a "bank" for purposes of Section 881(c)(3)(A) of the Code, is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any governmental authority, any application made to a rating agency or qualification for any exemption from any tax, securities law or other legal requirements, (ii) is not a ten percent (10%) shareholder for purposes of Section 881(c)(3)(B) of the Code and (iii) is not a controlled foreign corporation receiving interest from a related person for purposes of Section 881(c)(3)(C) of the Code, together with a properly completed Internal Revenue Service Form W-8 or W-9, as applicable (or successor forms). Each Lender or the Administrative Agent agrees that it shall, promptly upon a change of its lending office or the selection of any additional lending office, to the extent the forms previously delivered by it pursuant to this section are no longer effective, and promptly upon the Borrower's or the Administrative Agent's reasonable request after the occurrence of any other event (including the passage of time) requiring the delivery of a Form W-8BEN, Form W-8ECI, Form W-8 or W-9 in addition to or in replacement of the forms previously delivered, deliver to the Borrower and the Administrative Agent, as applicable, if and to the extent it is properly entitled to do so, a properly completed and executed Form W-8BEN, Form W-8ECI, Form W-8 or W-9, as applicable (or any successor forms thereto). 5.3. COMPUTATIONS. All computations of interest on Loans, any Fees or any other amount due hereunder shall, unless otherwise expressly provided herein, be based on a 360-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to LIBOR Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest and fees shall accrue during such extension. 5.4. INTEREST LIMITATION. Notwithstanding any other term of this Credit Agreement or any other document referred to herein or therein, the maximum amount of interest which may be charged to or collected from any person liable hereunder by the Lenders shall be absolutely limited to, and shall in no event exceed, the maximum amount of interest which could lawfully be charged or collected under applicable law (including, to the extent applicable, the provisions of Section 5197 of the Revised Statutes of the United States of America, as amended or 12 U.S.C. Section 85, as amended), so that the maximum of all amounts constituting interest under applicable law, howsoever computed, shall never exceed as to any Person liable therefor such lawful maximum, and any term of this Credit Agreement or any other document referred to herein or therein which could be construed as providing for interest in excess of such lawful maximum, shall be and hereby is made expressly subject to and modified by the provisions of this paragraph. 5.5. INABILITY TO DETERMINE LIBOR RATE. In the event, prior to the commencement of any Interest Period relating to any LIBOR Rate Loan, the Administrative Agent shall determine or be notified by the Required Lenders that (a) adequate and reasonable methods do not exist for ascertaining the LIBOR Rate that would otherwise determine the rate of interest to be applicable to any LIBOR Rate Loan during any Interest Period or (b) the LIBOR Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to the Lenders of making or maintaining their LIBOR Rate Loans during such period, the Administrative Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Lenders) to the Borrower and the Lenders. In such event (i) any Loan Request or Conversion Request with respect to LIBOR Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans, (ii) each LIBOR Rate Loan will automatically, on the last day of the then current Interest Period relating thereto, become a Base Rate Loan and (iii) the obligations of the Lenders to make LIBOR Rate Loans shall be suspended until the Administrative Agent or the Required Lenders determine that the circumstances giving rise to such suspension no longer exist, whereupon the Administrative Agent or, as the case may be, the Administrative Agent upon the instruction of the Required Lenders, shall so notify the Borrower and the Lenders. 5.6. ILLEGALITY. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or in the interpretation or application thereof shall make it unlawful for any Lender to (i) make or maintain LIBOR Rate Loans, or (ii) perform its obligations in respect of any LIBOR Rate Loan, such Lender shall forthwith give notice of such circumstances to the Borrower and the other Lenders and thereupon (a) the commitment of such Lender to make LIBOR Rate Loans or convert Loans of another Type to LIBOR Rate Loans shall forthwith be suspended, and (b) such Lender's Loans then outstanding as LIBOR Rate Loans if any such Loans exist, shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such LIBOR Rate Loans or within such earlier period as may be required by law. The Borrower hereby agrees promptly to pay to the Administrative Agent for the account of such Lender, upon demand by such Lender, any additional amounts necessary to compensate such Lender for any costs incurred by such Lender in making any conversion in accordance with this ss.5.6, including any interest or fees payable by such Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Rate Loans hereunder. 5.7. ADDITIONAL COSTS, ETC. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank to any Tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, such Lender's Commitment or the LIBOR Rate Loans, or change in the basis of taxation of payments to such Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank (other than Taxes, levies, imposts. charges, fees, deductions or withholdings covered by ss.5.2.2 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank), or (b) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of an office of any Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank, or (c) impose on any Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, such Lender's Commitment, any Letters of Credit or, the LIBOR Rate Loans, and the result of any of the foregoing is: (i) to increase the cost to any Lender or the Issuing Bank of making, funding, issuing, renewing, extending or maintaining any of the LIBOR Rate Loans, such Lender's Commitment or any Letter of Credit, or (ii) to reduce the amount of principal, interest, Reimbursement Obligation or other amount payable to such Lender, the Administrative Agent or the Issuing Bank hereunder on account of such Lender's Commitment, any Letter of Credit or any of the Loans, or (iii) to require such Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank to make any payment or to forego any interest or Reimbursement Obligation or other sum payable hereunder, the amount of which payment or foregone interest or Reimbursement Obligation or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank from the Borrower hereunder, then, and in each such case, the Borrower will, upon demand made by such Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank at any time and from time to time and as often as the occasion therefor may arise, pay to such Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank such additional amounts as will be sufficient to compensate such Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank for such additional cost, reduction, payment or foregone interest or Reimbursement Obligation or other sum upon presentation by such Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank of a certificate in accordance with ss.5.9 hereof; PROVIDED that the Borrower shall not be liable to any Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank for costs incurred more than one hundred and twenty (120) days prior to receipt by the Borrower of such certificate from such Lender, the Administrative Agent, the Issuing Bank, or the Cash Management Bank, as applicable, unless such costs were incurred prior to such 120-day period solely as a result of such present or future applicable law being retroactive to a date which occurred prior to such 120-day period. 5.8. CAPITAL ADEQUACY. If after the date hereof any Lender, the Administrative Agent or the Issuing Bank determines that (i) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (ii) compliance by such Lender, the Administrative Agent or the Issuing Bank or any corporation controlling such Lender, the Administrative Agent or the Issuing Bank with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on such Lender's, the Administrative Agent's or the Issuing Bank's commitment with respect to any Loans to a level below that which such Lender, the Administrative Agent or the Issuing Bank could have achieved but for such adoption, change or compliance (taking into consideration such Lender's, the Administrative Agent's or Issuing Bank's then existing policies with respect to capital adequacy and assuming full utilization of such entity's capital) by any amount deemed by such Lender, the Administrative Agent or the Issuing Bank to be material, then such Lender, the Administrative Agent or the Issuing Bank may notify the Borrower of such fact upon presentation of a certificate in accordance with ss.5.9 hereof. To the extent that the amount of such reduction in the return on capital is not reflected in the Base Rate, the Borrower and such Lender shall thereafter attempt to negotiate in good faith, within thirty (30) days of the day on which the Borrower receives such notice, an adjustment to the compensation payable hereunder which will adequately compensate such Lender in light of these circumstances. If the Borrower and such Lender are unable to agree to such adjustment within thirty (30) days of the date on which the Borrower receives such notice, then commencing on the date of such notice (but not earlier than the effective date of any such increased capital requirement), the fees payable hereunder shall increase by an amount that will, in the Administrative Agent's, Issuing Bank's or such Lender's reasonable determination, provide adequate compensation; PROVIDED that the Borrower shall not be liable to any Lender, the Administrative Agent or the Issuing Bank for costs incurred more than one hundred and twenty (120) days prior to receipt by the Borrower of such notice. Each Lender shall allocate such cost increases among its customers in good faith and on an equitable basis. 5.9. CERTIFICATE. A certificate setting forth any additional amounts payable pursuant to ss.5.7 or ss.5.8 and a brief explanation of such amounts which are due, submitted by any Lender, the Administrative Agent, the Issuing Bank or the Cash Management Bank to the Borrower, shall be PRIMA FACIE evidence that such amounts are due and owing. 5.10. INDEMNITY. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from and against any loss, cost or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in payment of the principal amount of or any interest on any LIBOR Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Lender to banks of funds obtained by it in order to maintain its LIBOR Rate Loans, (b) default by the Borrower in making a borrowing or conversion after the Borrower has given (or are deemed to have given) a Loan Request or a Conversion Request relating thereto in accordance with ss.2.7 or (c) the making of any payment of a LIBOR Rate Loan or the making of any conversion of any such Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain any such Loans. 5.11. INTEREST AFTER DEFAULT. Immediately upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the principal amount of all outstanding Obligations and Letter of Credit Fees at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable laws. 5.12. COLLATERAL SECURITY AND GUARANTIES. Each of the Parent and the Borrower covenants and agrees that: (a) Pursuant to the terms of the Security Documents, the Obligations shall be secured by a perfected first priority security interest (subject only to Permitted Liens, including, without limitation, the Lien of the Term Loan Agent on Fixed Asset Collateral) in the Collateral; (b) If at any time the Parent or any of its Subsidiaries grants any security interest to the Term Loan Agent or any lender party to Term Loan Agreement, or any of their respective successors, assigns or transferees, on any property of the Parent or such Subsidiary or any other party, then the Parent, such Subsidiary or such other party, as the case may be, shall simultaneously grant to the Administrative Agent a security interest in such property, and such security interest shall be subject to the Intercreditor Agreement. (c) The Obligations shall also be guaranteed pursuant to the terms of the Guaranties. 6. REPRESENTATIONS AND WARRANTIES. Each of the Parent and the Borrower represents and warrants to the Lenders and the Administrative Agent as follows: 6.1. CORPORATE AUTHORITY, ETC. 6.1.1. EXISTENCE, GOOD STANDING. (a) Each of the Parent and its Subsidiaries (i) is a corporation (or similar business entity) duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, (ii) has taken all actions which, by reason of its ownership of property or carrying on of business, are required to be taken by it under the laws of any jurisdiction, wherein it owns property or carries on business, except where the failure to do so would not materially and adversely affect the Borrower and the Guarantors (taken as a whole) and (iii) has all corporate authority (or the equivalent company) power to own its property and conduct its business as now conducted and as presently contemplated. (b) Each of the Parent and its Subsidiaries has adequate power and authority and has full legal right to enter into each of the Loan Documents to which it is or is to become a party, to perform, observe and comply with all of its agreements and obligations under each of such documents, and to make all of the borrowings and obtain the extensions of credit contemplated by this Credit Agreement. 6.1.2. AUTHORIZATION. The execution and delivery by each of the Parent and its Subsidiaries of each of the Loan Documents executed and delivered on the Closing Date to which, by the terms of such document, it is a party, the performance by each of the Parent and its Subsidiaries of all of its agreements and obligations under each of such documents, and the making by the Borrower of all of the borrowings contemplated by this Credit Agreement, are within the corporate (or the equivalent company) authority of the Parent and each of its Subsidiaries, as applicable, have been duly authorized by all necessary corporate or other action on the part of the Parent and its Subsidiaries, as applicable, and do not and will not (i) except as otherwise expressly contemplated by the Loan Documents, conflict with, or result in a breach of any material term, condition or provision of, or constitute a default under or result in the creation of any mortgage, lien, pledge, charge, security interest or other encumbrance upon any of the property of the Parent or its Subsidiaries, under any agreement, trust deed, indenture, mortgage or other instrument to which the Parent or any of its Subsidiaries is a party or by which the Parent or any of its Subsidiaries or any of the property of the Parent or any of its Subsidiaries is bound, the consequences of which would have a material and adverse effect on the financial condition, assets or operations of the Borrower and the Guarantors (taken as a whole), (ii) violate or contravene any provision of any law, regulation, order, ruling or interpretation thereunder or any decree, order or judgment of any court or governmental or regulatory authority, bureau, agency or official (all as from time to time in effect and applicable to the Parent or any of its Subsidiaries) except where such violation or contravention would not materially and adversely affect the financial condition, assets or operations of the Borrower and the Guarantors (taken as a whole), (iii) require any waivers, consents or approvals by any of the creditors of the Parent or any of its Subsidiaries which have not been obtained (except when failure to do so would not materially and adversely affect the financial condition, assets or operations of the Borrower and the Guarantors, taken as a whole, (iv) in the case of the Parent and its Subsidiaries, require any consents or approvals by any shareholders or members of such Person, (except such as will be obtained on or prior to the Closing Date and will be in full force and effect on and as of the Closing Date), (v) require any approval, consent, order, authorization or license by, or giving notice to, or taking any other action with respect to, any governmental or regulatory authority or agency under any provision of any law applicable to the Parent or any of its Subsidiaries, except those actions which have been taken or will be taken prior to the Closing Date and except where failure to take such actions would not materially and adversely affect the financial condition, assets or operations of the Borrower and the Guarantors (taken as a whole), or (vi) conflict with any provision of the Governing Documents of the Parent or any Subsidiary of the Parent. 6.1.3. DELIVERY. Each of the Parent and its Subsidiaries has duly executed and delivered each of the Loan Documents to which it is a party and each of such documents is in full force and effect. 6.1.4. ENFORCEABILITY. The execution and delivery of this Credit Agreement and the other Loan Documents to which the Parent or any of its Subsidiaries is or is to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. 6.2. FINANCIAL STATEMENTS; PROJECTIONS. (a) There has been furnished to the Administrative Agent and each of the Lenders the audited consolidated balance sheet of the Parent and its Subsidiaries as at December 31, 2005, and consolidated statements of income and cash flow of the Parent and its Subsidiaries for the Fiscal Year then ended, certified by PricewaterhouseCoopers. Such balance sheet and statements of income and cash flow have been prepared in accordance with GAAP and fairly present the financial condition of the Parent and its Subsidiaries as at the close of business on the date thereof and the results of operations for the Fiscal Year then ended. There are no contingent liabilities of the Parent or any of its Subsidiaries as of such date involving material amounts, known to the officers of the Parent or the Borrower, which were not disclosed in such balance sheet and the notes related thereto. (b) There has been furnished to the Administrative Agent and each of the Lenders an unaudited consolidated balance sheet of the Parent and its Subsidiaries as at September 30, 2006, and unaudited consolidated statements of income and cash flow of the Parent and its Subsidiaries for the period(s) then ended. Such balance sheet and statements of income and cash flow have been prepared in accordance with GAAP and fairly present the financial condition of the Parent and its Subsidiaries as at the close of business on the date thereof and the results of operations for the period(s) then ended. There are no contingent liabilities of the Parent or any of its Subsidiaries as of such date involving material amounts, known to the officers of the Parent or the Borrower, which were not disclosed in such balance sheet and the notes related thereto. 0 (c) There has also been furnished to the Administrative Agent and each of the Lenders the Projections and the Business Plan, in each case, on a consolidated basis. To the knowledge of the Parent and its Subsidiaries, no facts exist that (individually or in the aggregate) would result in any material change in any of such projections (taken as a whole). The Projections and the Business Plan are based upon reasonable estimates and assumptions and reflect the reasonable estimates of the Parent and its Subsidiaries of the results of operations and other information projected therein (it being understood that such projections are not a guarantee of future performance). 6.3. SOLVENCY. As of the Closing Date and after giving effect to the Loans hereunder and the other transactions contemplated hereby: (a) the aggregate value of all properties of the Parent and its Subsidiaries, on a consolidated basis, at their present fair saleable value exceed the amount of all the probable debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of the Parent and its Subsidiaries as they become absolute and mature; (b) the present fair saleable value of the assets of the Parent and its Subsidiaries, on a consolidated basis, is not less than the amount that will be required to pay the probable liability on their debts as they become absolute and mature; (c) the Parent and its Subsidiaries will not, on a consolidated basis, have an unreasonably small capital with which to conduct their business operations as heretofore conducted; and (d) the Parent and its Subsidiaries do not, on a consolidated basis, intend to incur debts or liabilities beyond their ability to pay such debts and liabilities as they mature. 6.4. NO MATERIAL ADVERSE CHANGES, ETC. Since the Balance Sheet Date, there has occurred no material adverse change in the financial condition or business of the Parent or any of its Subsidiaries, taken as a whole. Since the Balance Sheet Date, neither the Parent nor any Subsidiary of the Parent has made any Restricted Payment (other than Restricted Payments permitted under ss.8.4). 6.5. ABSENCE OF MORTGAGES AND LIENS. Except with respect to Permitted Liens, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry or other public office, that purports to cover, affect or give notice of any present or possible future Lien on, or security interest in, any of the material assets or property of the Parent or any Subsidiary of the Parent or of any of the rights relating thereto. 1 6.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Parent and its Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others unless the failure of such possession would not have a material adverse effect on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole). Attached hereto as SCHEDULE 6.6 is a true, correct and complete list of all patents, patent applications, federally registered copyrights, trademarks, trademark applications, trade names and other intellectual property owned by the Parent or any Subsidiary of the Parent as of the Closing Date. 6.7. LITIGATION. Except as set forth in SCHEDULE 6.7 hereto, there are no actions, suits, proceedings or investigations of any kind pending, or, to the best knowledge of the Senior Management after all due investigation appropriate under the circumstances, threatened against the Parent or any of its Subsidiaries, before any court, tribunal or administrative agency or board that would be likely to, either in any case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of the Borrower and the Guarantors, taken as a whole, or materially impair the right of the Borrower and the Guarantors, taken as a whole, to carry on business substantially as now conducted by them, or that questions the validity of this Credit Agreement or any of the other Loan Documents. 6.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Except as set forth on SCHEDULE 6.8, neither the Parent nor any of its Subsidiaries is subject to any charter, partnership or other legal restriction, or any judgment, decree, order, law, statute, rule or regulation that has or is expected in the future to have a material adverse effect on the business, assets or financial condition of the Borrower or the Guarantors, taken as a whole. Except as listed on SCHEDULE 6.8 hereto, neither the Parent nor any of its Subsidiaries is a party to any contract or agreement that has or is expected, in the judgment of the Parent's or the Borrower's officers, to have any material adverse effect on the business of the Borrower and the Guarantors, taken as a whole. 6.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Parent nor any of its Subsidiaries is in violation of any provision of its Governing Documents, or, except for environmental issues more specifically dealt with in SECTION 6.19, any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could materially and adversely affect the financial condition, properties or business of the Parent and its Subsidiaries. 6.10. TAX STATUS. Except as set forth on SCHEDULE 6.10, the Parent and its Subsidiaries (i) have made or filed all federal, provincial and all material state, provincial and foreign income and all other material tax returns, reports and declarations required by any jurisdiction to which any of them is subject, (ii) have paid all material Taxes and other governmental assessments and charges imposed on them, except those being contested in good faith and by appropriate proceedings and for which the Parent and its Subsidiaries have set aside on their books reasonably adequate provisions therefor (unless foreclosure or other enforcement action has been commenced in respect thereof or any Lien has attached as security therefor, in which case such exception does not apply), and (iii) have set aside on their books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid Taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, except those being contested in good faith and as to which adequate reserves are maintained, and the officers of the Parent and the Borrower know of no basis for any such claim. 6.11. NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. 2 6.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Parent nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor is it an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. 6.13. EMPLOYEE BENEFIT PLANS. 6.13.1. IN GENERAL. Each Employee Benefit Plan and each Guaranteed Pension Plan has been maintained and operated in compliance in all material respects with applicable law including without limitation the provisions of ERISA and all Applicable Pension Legislation and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions, other than as set forth on SCHEDULE 6.13.1 attached hereto. The Parent and the Borrower have heretofore delivered to the Administrative Agent the most recently completed annual report, Form 5500, with all required attachments, and actuarial statement required to be submitted under ss.103(d) of ERISA, with respect to each Guaranteed Pension Plan. 6.13.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit Plan which is an employee welfare benefit plan within the meaning of ss.3(1) or ss.3(2)(B) of ERISA, no benefits are due unless the event giving rise to the benefit entitlement occurs prior to plan termination (except as required by Title I, Part 6 of ERISA). The Parent, the Borrower or an ERISA Affiliate, as appropriate, may terminate each such Plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) in the discretion of the Parent, the Borrower or such ERISA Affiliate without liability to any Person, other than for benefits which have accrued prior to termination. 6.13.3. GUARANTEED PENSION PLANS. Each contribution required to be made to a Guaranteed Pension Plan, whether required to be made to avoid the incurrence of an accumulated funding deficiency, the notice or lien provisions of ss.302(f) of ERISA, or otherwise, has been timely made. No waiver of an accumulated funding deficiency or extension of amortization periods has been received with respect to any Guaranteed Pension Plan and none of the Parent, the Borrower nor any ERISA Affiliate is obligated to or has posted security in connection with an amendment to a Guaranteed Pension Plan pursuant to ss.307 of ERISA or ss.401(a)(29) of the Code. No liability to the PBGC (other than required insurance premiums, all of which have been paid) has been incurred by the Parent, the Borrower or any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event, or any other event or condition which presents a material risk of termination of any Guaranteed Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed Pension Plan (which in each case occurred within twelve months of the date of this representation), and on the actuarial methods and assumptions employed for that valuation, the aggregate benefit liabilities of all such Guaranteed Pension Plans within the meaning of ss.4001 of ERISA did not exceed the aggregate value of the assets of all such Guaranteed Pension Plans. 6.13.4. MULTIEMPLOYER PLANS. None of the Parent, the Borrower nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under ss.4201 of ERISA or as a result of a sale of assets described in ss.4204 of ERISA. None of the Parent, the Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of ss.4241 or ss.4245 of ERISA or is at risk of entering reorganization or becoming insolvent, or that any Multiemployer Plan intends to terminate or has been terminated under ss.4041A of ERISA. 6.14. REGULATIONS U AND X. The proceeds of the Loans and Letters of Credit shall be used solely for the purposes specified in ss.7.11. No portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. 6.15. TRUE COPIES OF GOVERNING DOCUMENTS. The Parent and the Borrower have furnished or caused to be furnished to each of the Lenders true and complete copies of the Governing Documents (together with any amendments thereto) of the Parent and each Subsidiary of the Parent. 6.16. FISCAL YEAR. The Parent has a Fiscal Year which is the fifty-two (52) or fifty-three (53) week period ending on the Saturday closest to January 1 of each calendar year. 6.17. PERFECTION OF SECURITY INTEREST. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary or advisable, under applicable United States federal and state law, to establish and perfect the Administrative Agent's (a) first-priority Lien and security interest in the Collateral (other than the Fixed Asset Collateral) and (b) second-priority Lien and security interest in the Fixed Asset Collateral. The Collateral and the Administrative Agent's rights with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses. The Borrower and the Guarantors party to the Security Agreements are the owners of the Collateral free from any Lien, except for Permitted Liens. 6.18. SUBSIDIARIES, ETC. The Parent does not have any Subsidiaries except as set forth on SCHEDULE 6.18 hereto, as such schedule may be updated from time to time by the Borrower in accordance with ss.8.11. 6.19. ENVIRONMENTAL COMPLIANCE. With respect to the past and present condition and usage of the Real Estate and the operations conducted thereon: (a) except as disclosed on SCHEDULE 6.19(A), none of the Parent, its Subsidiaries or any operator of the Real Estate or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule, permit or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any other state, local, foreign or common law, statute, regulation, ordinance, order, decree or any other binding requirement of any Governmental Authority relating to health, safety or the environment (all of the foregoing, collectively, the "Environmental Laws"), which violation could reasonably be expected to have a material adverse effect on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Credit Agreement or the other Loan Documents; (b) (i) except as set forth on SCHEDULE 6.19(A) hereto, as of the Closing Date, neither the Parent nor any of its Subsidiaries has received notice from any third party including, without limitation, any Governmental Authority, (A) that any one of them has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B; (B) that any hazardous waste, as defined by 42 U.S.C. ss.6903(5), any hazardous substances as defined by 42 U.S.C. ss.9601(14), any pollutant or contaminant as defined by 42 U.S.C. ss.9601(33) and any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws ("Hazardous Substances") which any one of them has generated, transported or disposed of has been found at any site at which a Governmental Authority has conducted or has ordered that the Parent or any Subsidiary of the Parent conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (C) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances and (ii) except as set forth on SCHEDULE 6.19(B), as such schedule may be updated from time to time by the Borrower (subject to the prior approval of the Administrative Agent), neither the Parent nor any of its Subsidiaries has received any notices referred to in clause (i) above identifying any event or condition that could materially and adversely affect the financial condition, properties or business of the Borrower and the Guarantors, taken as a whole; (c) except as set forth on SCHEDULE 6.19(A) attached hereto: (i) no portion of the Real Estate is used for the handling, processing, storage or disposal of Hazardous Substances except in material accordance with applicable Environmental Laws; and, to the best of the Parent's and Borrower's knowledge, no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Real Estate; (ii) in the course of any activities conducted by the Parent, its Subsidiaries or operators of its properties, no Hazardous Substances have been generated or are being used on the Real Estate except in material accordance with applicable Environmental Laws; (iii) there have been no releases (i.e. any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, disposing or dumping) or threatened releases of Hazardous Substances on, upon, into or from the properties of the Parent or its Subsidiaries, which releases could reasonably be expected to have a material adverse effect on the value of any of the Real Estate or on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or the Borrower to fulfill its obligations under this Credit Agreement or the other Loan Documents; (iv) to the best of the Parent's and the Borrower's knowledge, there have been no releases on, upon, from or into any real property in the vicinity of any of the Real Estate which, through soil or groundwater contamination, may have come to be located on, and which could reasonably be expected to have a material adverse effect on the value of any of the Real Estate or adjacent properties or the environment or on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Credit Agreement or the other Loan Documents; and (v) in addition, to the best of the Parent's and the Borrower's knowledge, any Hazardous Substances that have been generated on any of the Real Estate have been transported offsite only by carriers having an identification number issued by the EPA (or the equivalent thereof in any foreign jurisdiction), treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Parent's and the Borrower's knowledge, operating in compliance with such permits and applicable Environmental Laws; (d) none of the Parent nor its Subsidiaries, any Mortgaged Property or any of the other Real Estate is subject to any applicable Environmental Law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any Governmental Authority or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or as a condition to the recording of any Mortgage or to the effectiveness of any other transactions contemplated hereby; and (e) to the best of their knowledge after due inquiry, there are listed on SCHEDULE 6.19(E), all material environmental reports relating to the Parent and its Subsidiaries and their properties and operations, copies of which have been furnished to the Administrative Agent's Special Counsel. 6.20. BANK ACCOUNTS. SCHEDULE 6.20, as such schedule may be updated from time to time by the Borrower (subject to the prior approval of the Administrative Agent), sets forth the account numbers and location of all bank accounts of the Parent and its Subsidiaries. 6.21. LABOR CONTRACTS. Except as set forth on SCHEDULE 6.21, as of the Closing Date, neither the Parent nor any of its Subsidiaries is party to any collective bargaining agreement. Except as disclosed to the Administrative Agent and the Lenders in writing, (a) neither the Parent nor any of its Subsidiaries is a party to any collective bargaining agreement and (b) there are no material grievances, disputes or controversies with any union or other organization of the Parent's or any of its Subsidiary's employees, or threats of strikes or work stoppages. 6.22. DISCLOSURE. Neither this Credit Agreement nor any of the other Loan Documents contains any untrue statement of a material fact or omits to state a material fact (known to the Parent or any of its Subsidiaries in the case of any document or information not furnished by the Parent or any of its Subsidiaries) necessary in order to make the statements herein or therein not misleading. Except as disclosed to the Administrative Agent and the Lenders in writing, there is no fact known to the Parent or any of its Subsidiaries which could reasonably be expected to have a material adverse effect on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Credit Agreement or the other Loan Documents, exclusive of effects resulting from changes in general economic conditions, legal standards or regulatory conditions. 6.23. TITLE TO PROPERTIES; LEASES. (a) Except as set forth on SCHEDULE 6.23, the Parent and its Subsidiaries own all of the assets reflected in the consolidated balance sheet of the Parent and its Subsidiaries delivered to the Administrative Agent pursuant to ss.10.23, subject to no Liens or other rights of others, except Permitted Liens. (b) The Borrower has good, marketable and indefeasible title in fee to the Mortgaged Property free and clear of all Liens except Permitted Liens. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable legal requirements in connection with the transfer of the Mortgaged Property to the Borrower have been paid. Each Mortgage when properly recorded in the appropriate records, together with any Uniform Commercial Code Financing Statements required to be filed in connection therewith, will create (a) a valid, perfected first priority Lien on the Borrower's interest in the respective Mortgaged Property, (b) valid and perfected collateral assignments of, all leases relating to such Mortgaged Property, and (c) valid and perfected security interests in all other related assets constituting Fixed Asset Collateral, all in accordance with the terms thereof, in each case subject only to any applicable Permitted Liens. All mortgage, recording, stamp, intangible or other similar taxes required to be paid by any Person under applicable legal requirements in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents have been paid. No condemnation or other material proceeding has been commenced or, to Borrower's best knowledge, is contemplated with respect to all or part of the Mortgaged Property or for the relocation of roadways providing access to the Mortgaged Property. There are no claims for payment for work, labor or materials affecting the Mortgaged Property which are or may become a Lien prior to, or of equal priority with, the Liens created by the Loan Documents. Other than as disclosed to the Administrative Agent, there are no outstanding options to purchase or rights of first refusal affecting all or any portion of the Mortgaged Property. To the best of the Borrower's knowledge, the ALTA survey delivered by Borrower with respect to each parcel of Mortgaged Property does not fail to reflect any material matter affecting the applicable Mortgaged Property or the title thereto. To the best of Borrower's knowledge, all of the improvements included in determining the appraised value of each parcel of Mortgaged Property lie wholly within the boundaries and building restriction lines of such Mortgaged Property, and no improvement on an adjoining property encroaches upon such Mortgaged Property, and no easement or other encumbrance upon the Real Estate encroaches upon any of the improvements, except in each case those insured against by the title insurance policy insuring the Lien of the applicable Mortgage. Each parcel comprising each Mortgaged Property is a separate tax lot and is not a portion of any other tax lot that is not a part of the applicable Mortgaged Property. To Borrower's knowledge, there are no pending or proposed special or other assessments for public improvements or otherwise affecting any of the Mortgaged Property, or any contemplated improvements to the Mortgaged Property that may result in such special or other assessments. 6.24. CERTAIN TRANSACTIONS. Except for arm's length transactions pursuant to which the Parent, the Borrower, any of the Guarantors or any of their Subsidiaries make payments in the ordinary course of business upon terms no less favorable than the Parent, the Borrower, the Guarantors or such Subsidiary could obtain from third parties, none of the officers, directors, or employees of the Parent, the Borrower, the Guarantors or any of their Subsidiaries is presently a party to any transaction with the Parent, the Borrower, the Guarantors or any of their Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Parent and the Borrower, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 3 6.25. FOREIGN ASSETS CONTROL REGULATIONS, ETC. None of the requesting or borrowing of the Loans, the requesting or issuance, extension or renewal of any Letters of Credit or the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. ss. 1 et seq., as amended) (the "Trading With the Enemy Act") or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the "Foreign Assets Control Regulations") or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the "Executive Order") and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore, neither the Parent nor any of its Subsidiaries or other Affiliates (a) is or will become a "blocked person" as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) engages or will engage in any dealings or transactions, or be otherwise associated, with any such "blocked person". 6.26. COMPLIANCE. The Borrower and each parcel of Mortgaged Property and the use thereof comply in all material respects with all applicable legal requirements (including with respect to parking and applicable zoning and land use laws, regulations and ordinances) or constitute permitted, preexisting conditions with respect thereto. Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority, the violation of which could reasonably be expected to have a material adverse effect on the business, assets or financial condition of the Borrower or the Guarantors, taken as a whole. In the event that all or any part of the improvements on any of the Mortgaged Property are destroyed or damaged, said improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any material zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits (provided that a casualty affecting more than 50% of the assessed value of the structure may require such relief if not then in conformity with the zoning bylaw). No legal proceedings are pending or, to the best of Borrower's knowledge, threatened with respect to the zoning of the Real Estate the consequences of which could reasonably be expected to have a material adverse effect on the business, assets or financial condition of the Borrower or the Guarantors, taken as a whole. Neither the zoning nor any other right to construct, use or operate the Real Estate is in any way dependent upon or related to any property other than the Real Estate. All material certifications, permits, licenses and approvals, including certificates of completion and occupancy permits required for the legal use, occupancy and operation of the Real Estate (collectively, the "LICENSES"), have been obtained and are in full force and effect. The use being made of the Real Estate is in conformity with the certificates of occupancy issued for the Real Estate and all other restrictions, covenants and conditions affecting the Real Estate. 6.27. CONTRACTS. There are no service, maintenance or repair contracts affecting the Mortgaged Property that are not terminable on one month's notice or less without cause and without penalty or premium. All such service, maintenance or repair contracts affecting the Real Estate have been entered into at arms-length in the ordinary course of Borrower's business and provide for the payment of fees in amounts and upon terms comparable to existing market rates. 6.28. UTILITIES AND PUBLIC ACCESS. Excluding the Bleachery Pond property, there is reasonable utility and public access to the Real Estate. 6.29. PHYSICAL CONDITION. The Real Estate is in good condition, order and repair in all material respects; there exists no structural or other material defect or damages to the Real Estate, whether latent or otherwise. The Borrower has not received notice from any insurance company or bonding company of any defect or inadequacy in the Real Estate, or any part thereof, which would materially adversely affect its insurability or cause the imposition of extraordinary premiums or charges thereon or any termination of any policy of insurance or bond. Except as may be expressly disclosed on the compilation drawing of the Mortgage Property certified to the Administrative Agent, no portion of the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards. 7. AFFIRMATIVE COVENANTS OF THE PARENT AND THE BORROWER. Each of the Parent and the Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation or Letter of Credit is outstanding or any Lender has any obligation to make any Loans or the Administrative Agent has any obligation to cause the Issuing Bank to issue, extend or renew any Letter of Credit: 7.1. PUNCTUAL PAYMENT. Each of the Parent and the Borrower will duly and punctually pay or cause to be paid when due all principal and interest on the Loans, all Reimbursement Obligations, the Fees and all other Obligations and amounts provided for in this Credit Agreement and the other Loan Documents to which it is a party and will cause to be paid any amounts owing by any of Subsidiary of the Parent, all in accordance with the terms of this Credit Agreement and such other Loan Documents. 7.2. MAINTENANCE OF OFFICE. Each of the Parent and the Borrower will maintain its chief executive office in Fall River, Massachusetts or at such other place as the Parent and the Borrower shall designate upon written notice to the Administrative Agent, where notices, presentations and demands to or upon the Parent or the Borrower in respect of the Loan Documents to which the Parent or the Borrower is a party may be given or made. 7.3. RECORDS AND ACCOUNTS. Each of the Parent and the Borrower will (i) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with, and all financial statements provided for herein shall be prepared in accordance with GAAP consistently applied; (ii) maintain adequate accounts and reserves for all taxes (including incomes taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves; and (iii) at all times, maintain independent certified public accountants as the Parent's and the Borrower's accountants which shall be satisfactory to the Administrative Agent. 7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Parent and the Borrower will deliver to each of the Lenders: (a) as soon as practicable, but in any event not later than ninety (90) days after the end of each Fiscal Year, the consolidated balance sheet of the Parent and its Subsidiaries, as at the end of such year, and the related consolidated statements of income and retained earnings and consolidated statement of cash flow for such year, each setting forth in comparative form the figures for the previous Fiscal Year and all such consolidated financial statements to be in reasonable detail, prepared in accordance with GAAP consistently applied, and certified without qualification and without expression of uncertainty as to the ability of the Parent and its Subsidiaries to continue as going concerns, by PricewaterhouseCoopers or by other independent certified public accountants satisfactory to the Administrative Agent (PROVIDED, that for the 2006 Fiscal Year only, such certification may be issued with a going concern qualification if such qualification is reasonable and necessary in the reasonable judgment of the independent certified public accountant), together with (i) a written statement from such accountants to the effect that they have read a copy of this Credit Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; PROVIDED that such accountants shall not be liable to the Lenders for failure to obtain knowledge of any Default or Event of Default; and (ii) a copy of their accountants' management letter (if any) for such Fiscal Year; (b) as soon as practicable, but in any event within forty-five (45) days after the end of each Fiscal Quarter, unaudited quarterly consolidated and consolidating financial statements of the Parent and its Subsidiaries for such Fiscal Quarter (i.e., the consolidated and consolidating balance sheet of the Parent and its Subsidiaries, as at the end of such Fiscal Quarter, and the related consolidated and consolidating statements of income and retained earnings and consolidated and consolidating statement of cash flow for such Fiscal Quarter) and the unaudited consolidated and consolidating financial statements of the Parent and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, each prepared in accordance with GAAP consistently applied, together with a certification by the principal financial or accounting officer(s) of the Parent that the information contained in such financial statements fairly presents in all material respects the financial condition of the Parent and its Subsidiaries (as a whole) on the date thereof (subject to year-end adjustments); (c) as soon as practicable, but in any event within thirty (30) days after the end of each month in each Fiscal Year, unaudited monthly consolidated and consolidating financial statements of Parent and its Subsidiaries for such month (i.e., the consolidated and consolidating balance sheet of the Parent and its Subsidiaries, as at the end of such month, and the related consolidated and consolidating statements of income and retained earnings and consolidated and consolidating statement of cash flow for such month) and the unaudited consolidated and consolidating financial statements of the Parent and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, each, prepared in accordance with GAAP consistently applied, together with a certification by the principal financial or accounting officer(s) of the Parent that the information contained in such financial statements fairly presents in all material respects the financial condition of the Parent and its Subsidiaries (as a whole) on the date thereof (subject to year-end adjustments); (d) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement certified by the principal financial or accounting officer(s) of the Parent in substantially the form of EXHIBIT B hereto (a "Compliance Certificate") (i) setting forth in reasonable detail computations evidencing compliance with the covenants contained in ss.9 and (if applicable) reconciliations to reflect changes in GAAP since the Balance Sheet Date and (ii) stating that such officer(s) has caused this Credit Agreement to be reviewed and has no knowledge of any Default or Event of Default during such Fiscal Quarter or at the end of such year, or if such officer(s) has such knowledge, specifying each Default or Event of Default and the nature thereof; (e) as soon as available and in any event no later than within fifteen (15) days after the end of each calendar month, (i) a Collateral Update Certificate, (ii) an Accounts Receivable/Loan Reconciliation Report, (iii) a summary of inventory by type and location, (v) an accounts receivable aging report, and (iv) such other information relating to the Collateral as the Administrative Agent shall reasonably request, in each case, accompanied by such supporting detail and documentation as the Administrative Agent shall reasonably request; (f) as soon as available and in any event no later than 1:00 p.m. (Boston time) on Tuesday of each week (or, if such Tuesday is not a Business Day or if the preceding Monday is not a Business Day, in each case, on Wednesday of such week) (or with greater frequency as the Administrative Agent may request), a Borrowing Base Certificate with respect to the Collateral of the Borrower as of the close of business on the previous Saturday (or, if such day is not a Business Day, on the preceding Business Day), together with such other information relating to the Collateral as the Administrative Agent shall reasonably request, and accompanied by such supporting detail and documentation as the Administrative Agent shall reasonably request; (g) not later than December 31st of each calendar year, the annual business plan of the Parent and its Subsidiaries for the succeeding Fiscal Year on a monthly basis in reasonable detail, including projected consolidated balance sheets, statements of income and retained earnings and cash flow statements of the Parent and its Subsidiaries for the succeeding Fiscal Year on a monthly basis, in each case in the same format as the audited balance sheet, statement of income and retained earnings and cash flow statement respectively; (h) promptly after the sending or filing thereof, copies of all reports which the Parent or any Subsidiary of the Parent sends to any of its security holders, and copies of all reports and registration statements which the Parent or any Subsidiary of the Parent files with the Securities and Exchange Commission or any national securities exchange (including, without limitation, all 10-K, 10-Q and 8-K reports), which reports are required to be sent to security holders or so filed by law or by regulation or under the terms of the Parent's listing agreement with NASDAQ or any other stock exchange; (i) from time to time such other financial data and information (including accountants' management letters) as the Administrative Agent or any Lender may reasonably request; (j) simultaneously with the delivery of the financial statements referred to in subsection (c) above, a Compliance Certificate setting forth in reasonable detail computations evidencing compliance with the financial covenant contained in ss.9; (k) promptly after delivery or receipt thereof, copies of all notices and other written communications delivered or received by the Parent or any of its Subsidiaries in connection with the Term Loans; (l) [intentionally omitted]; (m) on Wednesday of each week, a comparison of actual results for the immediately prior one week period to the previously projected results for such one week period as set forth in the Projections; and (n) within five (5) Business Days after the end of each month, updated 13-week projections reflecting any changes to the previously provided Projections. Without limiting the generality of the foregoing, such projections shall detail, on a weekly basis, the projected outstanding amount of Revolving Loans and the Maximum Drawing Amount for all Letters of Credit for such period. 7.5. NOTICES. 7.5.1. DEFAULTS. The Parent and the Borrower will promptly notify the Administrative Agent in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice to the Parent or its Subsidiaries or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Credit Agreement or any other note, evidence of indebtedness, indenture or other obligation for borrowed money in excess of $500,000 to which or with respect to which the Parent or any of its Subsidiaries is a party or obligor, whether as principal, guarantor, surety or otherwise, the Parent shall forthwith give written notice thereof to the Administrative Agent, describing the notice or action and the nature of the claimed default. The Borrower shall promptly notify the Administrative Agent in writing of the occurrence of any default or event of default under the Term Loan Agreement, stating the nature of such default or event of default. 7.5.2. NOTICE OF LITIGATION AND JUDGMENTS. The Parent and the Borrower will give notice to the Administrative Agent in writing within fifteen (15) days of Senior Management becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Parent or any of its Subsidiaries or to which the Parent or any of its Subsidiaries is or becomes a party involving (i) an uninsured claim against the Parent or any of its Subsidiaries that would reasonably be expected to result in damages of more than $1,000,000 against the Parent or any of its Subsidiaries or have a material adverse effect on the Borrower and the Guarantors taken as a whole or (ii) any litigation proceeding against Persons with which the Parent or any of its Subsidiaries has a business relationship which is likely to materially and adversely affect the business, financial condition, assets or operations of the Borrower and the Guarantors (taken as a whole) and stating the nature and status of such litigation or proceedings. The Parent will give notice to the Administrative Agent, in writing, in form and detail satisfactory to the Administrative Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against the Parent or any of its Subsidiaries in an amount in excess of $1,000,000. 7.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Parent and the Borrower will, immediately upon becoming aware thereof, notify the Administrative Agent and each of the Lenders in writing of any setoff, claims (including, with respect to the Real Estate, environmental claims), withholdings or other defenses in amounts greater than $250,000 to which any of the Collateral, or the Administrative Agent's rights with respect to the Collateral, are subject. 7.5.4. NOTICES CONCERNING INVENTORY COLLATERAL. The Parent and the Borrower shall provide to the Administrative Agent prompt notice of (a) any quarterly physical count of the Parent's or any of its Subsidiaries' inventory, together with a copy of the results thereof certified by the Parent or such Subsidiary, (b) any determination by the Parent or any of its Subsidiaries that the inventory levels of the Parent or such Subsidiary are not adequate to meet the sales projections of the Parent or such Subsidiary, and (c) any failure of the Parent or any of its Subsidiaries to pay rent at any leased location, which failure continues for more than ten (10) days following the day on which such rent is due and payable by the Parent or such Subsidiary. 7.5.5. NOTIFICATION OF ADDITIONAL INTELLECTUAL PROPERTY RIGHTS. Within ten (10) days of the end of each Fiscal Quarter, the Parent and the Borrower will (a) notify the Administrative Agent in writing of (i) any patents, patent applications, patent application disclosures filed with any patent office during such Fiscal Quarter or which the intellectual property committee of the Parent or such Subsidiary has approved for filing during such Fiscal Quarter as a patent application, registered copyrights or mask works registered during such Fiscal Quarter, applications for registration of copyrights or mask works filed during such Fiscal Quarter, trademark and service mark registrations during such Fiscal Quarter, trademark and service mark registration applications filed during such Fiscal Quarter, trademarks, service marks and trade names for which the intellectual property committee of the Parent or such Subsidiary has approved filing trademark registration applications during such Fiscal Quarter, all of the foregoing whether a foreign or United States right and whether owned by the Parent or such Subsidiary, to the extent not listed on SCHEDULE 6.6, (ii) the abandonment of any of the foregoing during such Fiscal Quarter and (b) deliver to the Administrative Agent (i) a list of the fifty (50) most valuable copyrights of the Parent and its Subsidiaries as of the end of such Fiscal Quarter (based on the revenue derived therefrom) and (ii) evidence that such fifty (50) copyrights have been registered with the United States Copyright Office, or applications regarding the same have been filed with the United States Copyright Office. 7.5.6. ENVIRONMENTAL EVENTS. The Parent and the Borrower will promptly give notice to the Administrative Agent and each of the Lenders (a) of any violation of any Environmental Law that the Parent or any of its Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any Governmental Authority and (b) upon Senior Management becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, of any Governmental Authority that, in the case of clauses (a) or (b) above, could have a material and adverse affect on the financial position, business, operations, or affairs of the Borrower and the Guarantors (taken as a whole). 7.5.7. NOTIFICATION REGARDING THE REAL PROPERTY. The Borrower will promptly give notice to the Administrative Agent and each of the Lenders of receipt or knowledge of any notice or correspondence by a Governmental Authority concerning the Real Estate along with a copy of any such notice or correspondence by the Governmental Authority, including, but not limited to any notice of casualty loss and eminent domain proceedings. 7.6. LEGAL EXISTENCE; MAINTENANCE OF PROPERTIES. (a) Except as permitted by ss.8.5, the Parent and the Borrower will do and will cause each of their Subsidiaries to do all things necessary to (i) in the case of each of the Parent and the Borrower, maintain in full force and effect its legal existence and good standing under the laws of its jurisdiction of organization or incorporation, (ii) in the case of each of their Subsidiaries (excluding the Borrower), maintain in full force and effect its legal existence and good standing under the laws of its jurisdiction of organization or incorporation except where the failure to do so would not have a material adverse affect on the financial condition, properties or business of the Borrower and the Guarantors, taken as a whole, (iii) maintain its qualification to do business in each state or other jurisdiction in which the failure to do so would have a material adverse effect on the condition, financial or otherwise, of the Borrower and the Guarantors (taken as a whole), and (iv) maintain all of its rights and franchises, except where the failure to maintain such right or franchise would not have a material adverse effect on the conduct of the business of the Borrower and the Guarantors, taken as a whole. (b) Each of the Parent and the Borrower (i) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of the Parent's business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Parent and the Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, and (iii) will, and will cause each of its Subsidiaries to, continue to engage primarily in the businesses now conducted by them and in related or complementary businesses; PROVIDED that nothing in this ss.7.6(b) shall prevent either the Parent or the Borrower from discontinuing the operation and maintenance of any of its properties or any of those of its Subsidiaries if such discontinuance is, in the judgment of the Parent and the Borrower, desirable in the conduct of its or their business and that do not in the aggregate materially adversely affect the business of the Parent and its Subsidiaries on consolidated basis. 7.7. INSURANCE. Each of the Parent and the Borrower will and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent and in accordance with the terms of the Security Documents. Each of the Parent and the Borrower will, and will cause each of its Subsidiaries to, maintain insurance, in form, substance and amounts satisfactory to the Administrative Agent, on the Mortgaged Properties in accordance with the terms of the Mortgages. 7.8. TAXES. Each of the Parent and the Borrower will, and will cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all Taxes, assessments and other governmental charges imposed upon it and its real properties, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a Lien or charge upon any of its property; PROVIDED that any such Tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Parent, the Borrower or such Subsidiary shall have set aside on its books adequate reserves with respect thereto; and PROVIDED FURTHER that the Parent and each Subsidiary of the Parent will pay all such Taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose or otherwise enforce any Lien that may have attached as security therefor. 7.9. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. Each of the Parent and the Borrower will, and will cause each of its Subsidiaries to, comply with (i) the applicable laws and regulations wherever its business is conducted, including all environmental laws, (ii) the provisions of its Governing Documents, (iii) all agreements and instruments by which it or any of its properties may be bound and (iv) all applicable decrees, orders, and judgments, PROVIDED, that in each case, such compliance shall be required by this Credit Agreement only where noncompliance with ss.ss.7.9(i)-(iv) would have a material adverse effect on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of either the Parent or the Borrower to fulfill its obligations under this Credit Agreement or the other Loan Documents. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government or any central bank or other fiscal or monetary authority shall become necessary or required in order that the Parent, the Borrower or any of their Subsidiaries may fulfill any of their obligations hereunder or any of the other Loan Documents to which the Parent, the Borrower or such Subsidiary is a party, the Parent and the Borrower will, or (as the case may be) will cause such Subsidiary to, promptly take or cause to be taken all reasonable steps within the power of the Parent, the Borrower or such Subsidiary to obtain such authorization, consent, approval, permit or license, and upon request of the Administrative Agent, to furnish the Administrative Agent and the Lenders with evidence thereof. 7.10. EMPLOYEE BENEFIT PLANS. Each of the Parent and the Borrower will (i) promptly upon filing (if required by applicable law) the same with the Department of Labor or Internal Revenue Service upon request of the Administrative Agent, furnish to the Administrative Agent a copy of the most recent actuarial statement required to be submitted under ss.103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish to the Administrative Agent any notice, report or demand sent or received in respect of a Guaranteed Pension Plan under ss.ss.302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under ss.ss.4041A, 4202, 4219, 4242, or 4245 of ERISA. 7.11. USE OF PROCEEDS. The proceeds of the Loans and Letters of Credit contemplated to be advanced or made available to the Borrower shall be used solely for working capital and general business purposes, subject to the restrictions set forth in this Credit Agreement. 7.12. CERTAIN CHANGES. Each of the Parent and the Borrower shall notify the Administrative Agent, in writing, not less than thirty (30) days prior (i) to any change in its chief executive office, its name or the type of its organization, (ii) the acquisition of any real estate pursuant to ss.7.16 or (iii) the acquisition of any asset in any jurisdiction other than those jurisdictions specified on the Parent's and the Borrower's Perfection Certificate. 7.13. CONDUCT OF BUSINESS. Except as permitted by ss.8.5, each of the Parent and the Borrower will and will cause their Subsidiaries to continue to engage primarily in the businesses engaged in by the Parent, the Borrower and their Subsidiaries on the Closing Date, or such businesses as are reasonably related or complementary to the businesses engaged in by the Parent, the Borrower and their Subsidiaries on the Closing Date. 7.14. FURTHER ASSURANCES. Each of the Parent and the Borrower will, and will cause each of its Subsidiaries to, cooperate with the Lenders and the Administrative Agent and execute such further instruments and documents as the Lenders or the Administrative Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Credit Agreement and the other Loan Documents. 7.15. INSPECTION OF PROPERTIES AND BOOKS, ETC. 7.15.1. GENERAL. The Parent and the Borrower shall permit the Lenders, through the Administrative Agent or any of the Lenders' other designated representatives, at the Borrower's expense (such expense to include a $850 per day field examination charge plus all out of pocket expenses related thereto), to visit and inspect any of the properties of the Parent or any of its Subsidiaries, to examine the books of account of the Parent and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of the Parent and its Subsidiaries with, and to be advised as to the same by, its and their officers, and to conduct examinations and verifications (whether by internal commercial finance examiners or independent auditors satisfactory to the Administrative Agent (which may be affiliated with one or more of the Lenders)) of all components included in the Borrowing Base, all at such reasonable times and intervals and with prior notice as the Administrative Agent or any Lender may reasonably request, which report shall indicate whether or not the information set forth in the Borrowing Base Certificate most recently delivered is accurate and complete in all material respects based upon a review by such auditors of the Accounts Receivable (including verification with respect to the amount, aging, identity and credit of the respective account debtors and the billing practices of the Borrower) and inventory (including verification as to the value, location and respective types). The Administrative Agent may at the Borrower's expense, participate in or observe any physical count of any inventory of the Parent or such Subsidiary included in the Collateral. 7.15.2. APPRAISALS. At the request of the Administrative Agent or the Required Lenders, which requests may be made annually (or with such other frequency as the Administrative Agent shall request upon the occurrence and continuation of a Default or an Event of Default), the Parent and the Borrower will obtain and deliver to the Administrative Agent and the Lenders appraisal reports in form and substance and from appraisers satisfactory to the Administrative Agent, stating (a) the then current fair market, Net Orderly Liquidation Value and forced liquidation values of all or any portion of the inventory, equipment or real estate owned by the Parent or any of its Subsidiaries and (b) the then current business value of the Parent and its Subsidiaries. Each such appraisal shall be conducted and made at the expense of the Borrower. Notwithstanding the foregoing, prior to an Event of Default, the Administrative Agent and the Required Lenders shall not have the right to request such annual appraisals of equipment or Real Estate if the Term Loan Agent has (a) requested and received such annual appraisals and (b) copies of such annual appraisals have been provided to the Administrative Agent. 7.15.3. COMMUNICATIONS WITH ACCOUNTANTS. Upon the Administrative Agent's reasonable request, each of the Parent and the Borrower will request that the Parent's and the Borrower's independent certified public accountants communicate with the Administrative Agent, and, if accompanied by the Administrative Agent, the Lenders, with respect to the financial condition of the Parent or any of its Subsidiaries; PROVIDED that the Parent and the Borrower shall participate in all such communications. 7.15.4. ENVIRONMENTAL ASSESSMENTS. No more frequently than once during each calendar year (or with such other frequency as the Administrative Agent shall request upon the occurrence and continuation of a Default or an Event of Default), the Administrative Agent may, for the purpose of assessing and ensuring the value of any Mortgaged Property, obtain one or more environmental assessments or audits of such Mortgaged Property prepared by a hydrogeologist, an independent engineer or other qualified consultant or expert approved by the Administrative Agent to evaluate or confirm (a) whether any Hazardous Substances are present in the soil or water at such Mortgaged Property and (b) whether the use and operation of such Mortgaged Property complies with all Environmental Laws. Environmental assessments may include without limitation detailed visual inspections of such Mortgaged Property including any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, surface water samples and ground water samples, as well as such other investigations or analyses as the Administrative Agent deems appropriate. All such environmental assessments shall be conducted and made at the expense of the Borrower. Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing, prior to the repayment in full of the Term Loans, the Administrative Agent shall not have the right to request such annual environmental assessments so long as any copies of such annual environmental assessments requested and received by the Term Loan Agent have been provided to the Administrative Agent. 7.16. ADDITIONAL MORTGAGED PROPERTY. At any time following the Closing Date, upon request of the Administrative Agent, each of the Parent and the Borrower shall, and shall cause each of its Subsidiaries to, forthwith (but in any event within sixty (60) days following any such request therefor) deliver to the Administrative Agent for the benefit of the Lenders a fully executed mortgage or deed of trust over any or all parcels of Real Estate acquired or leased by the Parent, the Borrower or such Subsidiary after the Closing Date, each of which shall be in form and substance satisfactory to the Administrative Agent and shall be deemed to be a Security Document hereunder, together with such title insurance policies, surveys, environmental site assessments, evidences of insurance with the Administrative Agent named as loss payee and additional insured, legal opinions and other documents and certificates with respect to such Real Estate as the Administrative Agent may reasonably request. Each of the Parent and the Borrower further agrees that, following the taking of such actions with respect to such Real Estate, the Administrative Agent shall have, for the benefit of the Lenders, a valid and enforceable first priority (subject to the Lien of the Term Loan Agent on Fixed Asset Collateral) mortgage or deed of trust over such Real Estate, free and clear of all defects and encumbrances except for Permitted Liens. 7.17. BANK ACCOUNTS. 7.17.1. GENERAL. (a) Each of the Parent and the Borrower will, and will cause each of their Subsidiaries to, maintain their principal accounts for operation, administration, cash management and other deposit accounts for the conduct of the Parent's, the Borrower's and their Subsidiaries' business with the Cash Management Bank. (b) Without limiting the generality of (a) above, each of the Parent and the Borrower will, and will cause each of its Subsidiaries to, (i) establish a depository account with the Cash Management Bank (the "Concentration Account") which will be structured to assure that all amounts in such account shall only be applied in accordance with ss.ss.2.11.2 and 2.12, (ii) instruct all account debtors and other obligors of the Parent, the Borrower or any Subsidiary of the Parent, pursuant to notices of assignment and instruction letters in form and substance satisfactory to the Administrative Agent, to remit all cash proceeds of Accounts Receivable to local depository accounts maintained by the Parent, the Borrower or any Subsidiary of the Parent ("Local Accounts") with financial institutions which have entered into agency account agreements and, if applicable, lock box agreements (collectively, "Agency Account Agreements") in form and substance satisfactory to the Administrative Agent, or the Concentration Account, (iii) direct all depository institutions with Local Accounts to cause all funds held in each such Local Account to be transferred no less frequently than once each week to, and only to, the Concentration Account; PROVIDED that the Parent and its Subsidiaries may maintain an aggregate amount of no more than $150,000 in such Local Accounts, which amount shall not be subject to such transfers, (iv) at all times, subject to the Intercreditor Agreement, ensure that immediately upon the Parent's, the Borrower's or any of their Subsidiaries' receipt of any funds constituting cash proceeds of any Collateral, all such amounts shall have been deposited in a Local Account or the Concentration Account. Subject to the Intercreditor Agreement, the Borrower hereby agrees that all amounts received by the Administrative Agent in the Concentration Account will be the sole and exclusive property of the Administrative Agent, for the accounts of the applicable Lenders and the Administrative Agent, to be applied in accordance with ss.2.11 or ss.2.12 as applicable 7.18. DOMESTIC SUBSIDIARIES. The Parent shall cause each Domestic Subsidiary of the Parent (other than the Borrower) to be a Guarantor at all times. 7.19. [INTENTIONALLY OMITTED]. 7.20. FINANCIAL CONSULTANT. The Parent and the Borrower shall continue to retain, at the Borrower's and Guarantors' expense, Alvarez & Marsal (the "Financial Consultant") on terms and conditions satisfactory to the Administrative Agent for a period of not less than three (3) months following the Closing Date, as its financial consultant. Parent acknowledges that the Financial Consultant has been chosen solely by Parent and the Financial Consultant will be an agent only of Parent, and not of the Administrative Agent or any Lender, in all respects. At any time and from time to time, the Borrower and the Guarantors shall make the Financial Consultant, its officers and other consultants of the Parent and its Subsidiaries available, whether by telephone or in person, to review and discuss the Parent's and its Subsidiaries' financial condition; PROVIDED that the Parent shall have the option to participate in such communications. 8. NEGATIVE COVENANTS OF THE PARENT AND THE BORROWER. Each of the Parent and the Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation or Letter of Credit is outstanding or any Lender has any obligation to make any Loans or the Administrative Agent has any obligations to cause the Issuing Bank to issue, extend or renew any Letter of Credit: 8.1. INVESTMENTS. Neither the Parent nor the Borrower will or will permit any of their Subsidiaries to make any Investment in any Person, except for Investments which consist of: (a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Parent or any Subsidiary of the Parent; (b) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $100,000,000; (c) securities commonly known as "COMMERCIAL PAPER" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" if rated by Moody's, and not less than "A 1" if rated by S&P; (d) overnight Investments in money market funds with portfolios comprised of the items described in clauses (a) through (c) above; (e) Investments consisting of the Guaranties; (f) Investments existing on the date hereof and listed on SCHEDULE 8.1; (g) Investments with respect to Indebtedness permitted by ss.8.2(d) so long as such entities remain Subsidiaries of the Borrower; (h) Investments (i) by the Parent in Domestic Subsidiaries of the Parent and (ii) by the Borrower in Domestic Subsidiaries of the Borrower; (i) Investments consisting of loans and advances to employees for moving, entertainment, travel, housing and other similar expenses in the ordinary course of business not to exceed $250,000 in the aggregate at any time outstanding; and (j) Notes receivable and securities received in connection with the insolvency or inability to pay of any of the Parent's or the Borrower's account debtors in an aggregate amount not to exceed at any time the greater of (i) $3,000,000 and (ii) ten percent (10%) of the outstanding face amount of the Borrower's Accounts Receivable at such time; PROVIDED, HOWEVER, such Investments shall be permitted hereunder only to the extent such Investments (if held by the Parent or any Domestic Subsidiary of the Parent) are subject to the first priority perfected Lien in favor of the Administrative Agent securing the Obligations free of all Liens other than Permitted Liens. 8.2. RESTRICTIONS ON INDEBTEDNESS. The Parent and the Borrower will not, and will not permit any of their Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (a) Indebtedness created hereunder; (b) Indebtedness existing on the Closing Date which is set forth in SCHEDULE 8.2; (c) other Indebtedness incurred after the Closing Date (determined on a consolidated basis without duplication in accordance with GAAP) in respect of Capitalized Leases and/or secured by Liens permitted under ss.8.3(h), in an aggregate principal amount at any time outstanding not in excess of $2,500,000; (d) Indebtedness of a Domestic Subsidiary of the Borrower to the Borrower; PROVIDED that, in each case, such Indebtedness is evidenced by a note which is pledged to the Administrative Agent; (e) Indebtedness of the Parent or any Subsidiary of the Parent in respect of Derivative Agreements; (f) Indebtedness of the Parent and its Subsidiaries consisting of (i) the Term Loan Obligations; provided that the principal amount thereof does not exceed the Priority Term Loan Debt and (ii) any refinancings thereof; PROVIDED that the principal amount of such Indebtedness is not increased at the time of such refinancing and such refinancing and the intercreditor arrangements with the holders of such Indebtedness are otherwise on terms and conditions satisfactory to the Administrative Agent; and (g) Indebtedness of the Parent and its Subsidiaries consisting of the financing of insurance premiums incurred in the ordinary course of business. 8.3. RESTRICTIONS ON LIENS. 8.3.1. PERMITTED LIENS. Neither the Parent nor the Borrower will, nor will they permit any of their Subsidiaries to, create, incur, assume or permit to exist any Lien on any of its property or assets of any character now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except (the following being called "PERMITTED LIENS"): (a) Liens created hereunder or under the other Loan Documents; (b) any Lien on any property or asset of the Parent or any Subsidiary of the Parent existing on the date hereof and set forth in SCHEDULE 8.3.1, PROVIDED that (i) such Lien shall not apply to any other property or asset of the Parent or any Subsidiary of the Parent and (ii) such Lien shall secure only those obligations which it secures on the date hereof; (c) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet delinquent or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Parent and Subsidiaries of the Parent in accordance with GAAP and which reserves shall be acceptable to the Administrative Agent; (d) landlords', carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens, and vendors' Liens imposed by statute or common law not securing the repayment of Indebtedness, arising in the ordinary course of business which are not overdue for a period of more than sixty (60) days or which are being contested in good faith and by appropriate proceedings and Liens securing judgments (including, without limitation, pre-judgment attachments); (e) pledges or deposits under worker's compensation, unemployment insurance and other social security legislation and pledges or deposits to secure the performance of bids, tenders, trade contracts (other than for borrowed money), leases (other than Capitalized Leases), utility purchase obligations, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Real Property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not, in the aggregate, materially detract from the value of the Real Property of the Parent or any Subsidiary of the Parent or materially interfere with the ordinary conduct of the business of the Parent or any Subsidiary of the Parent; (g) Liens consisting of bankers' liens and rights of setoff, in each case, arising by operation of law, and Liens on documents presented in letter of credit drawings; (h) Liens on Capital Assets, acquired, constructed or improved by the Parent or any Subsidiary of the Parent, PROVIDED that (i) such Liens secure Indebtedness (including Indebtedness with respect to Capitalized Leases) permitted by ss.8.2(c), (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within ninety 90 days after such acquisition or the completion of such construction or improvement or were in effect at the time the Parent or a Subsidiary of the Parent acquired the assets or stock, (iii) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets, and (iv) such security interests shall not apply to any other property or assets of the Parent or its Subsidiaries; (i) Other nonconsensual Liens; PROVIDED that the aggregate amount of obligations secured thereby does not exceed $100,000 at any time; (j) Liens granted to the Term Loan Agent under the Term Loan Documents to secure the Indebtedness permitted under ss.8.2(f), and any Liens securing any permitted refinancing thereof; and (k) Liens on insurance policies and the proceeds thereof pursuant to insurance premium financing arrangements permitted under ss.8.2(g). 8.3.2. RESTRICTIONS ON NEGATIVE PLEDGES AND UPSTREAM LIMITATIONS. The Parent and the Borrower will not, nor will they permit any of their Subsidiaries to (a) enter into or permit to exist any arrangement or agreement (excluding this Credit Agreement, the other Loan Documents and the Term Loan Documents) which directly or indirectly prohibits the Parent or any of its Subsidiaries from creating, assuming or incurring any Lien upon its properties, revenues or assets or those of any of its Subsidiaries whether now owned or hereafter acquired, or (b) enter into any agreement, contract or arrangement (excluding this Credit Agreement, the other Loan Documents and the Term Loan Documents) restricting the ability of any Subsidiary of the Parent and the Borrower to pay or make dividends or distributions in cash or kind to the Parent or the Borrower, to make loans, advances or other payments of whatsoever nature to the Parent or the Borrower, or to make transfers or distributions of all or any part of its assets to the Parent or the Borrower; in each case other than customary anti-assignment provisions contained in leases and licensing agreements entered into by the Parent or any Subsidiary in the ordinary course of its business, but only if consents by the counterparty thereto have been obtained by the Parent or its Subsidiaries in form and substance satisfactory to the Administrative Agent. 8.4. RESTRICTED PAYMENTS. The Parent, the Borrower and their Subsidiaries will not make any Restricted Payments other than Distributions to the Parent from a Subsidiary of the Parent or to the Borrower from a Subsidiary of the Borrower. 8.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS. 8.5.1. MERGERS AND ACQUISITIONS. Neither the Parent nor the Borrower will, or will permit any of their Subsidiaries to, become a party to any merger or consolidation, or agree to or effect any asset acquisition or stock acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices) except for (i) the merger or consolidation of one or more of the Subsidiaries of the Borrower with and into the Borrower, (ii) the merger or consolidation of two or more Subsidiaries of the Borrower. 8.5.2. DISPOSITION OF ASSETS. Neither the Parent nor the Borrower will, or will permit any of their Subsidiaries to, become a party to or agree to or effect any disposition of any assets, other than (i) the sale of inventory, the licensing of intellectual property and the disposition of obsolete assets, in each case in the ordinary course of business consistent with past practices and (ii) prior to the indefeasible payment in full of the Term Loan Obligations, the sale of Fixed Asset Collateral so long as, (x) the sale of such Real Estate is permitted under the Term Loan Agreement and (y) all of the net proceeds from such sale are applied in accordance with the Term Loan Agreement as in effect on the date hereof. 8.6. SALE AND LEASEBACK. Neither the Parent nor the Borrower will, or will permit any of their Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Parent or any Subs idiary of the Parent shall sell or transfer any property owned by it in order then or thereafter to lease such property (other than short-term or transitional leases entered into in connection with the disposition of any Real Estate and/or consolidation of operations) that Parent or any Subsidiary of the Parent intends to use for substantially the same purpose as the property being sold or transferred. 8.7. CHANGE OF FISCAL YEAR. The Parent will not at any time change its Fiscal Year without the prior written consent of the Required Lenders. 8.8. EMPLOYEE BENEFIT PLANS. Neither the Parent, the Borrower nor any ERISA Affiliate will: (a) engage in any "prohibited transaction" within the meaning of ss.406 of ERISA or ss.4975 of the Code which could result in a material liability for the Parent or any of its Subsidiaries; or (b) permit any Guaranteed Pension Plan to incur an "accumulated funding deficiency", as such term is defined in ss.302 of ERISA, whether or not such deficiency is or may be waived; or (c) fail to contribute to any Guaranteed Pension Plan to an extent which, or terminate any Guaranteed Pension Plan in a manner which, could result in the imposition of a Lien or encumbrance on the assets of the Parent or any of its Subsidiaries pursuant to ss.302(f) or ss.4068 of ERISA; or (d) amend any Guaranteed Pension Plan in circumstances requiring the posting of security pursuant to ss.307 of ERISA or ss.401(a)(29) of the Code. 8.9. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Parent and the Borrower will not, and will not permit any of their Subsidiaries to, (a) use any of the Real Estate or any portion thereof for the handling, processing, storage or disposal of Hazardous Substances, (b) cause or permit to be located on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances, (c) generate any Hazardous Substances on any of the Real Estate, (d) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause a release (i.e. releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) or threatened release of Hazardous Substances on, upon or into the Real Estate or (e) otherwise conduct any activity at any Real Estate or use any Real Estate in any manner that would violate any Environmental Law or bring such Real Estate in violation of any Environmental Law, unless, in each case, such violation, use, condition, generation or activity could not reasonably be expected to have a material adverse effect on the value of such Real Estate or the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent, the Borrower or any of their Subsidiaries to fulfill its obligations under this Credit Agreement or the other Loan Documents. 8.10. CHANGE IN TERMS OF GOVERNING DOCUMENTS. The Parent and the Borrower shall not effect or permit any change in or amendment to the Governing Documents of the Parent or any of its Subsidiaries, which could reasonably be expected to adversely affect the Lenders. 8.11. CREATION OF SUBSIDIARIES. Neither the Parent nor the Borrower shall, or shall permit any of their `Subsidiaries to, create or permit to exist any Subsidiary unless (a) one hundred percent (100%) of the Capital Stock or other equity interests of such Subsidiary are owned by a Guarantor or the Borrower, (b) prior to the formation of such Subsidiary, the Parent and the Borrower shall notify the Administrative Agent and the Lenders thereof in writing and deliver to the Administrative Agent an updated SCHEDULE 6.18, (c) contemporaneously with the formation of any Domestic Subsidiary, the Parent and the Borrower shall, and shall cause each of their Subsidiaries to, (i) take all steps as may be necessary or advisable in the opinion of the Administrative Agent to pledge to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, on a perfected, first-priority basis, all of the Capital Stock or other equity interests of such Domestic Subsidiary pursuant to a pledge agreement in form and substance satisfactory to the Administrative Agent, which such pledge agreement shall be a Pledge Agreement and a Security Document hereunder, (ii) cause any such Domestic Subsidiary to guaranty all of the Obligations hereunder pursuant to a guaranty in form and substance satisfactory to the Administrative Agent, which such guaranty shall be a Guaranty and a Security Document hereunder, (iii) cause any such Subsidiary to take all steps as may be necessary or advisable in the opinion of the Administrative Agent to grant to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, a first priority (subject to the Lien of the Term Loan Agent on Fixed Asset Collateral), perfected security interest in substantially all of its assets as collateral security for such Guaranty, pursuant to security documents, mortgages, pledges and other documents in form and substance satisfactory to the Administrative Agent, each of which documents shall be a Security Document hereunder, and (iv) deliver to the Administrative Agent all such evidence of corporate or other authorization, legal opinions (including local counsel opinions where applicable) and other documentation as the Administrative Agent may request, and (d) contemporaneously with the formation of any Foreign Subsidiary, the Parent and the Borrower shall, and shall cause each of their Subsidiaries to, take all steps as may be necessary or advisable in the opinion of the Administrative Agent to pledge to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, sixty-five percent (65%) of the Capital Stock or other equity interests of such Foreign Subsidiary pursuant to a pledge agreement in form and substance satisfactory to the Administrative Agent, which such pledge agreement shall be a Pledge Agreement and a Security Document hereunder. 8.12. TRANSACTIONS WITH AFFILIATES. The Parent and the Borrower will not, and will not permit any of their Subsidiaries to, engage in any transaction with any Affiliate (excluding Domestic Subsidiaries of the Parent) of the Parent (other than for services by individuals as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such Affiliate or, to the knowledge of the Parent and the Borrower, any corporation, partnership, trust or other entity in which any such Affiliate has a substantial interest or is an officer, director, trustee or partner, on terms more favorable to such Person than would have been obtainable on an arm's-length basis in the ordinary course of business. 8.13. AGENCY ACCOUNT. The Parent and the Borrower will not, and will not permit any of their Subsidiaries to, (a) establish any bank accounts other than those listed on SCHEDULE 6.20, without the Administrative Agent's prior written consent, (b) violate directly or indirectly any Agency Account Agreement or other bank agency or lock box agreement in favor of the Administrative Agent for the benefit of the Lenders and the Administrative Agent with respect to such account, (c) deposit into any of the payroll accounts listed on SCHEDULE 6.20 any amounts in excess of amounts necessary to pay current payroll obligations from such accounts (other than balances not in excess of $250,000 in accordance with the Parent's and the Borrower's usual practices), or (d) cause the aggregate balance maintained in all deposit accounts (other than payroll accounts referred to in clause (c)) which are not subject to an Agency Account Agreement in favor of the Administrative Agent to exceed $750,000. 8.14. BUSINESS ACTIVITIES. The Parent and the Borrower will not, and will not permit any of their Subsidiaries to, engage directly or indirectly (whether through Subsidiaries or otherwise) in any type of business other than the businesses conducted by them on the Closing Date and in related businesses. 8.15. CHANGES RELATING TO TERM LOAN DOCUMENTS. The Parent and the Borrower will not, and will not permit any of their Subsidiaries to, amend the terms of the Term Loan Agreement without the prior written consent of the Administrative Agent. 9. FINANCIAL COVENANTS OF THE PARENT AND THE BORROWER. 9.1. FIXED CHARGE COVERAGE RATIO. Each of the Parent and the Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation or Letter of Credit is outstanding or any Lender has any obligation to make any Loans or the Administrative Agent has any obligation to cause the Issuing Bank to issue, extend or renew any Letters of Credit, and based on the consolidated financial statements of the Parent and its Subsidiaries delivered in accordance with the terms hereof: (a) at any time during any Fiscal Quarter (x) ending prior to or at the end of FQ3 of 2008 and (y) during which Excess Availability (prior to the application of the Availability Reserve) is less than the sum of (1) $4,250,000 plus (2) any increases in the Availability Reserve following the Closing Date plus (3) $500,000, the Parent and the Borrower shall not permit the Fixed Charge Coverage Ratio, determined as of the end of the most recently ended Fiscal Quarter, to be less than 1.0:1.0 and (b) at any time during any Fiscal Quarter (x) ending after FQ3 of 2008 and (y) during which Excess Availability (prior to the application of the Availability Reserve) is less than the sum of (1) $4,250,000 plus (2) any increases in the Availability Reserve following the Closing Date plus (3) $2,500,000, the Parent and the Borrower shall not permit the Fixed Charge Coverage Ratio, determined as of the end of the most recently ended Fiscal Quarter, to be less than 1.0:1.0. 9.2. [INTENTIONALLY OMITTED]. 9.3. CAPITAL EXPENDITURES. During any period referenced in the table set forth below, the Parent and the Borrower will not, and will not allow any of their Subsidiaries to, make Capital Expenditures that exceed the aggregate amount set forth in the table below opposite such period: - ----------------------------------------------- ------------------------------ Period Amount - ----------------------------------------------- ------------------------------ Fiscal Year 2006 $10,000,000 - ----------------------------------------------- ------------------------------ Fiscal Year 2007 $12,000,000 - ----------------------------------------------- ------------------------------ Fiscal Year 2008 and for each Fiscal Year $15,000,000 thereafter - ----------------------------------------------- ------------------------------ 10. CLOSING CONDITIONS. The obligations of the Lenders to amend and restate the Existing Credit Agreement shall be subject to the satisfaction of the following conditions precedent, in each case, in form and substance satisfactory to the Administrative Agent and the Lenders: 10.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Lenders. Each Lender shall have received a fully executed copy of each such document. 10.2. CERTIFIED COPIES OF GOVERNING DOCUMENTS. Each of the Lenders shall have received from the Guarantors, the Borrower and each of its Subsidiaries a copy, certified by a duly authorized officer of such Person or other appropriate Person to be true and complete on the Closing Date, of each of its Governing Documents as in effect on such date of certification or a certification that such Governing Documents have not been amended or otherwise modified since the Original Closing Date. 10.3. CORPORATE OR OTHER ACTION. All corporate (or other) action necessary for the valid execution, delivery and performance by each of the Guarantors, the Borrower and each of its Subsidiaries of this Credit Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Lenders shall have been provided to each of the Lenders. 10.4. INCUMBENCY CERTIFICATE. Each of the Lenders shall have received from each of the Guarantors, the Borrower and each of its Subsidiaries an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of such Guarantor, the Borrower or such Subsidiary, and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, in the name and on behalf of each such Person, each of the Loan Documents to which the Borrower, a Guarantor or such Subsidiary is or is to become a party; (b) in the case of the Borrower, to make Loan Requests and Conversion Requests and to apply for Letters of Credit; and (c) to give notices and to take other action on its behalf under the Loan Documents. 10.5. VALIDITY OF LIENS. The Security Documents shall be effective to create in favor of the Administrative Agent a legal, valid and enforceable first priority (subject to the Lien of the Term Loan Agent on Fixed Asset Collateral) perfected security interest in and Lien upon the Collateral. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Administrative Agent to protect and preserve such security interests shall have been duly effected. The Administrative Agent shall have received evidence thereof in form and substance satisfactory to the Administrative Agent. 10.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Administrative Agent shall have received from each of the Guarantors, the Borrower and its Subsidiaries a completed and fully executed Perfection Certificate and the results of UCC searches (and the equivalent thereof in all applicable foreign jurisdictions) with respect to the Collateral, indicating no Liens other than Permitted Liens and otherwise in form and substance satisfactory to the Administrative Agent. 10.7. CERTIFICATES OF INSURANCE. The Administrative Agent shall have received (a) a certificate of insurance from an independent insurance broker dated as of the Closing Date, naming the Administrative Agent as loss payee and/or additional insured, as applicable, identifying insurers, types of insurance, insurance limits, and policy terms, and otherwise describing the insurance obtained in accordance with the provisions of the Security Agreements and (b) certified copies of all policies evidencing such insurance (or certificates therefore signed by the insurer or an agent authorized to bind the insurer). 10.8. AGENCY ACCOUNT AGREEMENTS. The Parent and its Subsidiaries shall have established the Concentration Account, and the Administrative Agent shall have received an Agency Account Agreement executed by the Cash Management Bank and, to the extent required by ss.8.13, each depository institution with which the Parent or any Subsidiary of the Parent maintains a Local Account. 10.9. BORROWING BASE AND COLLATERAL UPDATE CERTIFICATES. The Administrative Agent shall have received an executed (a) Borrowing Base Certificate, which Borrowing Base Certificate shall demonstrate Excess Availability (after giving effect to the payment of all fees and expenses, the issuance of all Letters of Credit and the funding of the Term Loans and all Revolving Loans to be paid, issued or funded on the Closing Date) of not less than the sum of (i) $1,000,000 plus (ii) accounts payable that are more than seven (7) days past due in excess of $3,250,000, and (b) a Collateral Update Certificate, in each case, in form and substance satisfactory to the Administrative Agent. 10.10. ACCOUNTS RECEIVABLE AGING REPORT. The Administrative Agent shall have received from the Borrower the most recent Accounts Receivable aging report of the Borrower dated as of a date which shall be no more than fifteen (15) days prior to the Closing Date and the Borrower shall have notified the Administrative Agent in writing on the Closing Date of any material deviation from the Accounts Receivable values reflected in such Accounts Receivable aging report and shall have provided the Administrative Agent with such supplementary documentation as the Administrative Agent may reasonably request. 10.11. PAYMENT OF CLOSING FEES. The Borrower shall have paid to the Administrative Agent the Fees required to be paid by them on the Closing Date. 10.12. EXISTING CREDIT AGREEMENT. (a) The Administrative Agent shall have received (i) payment in full of all principal of, and interest and fees on, the Term Loan (as defined in the Existing Credit Agreement), (ii) the termination fee required pursuant to ss.2.3 of the Existing Credit Agreement as a result of the $5,000,000 reduction in the Total Commitment (as defined in the Existing Credit Agreement) and (iii) the deferred amendment fee equal to $319,900 earned in connection with the Fifth Amendment (as defined in the Existing Credit Agreement) and (b) all commitments under the Existing Credit Agreement of the Lenders party to this Credit Agreement shall be evidenced only by this Credit Agreement. 10.13. INTERCREDITOR AGREEMENT; TERM LOAN DOCUMENTS. (a) The Intercreditor Agreement shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Administrative Agent, (b) the Administrative Agent shall have received certified copies of the Term Loan Documents and (c) the Administrative Agent shall have received evidence that the Borrower has received proceeds of the Term Loans in an amount satisfactory to the Administrative Agent. 10.14. OPINIONS OF COUNSEL. Each of the Lenders and the Administrative Agent shall have received a favorable legal opinion addressed to the Lenders and the Administrative Agent, dated as of the Closing Date, in form and substance satisfactory to the Lenders and the Administrative Agent, from Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Parent and its Subsidiaries. 10.15. [INTENTIONALLY OMITTED]. 10.16. [INTENTIONALLY OMITTED]. 10.17. [INTENTIONALLY OMITTED]. 10.18. [INTENTIONALLY OMITTED]. 10.19. NO MATERIAL ADVERSE CHANGE. Since the Balance Sheet Date, as determined by the Administrative Agent, there has occurred no material adverse change in the financial condition, business, assets, liabilities or business prospects of the Borrower and the Guarantors, taken as a whole. 10.20. LANDLORD WAIVERS. The Administrative Agent shall have received landlord waivers, each in form and substance satisfactory to the Administrative Agent, relating to each of the leased properties listed on SCHEDULE 10.20(A) hereto. 10.21. LANDLORD CONSENTS. The Parent and its Subsidiaries shall have delivered to the Administrative Agent all consents required for the Administrative Agent to receive, as part of the Security Documents, a collateral assignment of each material leasehold of personal property, and a mortgage of each material leasehold of real property, together in each case with such estoppel certificates as the Administrative Agent may request. 10.22. COLLATERAL EXAMINATIONS/APPRAISALS. The Administrative Agent shall have received the results of collateral examinations and appraisals performed with respect to the Collateral, each in form and substance satisfactory to the Administrative Agent. 10.23. FINANCIAL STATEMENT AND PROJECTIONS. The Administrative Agent shall have received the financial statements and projections referred to in ss.6.2, each in form and substance satisfactory to the Administrative Agent. 11. CONDITIONS TO ALL BORROWINGS. The obligations of the Lenders to make any Loan, and of the Administrative Agent to cause the Issuing Bank to issue, extend or renew any Letter of Credit, in each case whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent: 11.1. REPRESENTATIONS TRUE; NO DEFAULT OR EVENT OF DEFAULT. Each of the representations and warranties of the Parent and any of its Subsidiaries contained in this Credit Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Credit Agreement (other than the representations and warranties contained in ss.ss.6.23(b), 6.26, 6.27, 6.28 and 6.29) shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing, and no condition shall exist on such date which constitutes an Event of Default. 11.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it illegal for such Lender to make such Loan or to participate in the issuance, extension or renewal of such Letter of Credit or in the reasonable opinion of the Administrative Agent would make it illegal for the Issuing Bank to issue, extend or renew such Letter of Credit. 11.3. GOVERNMENTAL REGULATION. Each Lender shall have received such statements in substance and form reasonably satisfactory to such Lender as such Lender shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System. 11.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the transactions contemplated by this Credit Agreement, the other Loan Documents and all other documents incident thereto shall be satisfactory in substance and in form to the Lenders and to the Administrative Agent and the Administrative Agent's Special Counsel, and the Lenders, the Administrative Agent and such counsel shall have received all information and such counterpart originals or certified or other copies of such documents as the Administrative Agent may reasonably request. 11.5. PAYMENT OF FEES. The Borrower shall have complied with their obligations to pay all Fees, Reimbursement Obligations and each other amount arising hereunder at any time subsequent to the Closing Date and becoming due and payable on or before the Drawdown Date of such Loan or the date of the issuance of such Letter of Credit. 11.6. EXCHANGE LIMITATIONS. There exists no reason whatsoever, including, without limitation, by reason of the application of any so-called "currency exchange" laws, rules or regulations (as in effect at the time of any proposed borrowings hereunder) which could reasonably be expected to interfere with the Borrower satisfying any of its Obligations in full at such time as such Obligations become due and payable pursuant to the terms hereof. 11.7. VALIDITY OF LIENS. The Security Documents shall be effective to create in favor of the Administrative Agent a legal, valid and enforceable first priority (subject to the Liens of the Term Loan Agent on the Fixed Asset Collateral) perfected security interest in and Lien upon all material components of the Collateral under applicable United States federal and state law. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Administrative Agent to protect and preserve such security interests shall have been duly effected. The Administrative Agent shall have received evidence thereof in form and substance satisfactory to the Administrative Agent. 11.8. FINANCIAL COVENANTS. There is no reasonable expectation that the Parent and the Borrower were not in compliance with all covenants contained in Article 9 at the end of their immediately preceding Fiscal Quarter if they have not yet delivered their Compliance Certificate for that Fiscal Quarter (it being understood that this ss.11.8 shall not impair the measurement of such covenants as of such Fiscal Quarter end date). 12. EVENTS OF DEFAULT; ACCELERATION; ETC. 12.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Borrower shall fail to pay any principal of the Loans or any Reimbursement Obligation when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) the Parent, the Borrower or any of their Subsidiaries shall fail to pay any interest on the Loans, the Fees, or other sums due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment and such failure shall continue for three (3) days after written notice of such failure has been given to the Parent and the Borrower by the Administrative Agent; (c) either the Parent or the Borrower shall fail to comply with any of its covenants contained in ss.ss.7.1 7.2, 7.4, 7.5, 7.6(a)(i), 7.6(b)(iii), 7.7, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16, 7.17, 7.18, 7.20, Article 8 or Article 9 of this Credit Agreement or any of the covenants contained in any of the Mortgages; (d) the Parent or any of its Subsidiaries shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this ss.12.1) for thirty (30) days after written notice of such failure has been given to the Parent and the Borrower by the Administrative Agent; (e) any representation or warranty of the Parent or any of its Subsidiaries in this Credit Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to or in connection with this Credit Agreement shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (f) the Parent or any of its Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Parent or any of its Subsidiaries or of any substantial part of the assets of the Parent or any of its Subsidiaries or shall commence any case or other proceeding relating to the Parent or any of its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application (including bankruptcy application) shall be filed or any such case or other proceeding shall be commenced against the Parent or any of its Subsidiaries or the Parent or any of its Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within sixty (60) days following the filing thereof; (g) a decree or order (including a bankruptcy order) is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Parent or any of its Subsidiaries bankrupt or insolvent, or approving a petition or bankruptcy application in any such case or other proceeding, or a decree or order (including a bankruptcy order) for relief is entered in respect of the Parent or any Subsidiary of the Parent in an involuntary case under bankruptcy laws as now or hereafter constituted; (h) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, any final judgment against the Parent and any of its Subsidiaries (considered collectively) that, with other outstanding final judgments, undischarged, against the Parent and its Subsidiaries (considered collectively) exceeds in the aggregate $1,000,000; (i) (A) the Parent, the Borrower or any ERISA Affiliate incurs any liability to the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate amount exceeding $1,000,000, or the Parent, the Borrower or any ERISA Affiliate is assessed withdrawal liability pursuant to Title IV of ERISA by a Multiemployer Plan requiring aggregate annual payments exceeding $1,000,000, or any of the following occurs with respect to a Guaranteed Pension Plan: (i) an ERISA Reportable Event, or a failure to make a required installment or other payment (within the meaning of ss.302(f)(1) of ERISA), PROVIDED that the Administrative Agent determines in its reasonable discretion that such event (A) could be expected to result in liability of the Parent or any of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and (B) could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC, for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan or for the imposition of a lien in favor of such Guaranteed Pension Plan; or (ii) the appointment by a United States District Court of a trustee to administer such Guaranteed Pension Plan; or (iii) the institution by the PBGC of proceedings to terminate such Guaranteed Pension Plan; (j) the Parent or any of its Subsidiaries shall fail to pay at maturity, or within any applicable period of grace, any obligation for Indebtedness in excess of $500,000, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing Indebtedness in excess of $500,000 for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; (k) if any of the Loan Documents shall be cancelled, terminated, revoked or rescinded or the Administrative Agent's security interests, mortgages or liens in all or a substantial portion of the Collateral shall cease to be perfected, or shall cease to have the priority contemplated by the Security Documents and the Intercreditor Agreement, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Lenders, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Parent, its Subsidiaries, the Guarantors or any of their respective stockholders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; (l) if any material covenant, agreement or obligation of the Parent or the Borrower contained in or evidenced by the Loan Documents shall cease to be legal, valid, binding, or enforceable in accordance with the terms thereof other than as a result of a default or waiver thereof by the Administrative Agent; (m) a Change of Control shall occur; (n) there shall occur any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, expropriation, act of God or public enemy, or other casualty, which in any such case causes, for more than thirty (30) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of the Parent or any of its Subsidiaries if such event or circumstance is not covered by business interruption insurance and would have a material adverse effect on the business, assets, operation or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Credit Agreement or the other Loan Documents; (o) the Parent or any of its Subsidiaries shall be enjoined, restrained or in any way prevented by the order of any Governmental Authority from conducting any part of their business and such order shall continue in effect for more than thirty (30) days unless such order would not have a material adverse effect on the business, assets, operation or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Credit Agreement or the other Loan Documents; (p) there shall occur the loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by the Parent or any of its Subsidiaries if such loss, suspension, revocation or failure to renew would have a material adverse effect on the business, assets, operation or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Credit Agreement or the other Loan Documents; (q) any "event of default" under the Term Loan Agreement shall occur and be continuing; or (r) the subordination provisions in the Intercreditor Agreement relative to the liens of the Term Loan Agent in the Collateral (other than the Fixed Asset Collateral) shall cease, in whole or in part, to be effective or cease to be legally valid, binding and enforceable against the Term Loan Agent and the holders of the Term Loans, then, and in any such event, so long as the same may be continuing, the Administrative Agent may, and upon the request of the Required Lenders shall, by notice in writing to the Borrower, declare all amounts owing with respect to this Credit Agreement and the other Loan Documents and all Reimbursement Obligations to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each of the Parent and the Borrower; provided that in the event of any Event of Default specified in ss.ss.12.1(f) or 12.1(g), all such amounts shall becOme immediately due and payable automatically and without any requirement of notice from the Administrative Agent or any Lender. 12.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of Default specified in ss.12.1(f) or ss.12.1(g) shall occur, Any unused portion of the credit hereunder shall forthwith terminate and each of the Lenders shall be relieved of all further obligations to make Loans to the Borrower, and the Administrative Agent shall be relieved of all further obligations to cause the Issuing Bank to issue, extend or renew Letters of Credit for the accounts of the Borrower. If any other Event of Default shall have occurred and be continuing, the Administrative Agent may and, upon the request of the Required Lenders, shall, by notice to the Borrower, terminate the unused portion of the credit hereunder, and upon such notice being given such unused portion of the credit hereunder shall terminate immediately and each of the Lenders shall be relieved of all further obligations to make Loans to the Borrower and the Administrative Agent shall be relieved of all further obligations to cause the Issuing Bank to issue, extend or renew Letters of Credit for the accounts of the Borrower. No termination of the credit hereunder shall relieve the Parent or any of its Subsidiaries of any of the Obligations. No termination of the credit hereunder shall relieve the Lenders of their obligation to fund their participations in the Letters of Credit as otherwise set out in this Credit Agreement. 12.3. REMEDIES. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Lenders shall have accelerated the maturity of the Loans pursuant to ss.12.1, each Lender, if owed any amount with respect to the LoanS or the Reimbursement Obligations, may, with the consent of the Required Lenders but not otherwise, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Lender are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Lender. No remedy herein conferred upon any Lender or the Administrative Agent or the purchaser of any Letter of Credit is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. 12.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following the occurrence or during the continuance of any Event of Default, the Administrative Agent or any Lender, as the case may be, receives any monies in connection with the enforcement of any of the Security Documents, or otherwise with respect to the realization upon any of the Collateral, such monies shall, subject to the Intercreditor Agreement, be distributed for application as follows: (a) FIRST, to the payment of, or (as the case may be) the reimbursement of the Administrative Agent and the Issuing Bank for or in respect of all amounts in respect of Administrative Agent Advances and all fees, indemnities, costs, expenses, disbursements and other amounts (including charges and disbursements of counsel to the Administrative Agent and the Issuing Bank) and losses payable to the Administrative Agent and the Issuing Bank or incurred or sustained by the Administrative Agent and the Issuing Bank in their capacity as such, including, without limitation, in connection with the collection of such monies by the Administrative Agent and the Issuing Bank, for the exercise, protection or enforcement by the Administrative Agent and the Issuing Bank of all or any of the rights, remedies, powers and privileges of the Administrative Agent and the Issuing Bank under this Credit Agreement or any of the other Loan Documents or in respect of the Collateral or in support of any provision of adequate indemnity to the Administrative Agent and the Issuing Bank against any Taxes or liens which by law shall have, or may have, priority over the rights of the Administrative Agent and the Issuing Bank to such monies; (b) SECOND, to the payment of that portion of the Obligations constituting fees, indemnities, costs, expenses, disbursements and other amounts (including charges and disbursements of counsel to the Lenders but excluding principal, interest and Cash Management Obligations) payable to the Lenders (including amounts payable under ss.5.7), ratably among them in proportion tO the amounts described in this clause SECOND payable to them; (c) THIRD, to the payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and other Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause THIRD payable to them; (d) FOURTH, ratably (a) to the payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause FOURTH payable to them and (b) to the Administrative Agent for the account of the Issuing bank, to cash collateralize the Reimbursement Obligations; (e) FIFTH, to all Cash Management Obligations owing to any Lender, the Administrative Agent, the Cash Management Bank or any Affiliate thereof, ratably among such Persons; (f) SIXTH, to all other Obligations in such order or preference as the Required Lenders may determine; provided, however, that (i) distributions shall be made with respect to each type of Obligation owing to the Lenders among the Lenders pro rata, and (ii) the Administrative Agent may in its discretion make proper allowance to take into account any Obligations not then due and payable; (g) SEVENTH, upon payment and satisfaction in full or other provisions for payment in full satisfactory to the Lenders and the Administrative Agent of all of the Obligations, to the payment of any obligations required to be paid pursuant to ss.9-608(a)(1)(C) or 9 615(a)(3) of the Uniform Commercial Code of the Commonwealth of Massachusetts; and (h) EIGHTH, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto. 13. SETOFF. Regardless of the adequacy of any collateral, if any Event of Default shall have occurred and be continuing, any deposits or other sums credited by or due from any of the Lenders to the Borrower or any of the Guarantors and any securities or other property of the Borrower or any of the Guarantors in the possession of such Lender or any of its Affiliates may, at any time, without demand or notice (any such notice being expressly waived by the Borrower and the Guarantors), in whole or in part, be applied to or set off by such Lender against the payment of Obligations and any and all other liabilities or obligations, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower or any of the Guarantors to such Lender regardless of the adequacy of any other collateral securing the Loan. Each of the Lenders agrees with each other Lender that (i) if an amount to be set off is to be applied to Indebtedness of the Borrower or any of the Guarantors to such Lender, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by the Notes of such Lender or constituting Reimbursement Obligations owed to such Lender, and (ii) if such Lender shall receive from the Borrower or any Guarantor or any other source, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes in the name of, or constituting Reimbursement Obligations, such Lender by proceedings against the Borrower at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of its Notes, or the Reimbursement Obligations owed to such Lender any amount in excess of its ratable portion of the payments received by all of the Lenders with respect to the debt evidenced by the Notes corresponding to, and Reimbursement Obligations owed to, all of the Lenders, such Lender will make such disposition and arrangements with the other Lenders with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender receiving in respect of the debt evidenced by the Notes in its name or Reimbursement Obligations owed it, its proportionate payment as contemplated by this Credit Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Lender, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. ANY AND ALL RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR ANY GUARANTOR ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. 14. THE ADMINISTRATIVE AGENT. 14.1. AUTHORIZATION. (a) The Administrative Agent is authorized to take such action on behalf of each of the Lenders and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Administrative Agent, together with such powers as are reasonably incident thereto, including the authority, without the necessity of any notice to or further consent of the Lenders, from time to time to take any action with respect to any Collateral or the Security Documents which may be necessary to perfect, maintain perfected or insure the priority of the security interest in and liens upon the Collateral granted pursuant to the Security Documents, and, PROVIDED that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Administrative Agent. (b) The relationship between the Administrative Agent and each of the Lenders is that of an independent contractor. The use of the term "Administrative Agent" is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Administrative Agent and each of the Lenders. Nothing contained in this Credit Agreement nor the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Administrative Agent and any of the Lenders. (c) As an independent contractor empowered by the Lenders to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Administrative Agent is nevertheless a "REPRESENTATIVE" of the Lenders, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Lenders and the Administrative Agent with respect to all collateral security and guaranties contemplated by the Loan Documents. Such actions include the designation of the Administrative Agent as "SECURED PARTY", "MORTGAGEE" or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Lenders and the Administrative Agent. (d) The Administrative Agent is authorized and directed to consent to any sale or other disposition of Collateral permitted to be sold or disposed of hereunder, and to release its liens on such Collateral, and the Administrative Agent is authorized to rely on a certification from the Borrower that such sale or disposition is permitted hereunder. (e) The Administrative Agent is authorized and directed to execute and deliver the Intercreditor Agreement and any mortgage and leasehold mortgage subordination agreements in favor of the Term Loan Agent on behalf of the Lenders and to act in accordance with the provisions thereof. Each of the Lenders agrees to be bound by the provisions thereof. 14.2. EMPLOYEES AND ADMINISTRATIVE AGENTS. The Administrative Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Credit Agreement and the other Loan Documents. The Administrative Agent may utilize the services of such Persons as the Administrative Agent in its sole discretion may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower. 14.3. NO LIABILITY. Neither the Administrative Agent (in its capacity as Administrative Agent, lender of the swing line loans and/or Cash Management Bank) nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall be liable to any Lender for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Administrative Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. 14.4. NO REPRESENTATIONS. 14.4.1. GENERAL. The Administrative Agent shall not be responsible for the execution or validity or enforceability of this Credit Agreement, the Letters of Credit, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for any of the Loan Documents, or for the value of any such collateral security or for the validity, enforceability, or collectibility of any such amounts owing with respect to any of the Loan Documents, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Parent or any of its Subsidiaries, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for any of the Loan Documents or to inspect any of the properties, books or records of the Parent or any of its Subsidiaries. The Administrative Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Parent or the Borrower shall have been duly authorized or is true, accurate and complete. The Administrative Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Lenders, with respect to the credit worthiness or financial conditions of the Parent or any of its Subsidiaries. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement. 14.4.2. CLOSING DOCUMENTATION, ETC. For purposes of determining compliance with the conditions set forth in ss.10, each Lender thaT has executed this Credit Agreement shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document and matter either sent, or made available, by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be to be consent to or approved by or acceptable or satisfactory to such Lender, unless an officer of the Administrative Agent active upon the Borrower's account shall have received notice from such Lender not less than one (1) Business Day prior to the Closing Date specifying such Lender's objection thereto and such objection shall not have been withdrawn by notice to the Administrative Agent to such effect on or prior to the Closing Date. 14.5. PAYMENTS. 14.5.1. PAYMENTS TO ADMINISTRATIVE AGENT. A payment by the Borrower to the Administrative Agent hereunder or under any of the other Loan Documents for the account of any Lender shall constitute a payment to such Lender. The Administrative Agent agrees promptly to distribute to each Lender such Lender's pro rata share of payments received by the Administrative Agent for the account of such Lender except as otherwise expressly provided herein or in any of the other Loan Documents. 14.5.2. DISTRIBUTION BY ADMINISTRATIVE AGENT. If in the opinion of the Administrative Agent the distribution of any amount received by it in such capacity hereunder or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Administrative Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Administrative Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. 14.5.3. DELINQUENT LENDERS. Notwithstanding anything to the contrary contained in this Credit Agreement or any of the other Loan Documents, any Lender that fails (i) to make available to the Administrative Agent its PRO RATA share of any Loan or to purchase any Letter of Credit Participation in accordance with the terms of this Credit Agreement or (ii) to comply with the provisions of ss.13 with respect to making dispositions and arrangements with the other Lenders, where such Lender's share oF any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Credit Agreement, shall be deemed delinquent (a "Delinquent Lender") and shall be deemed a Delinquent Lender until such time as such delinquency is satisfied. A Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Loans, Unpaid Reimbursement Obligations, interest, fees or otherwise, to the remaining applicable non-delinquent Lenders for application to, and reduction of, their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent Lender hereby authorizes the Administrative Agent to distribute such payments to the applicable non-delinquent Lenders in proportion to their respective pro rata shares of all applicable outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent Lender shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all applicable outstanding Loans and Unpaid Reimbursement Obligations of the non-delinquent Lenders, the Lenders' respective PRO RATA shares of all outstanding Loans and Unpaid Reimbursement Obligations have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. 14.6. HOLDERS OF LETTERS OF CREDIT PARTICIPATION. The Administrative Agent may deem and treat the purchaser of any Letter of Credit Participation as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. 14.7. INDEMNITY. The Lenders ratably agree hereby to indemnify and hold harmless the Administrative Agent and the Issuing Bank from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Administrative Agent and/or the Issuing Bank has not been reimbursed by the Borrower as required by ss.15), and liabilities of every nature and character arising out of or related to this Credit Agreement or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Administrative Agent's and/or the Issuing Bank's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Administrative Agent's or the Issuing Bank's willful misconduct or gross negligence. 14.8. ADMINISTRATIVE AGENT AS LENDER. In its individual capacity, Bank of America shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it and as the purchaser of any Letter of Credit Participation as it would have were it not also the Administrative Agent. 14.9. RESIGNATION. The Administrative Agent may resign at any time by giving sixty (60) days prior written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent. Unless a Default or Event of Default shall have occurred and be continuing, such successor Administrative Agent shall be reasonably acceptable to the Borrower. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor's Corporation. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation, the provisions of this Credit Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. 14.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Lender hereby agrees that, upon learning of the existence of a Default or Event of Default, it shall promptly notify the Administrative Agent thereof. The Administrative Agent hereby agrees that upon receipt of any notice under this ss.14.10 it shall promptly notify the other Lenders of the existence of such Default or Event oF Default. 14.11. DUTIES IN THE CASE OF ENFORCEMENT. Subject to the terms of the Intercreditor Agreement, in case one or more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Administrative Agent shall, if (a) so requested by the Required Lenders and (b) the Lenders have provided to the Administrative Agent such additional indemnities and assurances against expenses and liabilities as the Administrative Agent may reasonably request, proceed to enforce the provisions of the Security Documents authorizing the sale or other disposition of all or any part of the Collateral and exercise all or any such other legal and equitable and other rights or remedies as it may have in respect of such Collateral. The Required Lenders may direct the Administrative Agent in writing as to the method and the extent of any such sale or other disposition, the Lenders hereby agreeing to indemnify and hold the Administrative Agent, harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, PROVIDED that the Administrative Agent need not comply with any such direction to the extent that the Administrative Agent reasonably believes the Administrative Agent's compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction. 14.12. ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM. (a) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial, administrative or like proceeding or any assignment for the benefit of creditors relative to the Parent or any of its Subsidiaries, the Administrative Agent (irrespective of whether the principal of any Loan, Reimbursement Obligation or Unpaid Reimbursement Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding, under any such assignment or otherwise: (i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Reimbursement Obligations or Unpaid Reimbursement Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under ss.ss.2.2, 4.6, 5.1 and 15) allowed in such proceeding or under any sUch assignment; and (ii) subject to the Intercreditor Agreement, to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; (b) Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such proceeding or under any such assignment is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, nevertheless to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under ss.ss.2.2, 4.6, 5.1 and 15). (c) Nothing contained herein shall authorize the Administrative Agent to consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations owed to such Lender or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding or under any such assignment. 15. EXPENSES. The Borrower agrees to pay (i) the reasonable costs of producing and reproducing this Credit Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (ii) without duplication of any amounts paid by the Borrower pursuant to ss.5.2.2, any Taxes (including any interest and penalties in respect thereto) payable by the Administrative Agent, thE Issuing Bank, the Cash Management Bank or any of the Lenders (other than Excluded Taxes) on or with respect to the transactions contemplated by this Credit Agreement (the Borrower hereby agreeing to indemnify the Administrative Agent, the Issuing Bank, the Cash Management Bank and each Lender with respect thereto), (iii) the reasonable fees, expenses and disbursements of the Administrative Agent's Special Counsel or any local counsel to the Administrative Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, amendments, modifications, approvals, consents or waivers hereto or hereunder, and proposed amendments, modifications, approvals, consents or waivers hereto or hereunder, (iv) the reasonable fees, expenses and disbursements of the Administrative Agent incurred by the Administrative Agent in connection with the preparation and syndication of the Loan Documents and other instruments mentioned herein, including, without limitation, collateral examination, appraisal expenses and environmental audits, (v) the reasonable fees, expenses and disbursements of the Administrative Agent incurred by the Administrative Agent in connection with the administration or interpretation of the Loan Documents and other instruments mentioned herein, including, without limitation, collateral examination, appraisal expenses and environmental audits, inspections, testing and reports, (vi) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys' fees and costs and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by the Issuing Bank, the Cash Management Bank, the Administrative Agent or any Lender in connection with (A) the enforcement of or preservation of rights under any of the Loan Documents against any of the Guarantors, the Borrower or any of its Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default, and (B) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to any Lender's, the Issuing Bank's, the Cash Management Bank's or the Administrative Agent's relationship with any the Parent or any of its Subsidiaries, unless such Lender, the Issuing Bank, the Cash Management Bank or the Administrative Agent, as applicable, is conclusively determined to have breached its obligations hereunder, (vii) any fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by the Administrative Agent, the Issuing Bank, the Cash Management Bank or any of their Affiliates in establishing, maintaining or handling of any accounts for the collection of any of the Collateral, (viii) all reasonable fees, expenses and disbursements of the Issuing Bank, the Cash Management Bank or the Administrative Agent incurred in connection with UCC searches, UCC filings, intellectual property searches, intellectual property filings, mortgage recordings and other personal and real property searches and filings and (ix) all title insurance premiums and surveyor, engineering, appraisal and examination charges. The Borrower and each of the Guarantors authorizes the Administrative Agent, the Issuing Bank, the Cash Management Bank and the Lenders to debit any account maintained by such Persons with the Administrative Agent, the Issuing Bank, the Cash Management Bank, the Lenders, or any of their Affiliates, in payment of amounts due hereunder. The covenants of this ss.15 shall survive payment or satisfaction of all otheR Obligations. 16. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Administrative Agent, the Issuing Bank, the Arranger, the Cash Management Bank and the Lenders, together with each of their Affiliates and their officers, directors, employees, agents, attorneys and advisors, from and against any and all claims, actions and suits whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of this Credit Agreement or any of the other Loan Documents or the transactions contemplated hereby including, without limitation, (i) any actual or proposed use by the Borrower or any of its Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (ii) the reversal or withdrawal of any provisional credits granted by the Administrative Agent, the Issuing Bank, the Arranger, the Cash Management Bank or any of their Affiliates upon the transfer of funds from bank agency or lock box accounts or in connection with the provisional honoring of checks or other items, (iii) the Parent or any of its Subsidiaries entering into or performing this Credit Agreement or any of the other Loan Documents, (iv) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Parent or any of its Subsidiaries comprised in the Collateral, or (v) with respect to the Parent and its Subsidiaries and their respective properties and assets, the violation of any environmental law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding, PROVIDED, HOWEVER, that the Borrower shall not be liable to the Administrative Agent, the Arranger the Issuing Bank, the Cash Management Bank, any Lender, any of their Affiliates or any of their officers, directors, employees, agents and advisors for any of the foregoing to the extent that they arise from such Person's gross negligence, breach of contract or willful misconduct. In litigation, or the preparation therefor, the Lenders, the Issuing Bank, the Arranger, the Cash Management Bank and the Administrative Agent shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this ss.16 are unenforceable for any reason, the Borrower hereby agrees tO make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The covenants contained in this ss.16 shall survive payment or satisfaction in full of all other Obligations. Each of the AdministrativE Agent, the Issuing Bank, the Arranger, the Cash Management Bank and the Lenders agree to promptly notify the Borrower of any such claim, action, suit, liability, loss, damage or expense after becoming aware of the same; PROVIDED that the failure to provide such notice shall not affect the Borrower's obligations under this Article 16. 17. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Parent or any of its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Lenders and the Administrative Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Lenders of any of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letter of Credit or any amount due under this Credit Agreement or any of the other Loan Documents remains outstanding or any Lender has any obligation to make any Loans or the Administrative Agent has any obligation to issue, extend or renew any Letter of Credit, and for such further time as may be otherwise expressly specified in this Credit Agreement. All statements contained in any certificate or other paper delivered to any Lender or the Administrative Agent at any time by or on behalf of the Parent or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Parent or such Subsidiary hereunder. 18. ASSIGNMENT AND PARTICIPATION. 18.1. GENERAL CONDITIONS. The provisions of this Credit Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor the Parent may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (a) to an Eligible Assignee in accordance with the provisions of ss.18.2, (b) by way of participation in accordance with the provisions of ss.18.4 or (c) by way of pledge or assignment of a security interest subject to the restrictions of ss.18.6 (and any other attempted assignment or transfer by any party hereto shall bE null and void). Nothing in this Credit Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in ss.18.4 and, to thE extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Credit Agreement or any of the other Loan Documents. 18.2. ASSIGNMENTS. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Credit Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that: (a) except in the cases of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or of an assignment to a Lender or a Lender Affiliate, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loan of the assigning Lender subject to each such assignment (determined as of the date on which the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $10,000,000 unless each of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); (b) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Credit Agreement with respect to the Loan or the Commitment assigned, it being understood that NON-PRO RATA assignments of or among any of the Commitments, the Revolving Loans and Reimbursement Obligations are not permitted; (c) any assignment of a Commitment must be approved by the Administrative Agent and the Issuing Bank (whether or not the proposed assignee is itself a Lender with a commitment or would otherwise qualify as an Eligible Assignee); and (d) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Subject to acceptance and recording thereof by the Administrative Agent pursuant to ss.18.3, from and after the effective datE specified in each Assignment and Acceptance, the Eligible Assignee thereunder shall be a party to this Credit Agreement and, to the extent of the interest assigned by such Assignment and Acceptance have the rights and obligations of a Lender under this Credit Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Credit Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Credit Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of (i) ss.ss.5.2.2, 5.7, 5.8, and 5.10 with respect to facts and circumstances occurring prior to the effective date of such assignment and (ii) ss.16 notwithstanding such assignment. Any assignment or transfer by a Lender oF rights or obligations under this Credit Agreement that does not comply with this paragraph shall be treated for purposes of this Credit Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with ss.18.4. 18.3. REGISTER. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent's Office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Credit Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. 18.4. PARTICIPATIONS. Any Lender may at any time, without the consent of, or notice to, the Parent, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person) (each, a "Participant") in all or a portion of such Lender's rights and/or obligations under this Credit Agreement (including all or a portion of its Commitment and/or the Loans owing to it); PROVIDED that (a) such Lender's obligations under this Credit Agreement shall remain unchanged, (b) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (c) the Parent, the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Credit Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Credit Agreement and to approve any amendment, modification or waiver of any provision of this Credit Agreement; PROVIDED that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that would reduce the principal of or the interest rate on any Loans, extend the term or increase the amount of the Commitment of such Lender as it relates to such Participant, reduce the amount of any Commitment Fee or Letter of Credit Fees to which such Participant is entitled or extend any regularly scheduled payment date for principal or interest. Subject to ss.18.5, the Parent and the Borrower agree thaT each Participant shall be entitled to the benefits of ss.ss.5.2.2, 5.7, 5.8 and 5.10 to the same extent as if it were a Lender and Had acquired its interest by assignment pursuant to ss.18.2. To the extent permitted by law, each Participant also shall be entitled tO the benefits of ss.13 as though it were a Lender, provided such Participant agrees to be subject to ss.13 as though it were a Lender. 18.5. PAYMENTS TO PARTICIPANTS. A Participant shall not be entitled to receive any greater payment under ss.ss.5.2.2, 5.7 and 5.8 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant. 18.6. MISCELLANEOUS ASSIGNMENT PROVISIONS. A Lender may at any time grant a security interest in all or any portion of its rights under this Credit Agreement to secure obligations of such Lender, including without limitation (a) any pledge or assignment to secure obligations to any of the twelve Federal Reserve Banks organized under ss.4 of the Federal Reserve Act, 12 U.S.C. ss.341 and (b) wIth respect to any Lender that is a Fund, to any lender or any trustee for, or any other representative of, holders of obligations owed or securities issued by such Fund as security for such obligations or securities or any institutional custodian for such Fund or for such lender; PROVIDED that no such grant shall release such Lender from any of its obligations hereunder, provide any voting rights hereunder to the secured party thereof, substitute any such secured party for such Lender as a party hereto or affect any rights or obligations of the Parent, the Borrower or the Administrative Agent hereunder. 18.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE PARENT. If any assignee Lender is an Affiliate of the Parent, then any such assignee Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to ss.12.1 or ss.12.2, and the determination of the Required Lenders shall for All purposes of this Credit Agreement and the other Loan Documents be made without regard to such assignee Lender's interest in any of the Loans or Reimbursement Obligations. If any Lender sells a participating interest in any of the Loans or Reimbursement Obligations to a Participant, and such Participant is the Parent or an Affiliate of the Parent, then such transferor Lender shall promptly notify the Administrative Agent of the sale of such participation. A transferor Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to ss.12.1 or ss.12.2 to the extent that such participation is beneficially owned by the Parent or any Affiliate of the Parent, and The determination of the Required Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to the interest of such transferor Lender in the Loans or Reimbursement Obligations to the extent of such participation. 18.8. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Administrative Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Lenders (other than the assigning Lender). Within five (5) Business Days after receipt of such notice, the Borrower, at its own expense, shall, if applicable, execute and deliver to the Administrative Agent, in exchange for each surrendered Note, a new Note to the order of such Assignee in an amount equal to the amount assumed by such Assignee pursuant to such Assignment and Acceptance and, if the assigning Lender has retained some portion of its obligations hereunder, a new Note to the order of the assigning Lender in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes. 18.9. SPECIAL PURPOSE FUNDING VEHICLE. Notwithstanding anything to the contrary contained in this ss.18, any Lender (a "GrantinG Lender") may grant to a special purpose funding vehicle (an "SPC") of such Granting Lender, identified as such in writing from time to time delivered by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Credit Agreement, PROVIDED that (a) nothing herein shall constitute a commitment to make any Loan by any SPC, (b) the Granting Bank's obligations under this Credit Agreement shall remain unchanged, (c) the Granting Lender shall retain the sole right to enforce this Credit Agreement and to approve any amendment, modification or waiver of any provision of this Credit Agreement and (d) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by the Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any expense reimbursement, indemnity or similar payment obligation under this Credit Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Credit Agreement) that, prior to the date that is one year and one day after the later of (i) the payment in full of all outstanding senior indebtedness of any SPC and (ii) the Maturity Date, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States of America or any State thereof. In addition, notwithstanding anything to the contrary contained in this ss.18.9, any SPC may (A) with notice to, but (except as specified below) without the prioR written consent of, the Parent, the Borrower or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to its Granting Lender or to any financial institutions (consented to by the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower, which consents shall not be unreasonably withheld or delayed) providing liquidity and/or credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Loans and (B) disclose on a confidential basis any non-public information relating to its Loans (other than financial statements referred to in ss.ss.6.2 or 7.4) to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit or liquidity enhancement to such SPC. In no event shall the Borrower be obligated to pay to an SPC that has made a Loan any greater amount than the Borrower would have been obligated to pay under this Credit Agreement if the Granting Lender had made such Loan. An amendment to this ss.18.9 without thE written consent of an SPC shall be ineffective insofar as it alters the rights and obligations of such SPC. 19. NOTICES, ETC. Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or any Letter of Credit Applications shall be in writing and shall be (i) delivered in hand, (ii) mailed by United States registered or certified first class mail, postage prepaid, (iii) sent by overnight courier, or (iv) sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows: (a) if to the Parent or the Borrower, at 941 Grinnell Street, Fall River, MA 02721, Attention: Chief Financial Officer or at such other U.S. address for notice as the Parent or the Borrower shall last have furnished in writing to the Person giving the notice; (b) if to the Administrative Agent, at One Federal Street, Boston, Massachusetts 02110, USA, Attention: Matthew O'Keefe, or such other address for notice as the Administrative Agent shall last have furnished in writing to the Person giving the notice; and (c) if to any Lender, at such Lender's address for its Domestic Lending Office set forth on SCHEDULE 1 hereto, or such other address for notice as such Lender shall have last furnished in writing to the Person giving the notice. Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof. 20. GOVERNING LAW. THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH OF THE PARENT AND THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE PARENT AND THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SS.19. EACH OF THE PARENT AND THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. 21. HEADINGS. The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 22. COUNTERPARTS. This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. Delivery by facsimile by any of the parties hereto of an executed counterpart hereof or of any amendment or waiver hereto shall be as effective as an original executed counterpart hereof or of such amendment or waiver and shall be considered a representation that an original executed counterpart hereof or such amendment or waiver, as the case may be, will be delivered. 23. ENTIRE AGREEMENT, ETC. The Loan Documents are intended by the parties as the final, complete and exclusive statement of the transactions evidenced by the Loan Documents. All prior or contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be superseded by the Loan Documents, and no party is relying on any promise, agreement or understanding not set forth in the Loan Documents. 24. WAIVER OF JURY TRIAL. EACH PARTY HERETO MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM BASED HEREON ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREES THAT IT WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. Except as prohibited by law, each party hereto hereby waives any right it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. Each of the Parent and the Borrower (i) certifies that no representative, agent or attorney of any Lender or the Administrative Agent has represented, expressly or otherwise, that such Lender or the Administrative Agent would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that this waiver constitutes a material inducement for the Administrative Agent and the Lenders to execute this Credit Agreement and make the Loans. 25. CONSENTS, AMENDMENTS, WAIVERS, ETC. Any consent or approval required or permitted by this Credit Agreement to be given by all of the Lenders may be given, and any term of this Credit Agreement, the other Loan Documents or any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Parent or any of its Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Required Lenders. Notwithstanding the foregoing, no amendment, modification or waiver shall: (a) without the written consent of the Parent, the Borrower and each Lender directly affected thereby: (i) reduce or forgive the principal amount of any Loans or Reimbursement Obligations, or reduce the rate of interest on the Loans or the amount of the Commitment Fees or Letter of Credit Fees (other than interest accruing pursuant to ss.5.11 following the effective date of any waiver by the Required Lenders of the Event of Default relating thereto); (ii) increase the amount of the Total Commitment or any Lender's Commitment or extend the expiration date of the Total Commitment or any Lender's Commitment; (iii) postpone or extend the Maturity Date or any other regularly scheduled dates for payments of principal of, or interest on, the Loans or Reimbursement Obligations or any fees or other amounts payable to such Lender or waive any Event of Default relating thereto (it being understood that (A) a waiver of the application of the Default Rate, (B) any vote to rescind any acceleration made pursuant to ss.12.1 of amounts owing with respect to the Loans and other ObligationS and (C) any modifications of the provisions relating to amounts or timing of prepayments of Loans and other Obligations shall require only the approval of the Required Lenders); or (iv) release the Borrower from any Obligations consisting of principal, interest, fees, reimbursement obligations, expenses, or indemnities, release all or substantially all of the Collateral or release all or substantially all of the Guarantors from their guaranty obligations under the Guaranties (excluding, if the Parent or any Subsidiary of the Parent becomes a debtor under the federal Bankruptcy Code, the release of "cash collateral", as defined in Section 363(a) of the federal Bankruptcy Code pursuant to a cash collateral stipulation with the debtor approved by the Required Lenders); (b) without the written consent of all of the Lenders, (i) amend or waive this ss.25 or the definition of Required Lenders, (ii) increase the advance rates set forth in the definition of the Borrowing Base, (iii) amend the definition of Availability Reserve, Borrowing Base, Eligible Accounts Receivable, Eligible Finished Goods Inventory, Eligible Inventory, Eligible Raw Materials Inventory, Net Book Value or Net Orderly Liquidation Value, in each case, in a manner which would result in more credit being made available to the Borrower hereunder; or (iv) amend or waive ss.12.4; (c) without the written consent of the Administrative Agent, amend or waive ss.2.6.2, ss.2.16, ss.4, ss.14, the amount or Time of payment of the Administrative Agent's Fee or any Letter of Credit Fees payable for the Administrative Agent's or the Issuing Bank's account or any other provision applicable to the Administrative Agent or the Issuing Bank; (d) without the written consent of the Cash Management Bank, amend or waive any provision applicable to the Cash Management Bank; (e) without the written consent of the Issuing Bank, amend or waive ss.4 or any other provision applicable to the Issuing Bank; or (f) in the event of any change in the Person acting as the Administrative Agent, the Issuing Bank or the Cash Management Bank hereunder, without the written consent of the Person formerly acting as Administrative Agent, Issuing Bank or Cash Management Bank, amend or waive any provision of this Credit Agreement accruing to the benefit of such Person in respect of all actions taken or omitted to be taken by either of them prior to such change. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Administrative Agent or any Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Parent or the Borrower shall entitle the Parent or the Borrower to other or further notice or demand in similar or other circumstances. 26. SEVERABILITY. The provisions of this Credit Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in any jurisdiction. The parties agree that they will negotiate in good faith to replace any provision hereof so held invalid or unenforceable with a valid provision which is as similar as possible to the invalid or unenforceable provision. 27. CONFIDENTIALITY. Each of the Administrative Agent, the Lenders and the Issuing Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates' respective partners, directors, officers, employees, agents, advisors and representatives in connection with this Credit Agreement and the transactions contemplated hereby (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Article 27, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Credit Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Parent and its obligations or the Borrower and its obligations, (g) with the consent of the Parent or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Article 27 or (y) becomes available to the Administrative Agent, any Lender, the Issuing Bank or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower. For purposes of this Section, "INFORMATION" means all information received from the Parent or any Subsidiary of the Parent relating to the Parent or any Subsidiary of the Parent or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the Issuing Bank on a nonconfidential basis prior to disclosure by the Parent or any Subsidiary of the Parent. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Each of the Administrative Agent, the Lenders and the Issuing Bank acknowledges that (a) the Information may include material non-public information concerning the Parent or a Subsidiary of the Parent, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws. To the extent practicable and possible in compliance with applicable law, regulation, proceeding or court order, each of the Lenders and the Administrative Agent shall, prior to disclosure thereof, notify the Borrower of any request for disclosure of any such non-public information by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) or pursuant to legal process. The Parent and the Borrower hereby acknowledge that (a) the Administrative Agent will make available to the Lenders and the Issuing Bank materials and/or information provided by or on behalf of the Parent and the Borrower hereunder (collectively, "BORROWER MATERIALS") by posting the Borrower Materials on IntraLinks or another similar electronic system (the "PLATFORM") and (b) certain of the Lenders may be "public-side" Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Parent, the Borrower or their securities) (each, a "PUBLIC LENDER"). The Parent and the Borrower hereby agree that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked "PUBLIC" which, at a minimum, shall mean that the word "PUBLIC" shall appear prominently on the first page thereof; (x) by marking Borrower Materials "PUBLIC," the Parent and the Borrower shall be deemed to have authorized the Administrative Agent, the Issuing Bank and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Parent, the Borrower or its securities for purposes of United States Federal and state securities laws (PROVIDED, HOWEVER, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in this Article 27); (y) all Borrower Materials marked "PUBLIC" are permitted to be made available through a portion of the Platform designated "Public Investor;" and (z) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked "PUBLIC" as being suitable only for posting on a portion of the Platform not designated "Public Investor." 28. USA PATRIOT ACT. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "ACT"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act. 29. DESIGNATION OF PERMITTED LIENS. The designation of a Lien as a Permitted Lien is not, and shall not be deemed to be, an acknowledgment by the Administrative Agent or the Lenders to any Person that the Lien shall have priority over any Lien of the Administrative Agent granted in any Loan Document. 30. TRANSITIONAL ARRANGEMENTS On the Closing Date, this Agreement shall supersede the Existing Credit Agreement in its entirety. On the Closing Date, the rights and obligations of the parties evidenced by the Existing Credit Agreement shall be evidenced by this Credit Agreement and the other Loan Documents, and the Existing Letters of Credit issued by any Issuing Bank for the account of the Borrower prior to the Closing Date shall be converted into Letters of Credit under this Credit Agreement. All interest and fees and expenses, if any, owing or accruing under or in respect of the Existing Credit Agreement through the Closing Date shall be calculated as of the Closing Date (pro rated in the case of any fractional periods), and shall be paid in full at the times that interest, fees and expenses under this Credit Agreement are required to be paid pursuant to this Credit Agreement. Commencing on the Closing Date, the Commitment Fee shall be payable by the Borrower to the Administrative Agent for the account of the Lenders in accordance with ss.2.2. IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as a sealed instrument as of the date first set forth above. QUAKER FABRIC CORPORATION OF FALL RIVER QUAKER FABRIC CORPORATION By: /s/ Paul J. Kelly --------------------------------------------- Name: Paul J. Kelly Title: Vice President Finance BANK OF AMERICA, N.A., individually and as Administrative Agent, Issuing Bank and Cash Management Bank By: /s/ Matthew T. O'Keefe --------------------------------------------- Name: Matthew T. O'Keefe Title: Senior Vice President WELLS FARGO FOOTHILL, LLC By: ---------------------------------------- Name: Title: MERRILL LYNCH CAPITAL, A DIVISION OF MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC. By: ---------------------------------------- Name: EX-10.37 3 a5274680ex10_37.txt SCHEDULE EXHIBIT 10.37 SCHEDULE 1 - LENDERS, COMMITMENT PERCENTAGES, LENDING OFFICES LENDER REVOLVING LOAN REVOLVING LOAN COMMITMENT COMMITMENT PERCENTAGE Bank of America, N.A. $12,500,000.00 50% One Federal Street Boston, MA 02110 Attn: Matthew T. O'Keefe Wells Fargo Foothill, LLC $6,250,000.00 25% 2450 Colorado Avenue Suite 3000W Santa Monica, CA 90404 Attn: Rina Shinoda Merrill Lynch Capital, a Division of Merrill Lynch $6,250,000.00 25% Business Financial Services Inc. 225 Liberty Street, 5th floor New York, NY 10281 Attn: James Betz TOTAL: $25,000,000.00 100% SCHEDULE 1.1(A) MORTGAGED PROPERTIES FEE MORTGAGES 1. 941 Grinnell Street, Fall River, Massachusetts 2. 1082 Davol Street, Fall River, Massachusetts 3. 81 Ferry Street, Fall River, Massachusetts 4. 1450 Brayton Avenue, Fall River, Massachusetts 5. 387 Quarry Street, Fall River, Massachusetts 6. Godfrey Road, Verona, Mississippi 7. Bleachery Road, Fall River, Massachusetts LEASEHOLD MORTGAGES 1. 81 Commerce Drive, Fall River, Massachusetts SCHEDULE 10.20(A) LANDLORD WAIVERS None. EX-10.38 4 a5274680ex1038.txt EXHIBIT 10.38 EXHIBIT 10.38 AMENDMENT AND REAFFIRMATION OF LOAN DOCUMENTS AMENDMENT AND REAFFIRMATION OF LOAN DOCUMENTS, dated as of November 9, 2006 (the "AMENDMENT"), by and among (a) QUAKER FABRIC CORPORATION OF FALL RIVER, a Massachusetts corporation (the "BORROWER"), (b) QUAKER TEXTILE CORPORATION, a Massachusetts corporation, QUAKER FABRIC MEXICO, S.A. DE C.V., a Mexican corporation and QUAKER FABRIC CORPORATION, a Delaware corporation (collectively, the "GUARANTORS", and each individually, a "GUARANTOR"), and (c) BANK OF AMERICA, N.A., as administrative agent (the "ADMINISTRATIVE AGENT") for itself and such other lending institutions (the "LENDERS") which are or may become parties to that certain Amended and Restated Revolving Credit Agreement, dated as of the November 9, 2006 (as amended, modified, supplemented or restated and in effect from time to time, the "CREDIT AGREEMENT") by and among the Borrower, Quaker Fabric Corporation, the Lenders, the Administrative Agent, and Bank of America, N.A., as Issuing Bank and Cash Management Bank. Each capitalized term used herein without definition shall have the same meaning herein as in the Credit Agreement. WHEREAS, the Borrower and Quaker Fabric Corporation,, entered into that certain Revolving Credit and Term Loan Agreement dated as of May 18, 2005 (as amended, the "EXISTING CREDIT AGREEMENT"), among the Borrower, Quaker Fabric Corporation, the lenders named therein, and Bank of America, N.A., as administrative agent ; and WHEREAS, the Borrower, Quaker Fabric Corporation, the Lenders and the Administrative Agent have agreed to amend and restate the Existing Credit Agreement in its entirety pursuant to the Credit Agreement; and WHEREAS, the Borrower and the Guarantors are members of a group of related entities, the success of any of which is dependent in part on the success of the other members of such group; and WHEREAS, the Borrower, the Guarantors, the Lenders and the Administrative Agent are parties to the Loan Documents (as defined in the Existing Credit Agreement); and WHEREAS, it is a condition precedent to the effectiveness of the Credit Agreement that the Borrower and the Guarantors enter into this Amendment amending and reaffirming the terms of the Loan Documents; NOW, THEREFORE, in consideration of the foregoing premises, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. CREDIT AGREEMENT REFERENCES. The parties hereto acknowledge and agree that each reference to the Existing Credit Agreement, however so defined, in the Loan Documents (other than the Credit Agreement) from and after the date hereof shall mean the Existing Credit Agreement as amended and restated pursuant to the Credit Agreement and each of the Loan Documents (other than the Credit Agreement) is hereby amended by (a) substituting a reference to the Credit Agreement as herein defined in place of each reference to the Existing Credit Agreement (whether referred to by the full name of the Existing Credit Agreement or by any other name which refers thereto by definition); and (b) substituting for the definition of each capitalized term defined by reference to the Existing Credit Agreement the definition of such capitalized term set forth in the Credit Agreement, including without limitation the definition of the term "OBLIGATIONS". 2. AMENDMENTS TO SECURITY DOCUMENTS. Each of the Security Documents are hereby amended by adding the following language at the end of each such Security Document: "the representations, warranties and covenants of parties hereunder, and the rights and remedies of the Administrative Agent hereunder, are subject to the provisions of the Intercreditor Agreement." 3. CONTINUED VALIDITY OF LOAN DOCUMENTS. Except as specifically amended by this Amendment, the Loan Documents (as amended hereby and by the Credit Agreement) shall remain in full force and effect, and each of the Borrower and the Guarantors listed as signatories hereto reaffirms the continued validity of the Loan Documents (as amended hereby and by the Credit Agreement) and agrees and confirms that the Obligations are secured under and in accordance with the Security Documents. Each of the Loan Documents (as amended hereby and by the Credit Agreement) and this Amendment shall be read and construed as a single agreement. All references in each of the Loan Documents or any related agreement or instrument to the Loan Documents shall hereafter refer to each of the Loan Documents as amended hereby. 4. REPRESENTATIONS AND WARRANTIES. Each of the Borrower and the Guarantors represents and warrants that all the representations and warranties as set forth in each of the Loan Documents (as amended hereby and by the Credit Agreement) are true and correct in all material respects on and as of the date hereof. All such representations and warranties are hereby ratified, affirmed and incorporated herein by reference, with the same force and effect as though set forth herein in their entirety. 5. DEFINITIONS. Each capitalized term used herein without specific definition shall have the same meaning herein as in the Credit Agreement. 6. NO WAIVER. Nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligation of the Borrower or the Guarantors, or any right of the Administrative Agent or any Lenders consequent thereon. 7. COUNTERPARTS. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. 8. GOVERNING LAW. THIS AMENDMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAWS). 9. EFFECTIVENESS OF AMENDMENT. This Amendment shall become effective as of the date hereof upon receipt by the Administrative Agent of counterparts of this Amendment duly executed by each of the Borrower, the Guarantors, and the Administrative Agent and the occurrence of the Closing Date under the Credit Agreement. 2 Signature Page to Amendment and Reaffirmation of Loan Documents BUSDOCS/1591205.4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Reaffirmation of Loan Documents to be executed by their duly authorized officers as a sealed instrument as of the date first set forth above. QUAKER FABRIC CORPORATION OF FALL RIVER By:_________________________________ Name: Title: QUAKER TEXTILE CORPORATION By:_________________________________ Name: Title: QUAKER FABRIC MEXICO, S.A. DE C.V. By:_________________________________ Name: Title: QUAKER FABRIC CORPORATION By:_________________________________ Name: Title: 3 Signature Page to Amendment and Reaffirmation of Loan Documents BUSDOCS/1591205.4 BANK OF AMERICA, N.A., By:_________________________________ Name: Title: 4 EX-10.39 5 a5274680ex1039.txt EXHIBIT 10.39 EXHIBIT 10.39 ENVIRONMENTAL INDEMNITY AGREEMENT THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "AGREEMENT"), made as of November 9, 2006, Quaker Fabric Corporation of Fall River, a Massachusetts corporation (the "BORROWER"), Quaker Textile Corporation, a Massachusetts corporation ("QUAKER TEXTILE"), Quaker Fabric Mexico, S.A. de C.V., a Mexico corporation ("QUAKER MEXICO"), and Quaker Fabric Corporation, a Delaware corporation (the "PARENT", and together with Quaker Textile and Quaker Mexico, the "GUARANTORS") (each of the Borrower and Guarantors being sometimes referred to herein as an "INDEMNITOR" and collectively, as the "INDEMNITORS"), to Bank of America, N.A., as Administrative Agent (as defined in the Credit Agreement referred to below) and the lenders from time to time party to the Credit Agreement (the Administrative Agent and the Lenders, together with their officers, directors, employees, shareholders, members, successors and assigns, the "INDEMNITEES"). RECITALS WHEREAS, Indemnitor is the owner and/or lessee of the Real Property described on EXHIBIT A attached hereto, together with all improvements dated thereon (the "REAL PROPERTY") and has the exclusive rights to manage, control and operate the Real Property; WHEREAS, pursuant to that certain Amended and Restated Revolving Credit Agreement, dated as of the date hereof, by and among the Borrower, the Parent, the Administrative Agent, and the Lenders (as amended, modified and supplemented and in effect from time to time, the "CREDIT AGREEMENT", all capitalized terms used herein without definitions shall have the respective meanings ascribed to such terms in the Credit Agreement), at the request of the Borrower, the Indemnitees agreed to make loans (the "REVOLVING LOANS") to the Borrower, which Revolving Loans are secured, in part, by those certain mortgages, dated on or prior to the date hereof, by the Borrower to the Indemnitees encumbering the Real Property (as the same may be amended, modified, supplemented or restated and in effect from time to time, collectively, the "SECURITY INSTRUMENTS") ; WHEREAS, the Borrower has disclosed to the Indemnitees the existence of certain Environmental Conditions at the Real Property; and WHEREAS, the Lenders are unwilling to make Revolving Loans unless the Indemnitors indemnify the Indemnitees against liabilities arising under Environmental Laws (as herein defined), relating to those disclosed and any undisclosed Environmental Conditions at the Real Property. NOW, THEREFORE, in consideration of the making of the Revolving Loans by the Lenders and the covenants, agreements, representations and warranties set forth in this Agreement and the Credit Agreement, the parties hereby covenant, agree, represent and warrant as follows: 1. DEFINED TERMS. Unless the context otherwise requires, capitalized terms used but not otherwise defined herein shall have the meanings provided therefore in the Credit Agreement, and the following terms shall have the following meanings: "ENVIRONMENTAL CLAIM" means any notice, notification, claim, administrative, regulatory or judicial action, suit, judgment, demand, decree or other communication by any Person or Governmental Authority requiring, alleging or asserting liability with respect to the Indemnitors or the Real Property pursuant to Environmental Laws, whether for damages, contribution, indemnification, cost recovery, compensation, injunctive relief, investigatory, assessment, monitoring, response, remedial or cleanup costs, damages to natural resources, real property damage, personal injuries, fines or penalties arising out of, based on or resulting from or related to (a) the presence or alleged presence, Use, Release or threatened Release of any Hazardous Substances originating, at or from, migrating to or from or otherwise affecting, the Real Property or any part thereof, (b) any fact, circumstance, condition or occurrence forming the basis of any violation, or alleged violation, of any Environmental Law by the Indemnitors, the Real Property or any part thereof, or (c) any alleged injury or threat of injury to health, safety or the environment by the Indemnitors or relating the Real Property or any part thereof. "ENVIRONMENTAL CONDITIONS" means any environmental condition (a) constituting or which with the passage of time or lack of Remediation would or would likely constitute a violation of Environmental Laws, including but not limited to the presence of any Hazardous Substances requiring reporting and/or the performance of response actions under Massachusetts General Laws Chapter 21E, or (b) that requires reporting, investigation, assessment, monitoring, remediation or other response actions or would allow any Governmental Authority to record a lien or encumbrance in the land records with respect to the Real Property or an Environmental Claim. Submission to the Massachusetts Department of Environmental Protection of a Class A or B Response Action Outcome Statement by a Licensed Site Professional (as defined in Mass. Gen. L. ch. 21E, ss.2) pursuant to, and in compliance with, the Massachusetts Contingency Plan (310 CMR 40.0000) shall be deemed confirmation that any Environmental Condition(s) addressed in such Response Action Outcome Statement no longer exists. "ENVIRONMENTAL LAWS" means any judgment, decree, order, law, license, rule, permit or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any other state, local, foreign or common law, statute, regulation, ordinance, order, decree or any other binding requirement of any Governmental Authority relating to health, safety or the environment. "FORECLOSURE DATE" has the meaning provided in SECTION 2(E) hereof. "HAZARDOUS SUBSTANCE" means any hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) and any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws "KNOWN ENVIRONMENTAL CONDITIONS" has the meaning provided in SECTION 2(D) hereof. "LOSSES" has the meaning provided in SECTION 2(A) hereof. "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, or any other entity, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. "RELEASE" means any past or present release, spill, emission, leaking, pumping, injecting, pouring, emptying, escaping, dumping, deposit, disposal, discharge, dispersal, leaching, migration into the indoor or outdoor environment of Hazardous Substances, including, without limitation, the movement of Hazardous Substances through ambient air, soil, surface water, sediments, ground water, wetlands, land or subsurface strata. "REMEDIATION" means the investigation, assessment, monitoring, removal, abatement, treatment, risk assessment, institutional controls, deed restrictions and/or activity and use limitations, containment, payment of compliance or oversight fees, and all other activities required under Environmental Laws to respond to an Environmental Condition. "USE" means, with respect to any Hazardous Substance, the generation, manufacture, processing, distribution, handling, use, treatment, recycling or storage of such Hazardous Substances or transportation to or from the Real Property by any Person of such Hazardous Substances. 2. INDEMNIFICATION. (a) The Indemnitors agree to indemnify, reimburse, defend (with counsel reasonably satisfactory to Indemnitees), and hold harmless the Indemnitees from and against all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, interest, reasonable costs and expenses, including, without limitation, interest, penalties, reasonable attorneys' fees, reasonable disbursements and expenses, diminution in the value of the Real Property (subject to subsection (e) below) and reasonable consultants' and expert witness fees, disbursements, fines, penalties, fees and expenses, including costs of reporting, investigation, assessment, monitoring, remediation or other response actions (collectively, the "LOSSES"), asserted against, resulting to, imposed on, or incurred by Indemnitees directly or indirectly in connection with any of the following: (i) any events, circumstances, or conditions which relate to, form or are alleged to form the basis for an Environmental Claim; (ii) the presence, Use, Release, or threatened Release of Hazardous Substances at, on, in, under, from or otherwise affecting the Real Property; (iii) any violation or alleged violation of Environmental Laws by the Indemnitors or with respect to the Real Property, or any act or omission causing an Environmental Condition; (iv) the material breach of any representation, warranty or covenant set forth in Sections 6.19, 7.5.6, 7.15.4, 8.9, and 16 of the Credit Agreement relating to Environmental Claims; or (v) any reasonable costs and expenses, including reasonable attorneys' fees and disbursements incurred by any Indemnitee in (x) exercising any right, power or remedy conferred by this Agreement, or (y) enforcing the Indemnitors' obligations pursuant hereto. (b) The indemnity provided in this Agreement is not intended to be and shall not be included in any exculpation of the Indemnitors from personal liability provided in the Credit Agreement or in any of the other Loan Documents. Nothing in this Agreement shall be deemed to deprive the Indemnitees of any rights or remedies provided to the Indemnitees elsewhere in this Agreement or in the Loan Documents or otherwise available to them under law or at equity. (c) The Indemnitors waive and release the Indemnitees from any rights or defenses the Indemnitors may have under common law or Environmental Laws for any liability arising from or resulting from the presence, Use or Release of Hazardous Substances, except with respect to an Indemnitee to the extent directly and solely caused by that Indemnitee's gross negligence, criminal acts, fraud or willful misconduct. (d) Indemnitors acknowledge that Environmental Conditions have been identified at or with respect to certain Real Properties as set forth on the Environmental Report (collectively, the "KNOWN ENVIRONMENTAL CONDITIONS"). In addition to and without limiting any of the Indemnitors' obligations hereunder, Indemnitors shall undertake a Remediation of the Known Environmental Conditions to the extent required by Environmental Laws. Submission to the Massachusetts Department of Environmental Protection of a Class A or B Response Action Outcome Statement by a Licensed Site Professional (as defined in Mass. Gen. L. ch. 21E, ss.2) pursuant to, and in compliance with, the Massachusetts Contingency Plan (310 CMR 40.0000) shall be deemed confirmation that any Environmental Condition(s) addressed in such Response Action Outcome Statement no longer exists for the purposes of this Section 2(d). (e) With respect to any Losses which are attributable to a diminution in value of the Real Property, such Losses shall: (i) be calculated based upon the value of the Real Property determined as of the date of foreclosure of the applicable Security Instrument, exercise of power of sale under the Security Instrument, or conveyance in lieu thereof (such date, the "Foreclosure Date"), and (ii) in no event be greater than the excess, if any, of (x) the amount of the unpaid principal balance of the Revolving Loans, together with unpaid interest thereon (including interest accruing at the Default Rate), fees and prepayment premiums (if any), and all other costs, amounts, fees and expenses (including reasonable attorney's fees) due and owing under the Loan Documents on the Foreclosure Date, over (y) the value of the Real Property on the Foreclosure Date; PROVIDED, that if an Environmental Claim or Release is not existing or known on the Foreclosure Date (but only comes into existence and/or becomes known thereafter), then the value of the Real Property on the Foreclosure Date shall be deemed to have not been affected by such Environmental Claim or Release. 3. PAYMENT. All payments due to the Indemnitees under this Agreement shall be payable to the Indemnitees within ten (10) days after written demand therefor, and shall bear interest at the Default Rate from the date such payment is due until the date of payment. 4. GOVERNING LAW. The parties agree that this Agreement is a contract under the laws of the Commonwealth of Massachusetts (excluding the laws applicable to conflicts of law or choice of law) and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts and any applicable law of the United States of America. 5. COURT PROCEEDING. Any legal suit, action or proceeding against the Indemnitees or Indemnitors arising out of or relating to this Agreement shall be instituted in any federal or state court in the Commonwealth of Massachusetts, and the Indemnitors waive any objection which they may now or hereafter have to the laying of venue of any such suit, action or proceeding, and the Indemnitors hereby irrevocably submit to the jurisdiction of any such court in any suit, action or proceeding. 6. MODIFICATION, WAIVER IN WRITING. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement or consent to any departure by the Indemnitors therefrom, shall be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on the Indemnitors shall entitle the Indemnitors to any other or future notice or demand in the same, similar or other circumstances. 7. DELAY NOT A WAIVER. Neither any failure nor any delay on the part of the Indemnitees to enforce the demand or strict performance of any term, condition, covenant or agreement or exercise any right, power, remedy or privilege hereunder, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Indemnitees shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, or to declare a default for failure to effect prompt payment of any such other amount. 8. NOTICES. All notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) hand delivery, with proof of attempted delivery, (b) certified or registered United States mail, postage prepaid, (c) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or (d) by telecopier (with answerback acknowledged) provided that such telecopied notice must also be delivered by one of the means set forth in (a), (b) or (c) above, addressed If to Indemnitees: Bank of America, N.A., as Administrative Agent 1 Federal Street Boston, MA 02110 Attn: Matthew T. O'Keefe Telecopy No.: (617) 654-1167 If to Indemnitors: Quaker Fabric Corporation of Fall River 941 Grinnell Street Fall River, MA 02721 Attn: Chief Financial Officer Telecopy No.: (508) 678-2656 or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this SECTION 8. A notice shall be deemed to have been given: (i) in the case of hand delivery, at the time of delivery; (ii) in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; (iii) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day; or (iv) in the case of telecopier, upon receipt of answerback confirmation, provided that such telecopied notice was also delivered as required in this SECTION 8. A party receiving a notice who does not comply with the technical requirements for notice under this SECTION 8 may elect to waive any deficiencies and treat the notice as having been properly given. 9. TRIAL BY JURY. EACH OF THE INDEMNITORS AND THE INDEMNITEES, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED IN CONNECTION HEREWITH AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY. 10. HEADING. The Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. 11. ASSIGNMENT. The Indemnitees shall have the right to assign this Agreement and the obligations hereunder to any Person who is from time to time the holder of the Revolving Loans, but not otherwise. All references to "Indemnitees" hereunder shall be deemed to include the successors and assigns of the Indemnitees, including any trustee or servicer. 12. SEVERABILITY. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 13. HEADING AND RECITALS. The information set forth in the recitals hereof are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof. 14. ESTOPPEL CERTIFICATES. Indemnitors and Indemnitees each hereby agree at any time, but not more than one time each calendar year (unless a Default or Event of Default exists or is continuing, in which case, as required by the Administrative Agent in its sole discretion), and upon not less than thirty (30) days prior written notice by Indemnitor or Indemnitees to execute, acknowledge and deliver to the party specified in such notice, a statement, in writing, certifying that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same, as modified, is in full force and effect and stating the modifications hereto), and stating whether or not, to the best knowledge of such certifying party, there exists any matter giving rise to a claim under SECTION 2, and, if so, specifying each such matter. 15. WAIVER. Indemnitors hereby waive each of the following, to the fullest extent allowed by applicable law: (a) laches as a defense to any action brought by any Indemnitee against the Indemnitors; (b) any defense based upon: (i) the unenforceability or invalidity of all or any part of any security or other indemnity for the obligations of the Indemnitors hereunder or the lack of any perfection or failure of priority of any security for the obligations of the Indemnitors hereunder; or (ii) any act or omission of Indemnitor or any other Person that directly or indirectly results in the discharge or release of the Indemnitors or any other Person or any security for the obligations of the Indemnitors hereunder, other than the gross negligence, willful misconduct, criminal acts or fraud of the Indemnitees, any deed of trust trustee or any other Indemnitee; or 5 (iii) any disability or any other defense of any Person with respect to its obligations hereunder, whether consensual or arising by operation of law or any bankruptcy, insolvency or debtor-relief proceeding, or from any similar cause; (c) any right (whether now or hereafter existing) to require any Indemnitee, as a condition to the enforcement of this Agreement, to proceed against any other indemnitor, guarantor or any other Person, or to proceed against or exhaust any security for the obligations of the Indemnitors hereunder; (d) all suretyship defenses and rights of every nature otherwise available under any requirement of law; (e) all defenses arising as a result of the exercise of nonjudicial or judicial remedies against the Indemnitors, or any other Person, or any security for the obligations of the Indemnitors hereunder, or arising out of any impairment of the Indemnitors' or any other Person's right of subrogation, reimbursement or contribution against the Indemnitors or any other Person, or any security for the obligations of the Indemnitors hereunder that may arise from the exercise of any such remedies; (f) without limiting the generality of the foregoing or any other provision hereof, any and all benefits under any requirement of Law, except any rights of subrogation which the Indemnitors may have, provided that the indemnity provided for hereunder shall neither be contingent upon the existence of any such rights of subrogation or subject to any claims or defenses whatsoever which may be asserted in connection with the enforcement or attempted enforcement of such subrogation rights including, without limitation, any claims that such subrogation rights were abrogated by any acts of any Indemnitee, provided that the Indemnitors agree to postpone any subrogation rights with respect to any Collateral securing the Revolving Loans until the Revolving Loans shall have been paid in full and the commitments of the Lenders under the Credit Agreement have been terminated. 16. SURVIVAL. The indemnity provided in this Agreement shall survive the repayment in full of the Obligations, or transfer of title to any of the Real Property to the Indemnitees or other transferee (to the extent such transferee is not an Affiliate of Indemnitors), in foreclosure or otherwise. Notwithstanding anything contained herein or in any of the other Loan Documents to the contrary, the Indemnitors will not be liable under this Agreement for any Environmental Claims which give rise to liability under SECTION 2(A) where such event first occurs following the effective date of a transfer of title of any parcel of Real Property to the Indemnitees or other transferee (to the extent such transferee is not an Affiliate of Indemnitors), in foreclosure or otherwise. 17. TIME OF THE ESSENCE. Time is of the essence with respect to each and every covenant, agreement and obligation of the Indemnitors under this Agreement. 18. LIABILITY. (a) The liability of the Indemnitors under this Agreement shall in no way be limited or impaired by (i) any amendment, modification, or restatement of or supplement to the Loan Documents, (ii) any extensions of time for or acceleration or alteration of payment or performance required by any of the Loan Documents or any waiver of such payment or performance, or (iii) the release or substitution in whole or in part, of any security for the Obligations; and in any of such cases, whether with or without notice to the Indemnitors and with or without consideration. (b) The obligations of the Indemnitors hereunder are independent of the obligations of any other Person, including any other indemnitor, and any Indemnitee may enforce any of its rights hereunder independently of any other right or remedy it or any other Indemnitee may at any time hold with respect to the obligations indemnified against hereby or any other security or other indemnity for such obligations. The obligations of the Indemnitors set forth herein constitute the full recourse obligations of the Indemnitors enforceable against the Indemnitors to the full extent of all its assets and properties, notwithstanding any provisions in the Loan Documents to the contrary. 19. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. [SIGNATURES ON THE FOLLOWING PAGE] IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written. INDEMNITORS: QUAKER FABRIC CORPORATION OF FALL RIVER QUAKER FABRIC CORPORATION QUAKER TEXTILE CORPORATION QUAKER FABRIC MEXICO, S.A. DE C.V. By: /s/ Paul J. Kelly ---------------------------------------- Name: Paul J. Kelly Title: Vice President Finance ON BEHALF OF THE INDEMNITEES: BANK OF AMERICA, N.A., As Administrative Agent By: ----------------------------------------- Name: Title: EXHIBIT A SCHEDULE OF REAL PROPERTIES 1. 941 Grinnell Street, Fall River, MA 2. 1092 Davol Street, Fall River, MA 3. 81 Ferry Street, Fall River, MA 4. 1450 Brayton Ave, Fall River, MA 5. 387 Quarry Street, Fall River, MA 6. Godfrey Road, Verona, MS 7. 994 Jefferson Street (Bleachery Pond), Fall River, MA 8. 81 Commerce Drive, Fall River, MA EX-10.40 6 a5274680ex1040.txt EXHIBIT 10.40 Exhibit 10.40 TERM LOAN AGREEMENT DATED AS OF NOVEMBER 9, 2006 AMONG QUAKER FABRIC CORPORATION OF FALL RIVER, AS BORROWER, 1903 DEBT FUND, LP, AND THE OTHER LENDING INSTITUTIONS LISTED ON SCHEDULE 1 HERETO, AND GB MERCHANT PARTNERS, LLC, AS ADMINISTRATIVE AGENT
TABLE OF CONTENTS 1. DEFINITIONS AND RULES OF INTERPRETATION..................................................1 1.1.DEFINITIONS 1 1.2.RULES OF INTERPRETATION...........................................................21 2. TERM LOANS..............................................................................22 2.1.REAL PROPERTY TERM LOAN...........................................................22 2.2.EQUIPMENT TERM LOAN...............................................................22 2.3.NOTES.............................................................................22 2.4.INTEREST ON LOANS.................................................................23 3. REPAYMENT OF LOANS......................................................................23 3.1.REAL PROPERTY TERM LOAN...........................................................23 3.1.1. MINIMUM AMORTIZATION PAYMENTS........................................23 3.1.2. LATE SALE AMORTIZATION PAYMENTS......................................24 3.1.3. MANDATORY PREPAYMENTS OF THE REAL PROPERTY TERM LOAN.................24 3.1.4. MANDATORY PREPAYMENTS OF THE EQUIPMENT TERM LOAN.....................26 3.1.5. ADDITIONAL TERM LOAN PREPAYMENTS.....................................26 3.1.6. OPTIONAL PREPAYMENTS OF TERM LOANS...................................27 3.1.7. APPLICATION OF PREPAYMENTS...........................................28 3.1.8. MATURITY DATE........................................................28 4. ENVIRONMENTAL AND PLANT CONSOLIDATION ESCROWS...........................................28 4.1.ENVIRONMENTAL ESCROW..............................................................28 4.2.PLANT CONSOLIDATION ESCROW........................................................29 5. CERTAIN GENERAL PROVISIONS..............................................................30
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5.1.CLOSING FEE.......................................................................30 5.2.FUNDS FOR PAYMENTS................................................................30 5.2.1. PAYMENTS TO ADMINISTRATIVE AGENT.....................................30 5.2.2. NO OFFSET, ETC.......................................................30 5.2.3. NON-U.S. LENDERS.....................................................30 5.3.COMPUTATIONS 31 5.4.INTEREST LIMITATION...............................................................31 5.5.INTENTIONALLY OMITTED.............................................................32 5.6.INTENTIONALLY OMITTED.............................................................32 5.7.ADDITIONAL COSTS, ETC.............................................................32 5.8.CAPITAL ADEQUACY..................................................................33 5.9.CERTIFICATE 34 5.10. INTENTIONALLY OMITTED................................................34 5.11. INTEREST AFTER DEFAULT...............................................34 5.12. COLLATERAL SECURITY AND GUARANTIES...................................34 6. REPRESENTATIONS AND WARRANTIES..........................................................34 6.1.CORPORATE AUTHORITY, ETC..........................................................34 6.1.1. EXISTENCE, GOOD STANDING.............................................34 6.1.2. AUTHORIZATION........................................................35 6.1.3. DELIVERY.............................................................36 6.1.4. ENFORCEABILITY.......................................................36 6.2.FINANCIAL STATEMENTS; PROJECTIONS.................................................36 6.3.SOLVENCY...........................................................................37 6.4.NO MATERIAL ADVERSE CHANGES, ETC.................................................37 6.5.ABSENCE OF MORTGAGES AND LIENS....................................................37 6.6.FRANCHISES, PATENTS, COPYRIGHTS, ETC..............................................37 6.7.LITIGATION.........................................................................37
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6.8.NO MATERIALLY ADVERSE CONTRACTS, ETC...............................................38 6.9.COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.......................................38 6.10. TAX STATUS...........................................................38 6.11. NO DEFAULT OR EVENT OF DEFAULT.......................................38 6.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS..........................38 6.13. EMPLOYEE BENEFIT PLANS...............................................39 6.13.1. IN GENERAL...........................................................39 6.13.2. TERMINABILITY OF WELFARE PLANS.......................................39 6.13.3. GUARANTEED PENSION PLANS.............................................39 6.13.4. MULTIEMPLOYER PLANS..................................................39 6.14. REGULATIONS U AND X..................................................40 6.15. TRUE COPIES OF GOVERNING DOCUMENTS...................................40 6.16. FISCAL YEAR..........................................................40 6.17. PERFECTION OF SECURITY INTERESTS.....................................40 6.18. SUBSIDIARIES, ETC....................................................40 6.19. ENVIRONMENTAL COMPLIANCE.............................................40 6.20. BANK ACCOUNTS........................................................42 6.21. LABOR CONTRACTS......................................................42 6.22. DISCLOSURE...........................................................42 6.23. TITLE TO PROPERTIES; LEASES..........................................43 6.23.1. GENERAL..............................................................43 6.23.2. REAL PROPERTY........................................................43 6.24. CERTAIN TRANSACTIONS.................................................44 6.25. FIXED ASSETS.........................................................44 6.26. FOREIGN ASSETS CONTROL REGULATIONS, ETC..............................44
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6.27. COMPLIANCE...........................................................44 6.28. CONTRACTS............................................................45 6.29. UTILITIES AND PUBLIC ACCESS..........................................45 6.30. PHYSICAL CONDITION...................................................45 7. AFFIRMATIVE COVENANTS OF THE PARENT AND THE BORROWER....................................45 7.1.PUNCTUAL PAYMENT..................................................................45 7.2.MAINTENANCE OF OFFICE.............................................................45 7.3.RECORDS AND ACCOUNTS..............................................................46 7.4.FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION................................46 7.5.NOTICES...........................................................................48 7.5.1. DEFAULTS.............................................................48 7.5.2. NOTICE OF LITIGATION AND JUDGMENTS...................................48 7.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL.............................49 7.5.4. NOTICES CONCERNING INVENTORY COLLATERAL..............................49 7.5.5. NOTIFICATION OF ADDITIONAL INTELLECTUAL PROPERTY RIGHTS..............49 7.5.6. ENVIRONMENTAL EVENTS.................................................50 7.5.7. NOTIFICATION REGARDING THE REAL PROPERTY.............................50 7.6.LEGAL EXISTENCE; MAINTENANCE OF PROPERTIES........................................50 7.7.INSURANCE.........................................................................50 7.8.TAXES.............................................................................51 7.9.COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS............................51 7.10. EMPLOYEE BENEFIT PLANS...............................................51 7.11. USE OF PROCEEDS......................................................52 7.12. CERTAIN CHANGES......................................................52 7.13. CONDUCT OF BUSINESS..................................................52
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7.14. FURTHER ASSURANCES...................................................52 7.15. INSPECTION OF PROPERTIES AND BOOKS, ETC..............................52 7.15.1. GENERAL..............................................................52 7.15.2. APPRAISALS...........................................................52 7.15.3. COMMUNICATIONS WITH ACCOUNTANTS......................................53 7.15.4. ENVIRONMENTAL ASSESSMENTS............................................53 7.16. ADDITIONAL MORTGAGED PROPERTY........................................53 7.17. INTENTIONALLY OMITTED................................................54 7.18. DOMESTIC SUBSIDIARIES................................................54 7.19. LANDLORD WAIVERS.....................................................54 7.20. INTENTIONALLY OMITTED................................................54 7.21. FINANCIAL CONSULTANT.................................................54 7.22. POST CLOSING OBLIGATIONS.............................................54 8. NEGATIVE COVENANTS OF THE PARENT AND THE BORROWER.......................................54 8.1.INVESTMENTS.......................................................................54 8.2.RESTRICTIONS ON INDEBTEDNESS......................................................55 8.3.RESTRICTIONS ON LIENS.............................................................56 8.3.1. PERMITTED LIENS......................................................56 8.3.2. RESTRICTIONS ON NEGATIVE PLEDGES AND UPSTREAM LIMITATIONS............57 8.4.RESTRICTED PAYMENTS...............................................................58 8.5.MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS...................................58 8.5.1. MERGERS AND ACQUISITIONS.............................................58 8.5.2. DISPOSITION OF ASSETS................................................58 8.6.SALE AND LEASEBACK................................................................58 8.7.CHANGE OF FISCAL YEAR.............................................................59
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8.8.EMPLOYEE BENEFIT PLANS............................................................59 8.9.COMPLIANCE WITH ENVIRONMENTAL LAWS................................................59 8.10. CHANGE IN TERMS OF GOVERNING DOCUMENTS...............................59 8.11. CREATION OF SUBSIDIARIES.............................................60 8.12. TRANSACTIONS WITH AFFILIATES.........................................60 8.13. INTENTIONALLY OMITTED................................................60 8.14. BUSINESS ACTIVITIES..................................................61 9. FINANCIAL COVENANTS OF THE PARENT AND THE BORROWER......................................61 9.1.FIXED CHARGE COVERAGE RATIOS......................................................61 9.2.CAPITAL EXPENDITURES..............................................................61 10. CLOSING CONDITIONS.....................................................................62 10.1. LOAN DOCUMENTS.......................................................62 10.2. CERTIFIED COPIES OF GOVERNING DOCUMENTS..............................62 10.3. CORPORATE OR OTHER ACTION............................................62 10.4. INCUMBENCY CERTIFICATE...............................................62 10.5. VALIDITY OF LIENS....................................................62 10.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS.......................62 10.7. CERTIFICATES OF INSURANCE............................................62 10.8. INTENTIONALLY OMITTED................................................63 10.9. BORROWING BASE CERTIFICATES AND COLLATERAL UPDATE CERTIFICATE........63 10.10. ACCOUNTS RECEIVABLE AGING REPORT.....................................63 10.11. PAYMENT OF CLOSING FEES..............................................63 10.12. INTENTIONALLY OMITTED................................................63 10.13. OPINIONS OF COUNSEL..................................................63 10.14. SURVEY, TAXES, ETC...................................................63
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10.15. TITLE INSURANCE......................................................63 10.16. HAZARDOUS WASTE ASSESSMENTS..........................................64 10.17. INTENTIONALLY OMITTED................................................64 10.18. NO MATERIAL ADVERSE CHANGE...........................................64 10.19. LANDLORD WAIVERS.....................................................64 10.20. LANDLORD CONSENTS....................................................64 10.21. COLLATERAL EXAMINATIONS/APPRAISALS...................................64 10.22. FINANCIAL STATEMENT AND PROJECTIONS..................................64 10.23. REFERENCES...........................................................64 10.24. INTERCREDITOR AGREEMENT ET. AL.......................................64 10.25. NO LEGAL.............................................................65 10.27. IMPEDIMENT...........................................................65 10.27. PROCEEDINGS AND DOCUMENTS............................................65 10.28. REPRESENTATIONS TRUE; NO DEFAULT OR EVENT OF DEFAULT.................65 10.29. EXCHANGE LIMITATIONS.................................................65 11. INTENTIONALLY OMITTED..................................................................65 12. EVENTS OF DEFAULT; ACCELERATION; ETC...................................................65 12.1. EVENTS OF DEFAULT AND ACCELERATION...................................65 12.2. INTENTIONALLY OMITTED................................................68 12.3. REMEDIES.............................................................68 12.4. DISTRIBUTION OF COLLATERAL PROCEEDS..................................69 13. SETOFF.................................................................................70 14. THE ADMINISTRATIVE AGENT...............................................................71 14.1. AUTHORIZATION........................................................71 14.2. EMPLOYEES AND ADMINISTRATIVE AGENTS..................................72
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14.3. NO LIABILITY.........................................................72 14.4. NO REPRESENTATIONS...................................................72 14.4.1. GENERAL..............................................................72 14.4.2. CLOSING DOCUMENTATION, ETC...........................................72 14.5. PAYMENTS.............................................................73 14.5.1. PAYMENTS TO ADMINISTRATIVE AGENT.....................................73 14.5.2. DISTRIBUTION BY ADMINISTRATIVE AGENT.................................73 14.5.3. DELINQUENT LENDERS...................................................73 14.6. INTENTIONALLY OMITTED................................................74 14.7. INDEMNITY............................................................74 14.8. ADMINISTRATIVE AGENT AS LENDER.......................................74 14.9. RESIGNATION..........................................................74 14.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT.......................74 14.11. DUTIES IN THE CASE OF ENFORCEMENT....................................74 14.12. ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM........................75 15. EXPENSES...............................................................................76 16. INDEMNIFICATION........................................................................77 17. SURVIVAL OF COVENANTS, ETC.............................................................77 18. ASSIGNMENT AND PARTICIPATION...........................................................78 18.1. GENERAL CONDITIONS...................................................78 18.2. ASSIGNMENTS..........................................................78 18.3. REGISTER.............................................................79 18.4. PARTICIPATIONS.......................................................79 18.5. PAYMENTS TO PARTICIPANTS.............................................80 18.6. MISCELLANEOUS ASSIGNMENT PROVISIONS..................................80 18.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE PARENT...................80
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18.8. NEW NOTES............................................................81 18.9. SPECIAL PURPOSE FUNDING VEHICLE......................................81 19. NOTICES, ETC...........................................................................82 20. GOVERNING LAW..........................................................................82 21. HEADINGS...............................................................................83 22. COUNTERPARTS...........................................................................83 23. ENTIRE AGREEMENT, ETC..................................................................83 24. WAIVER OF JURY TRIAL...................................................................83 25. CONSENTS, AMENDMENTS, WAIVERS, ETC.....................................................84 26. SEVERABILITY...........................................................................85 27. CONFIDENTIALITY........................................................................86 28. USA PATRIOT ACT........................................................................87 29. DESIGNATION OF PERMITTED LIENS.........................................................87
9 SCHEDULES AND EXHIBITS Schedule 1 Lenders, Commitment Percentages, Lending Offices Schedule 1.1(a) Mortgaged Properties Schedule 6.6 Intellectual Property Schedule 6.7 Litigation Schedule 6.8 Material Adverse Contracts Schedule 6.10 Municipal Taxes Schedule 6.13.1 Employment Matters Schedule 6.18 Subsidiaries Schedule 6.19(a) Environmental Notices Schedule 6.19(b) Material Environmental Notices Schedule 6.19(c Hazardous Substances Schedule 6.19(e) . Material Environmental Reports Schedule 6.20 Bank Accounts Schedule 6.21 Labor Contracts Schedule 6.23 Title to Properties Schedule 6.25 Fixed Assets Schedule 8.1 Existing Investments Schedule 8.2 Existing Indebtedness Schedule 8.3.1 Existing Liens Schedule 10.20(a). Landlord Waivers Exhibit A Form of Compliance Certificate Exhibit B Form of Assignment and Acceptance Exhibit C Form of Term Note 10 TERM LOAN AGREEMENT THIS TERM LOAN AGREEMENT dated as of November 9, 2006 is by and among Quaker Fabric Corporation of Fall River, a Massachusetts corporation (the "BORROWER"), Quaker Fabric Corporation, a Delaware corporation (the "PARENT"), 1903 Debt Fund, LP and the other Lenders from time to time party hereto, and GB Merchant Partners, LLC, a Delaware limited liability company, as Administrative Agent. The parties hereto agree as follows: 1. DEFINITIONS AND RULES OF INTERPRETATION. 1.1. DEFINITIONS. The following terms shall have the meanings set forth in this SECTION 1 or elsewhere in the provisions of this Term Loan Agreement referred to below: ADJUSTED NET PROCEEDS. With respect to any Real Property, the sum of (i) the Net Proceeds realized by the Borrower on account of the sale of such Real Property, plus (ii) the aggregate amount of Late Sale Amortization Payments paid by the Borrower with respect to such Real Property, if any, plus (iii) the aggregate amount of any Sale Proceeds Credit previously applied to reduce such Late Sale Amortization Payments, if any, plus (iv) the then outstanding Sale Proceeds Credit Balance, if any. ADJUSTED REAL PROPERTY VALUE. With respect to each parcel of Real Property, an amount equal to 50% of the Real Property Appraisal Value of such parcel of Real Property. ADMINISTRATIVE AGENT. GB Merchant Partners, LLC, acting as administrative agent for the Lenders, and each other person appointed as the successor Administrative Agent in accordance with SECTION 14.9. ADMINISTRATIVE QUESTIONNAIRE. An Administrative Questionnaire in a form supplied by the Administrative Agent. ADMINISTRATIVE AGENT'S OFFICE. The Administrative Agent's office located at 101 Huntington Ave., Boston MA 02109, or at such other location as the Administrative Agent may designate from time to time. ADMINISTRATIVE AGENT'S SPECIAL COUNSEL. Greenberg Traurig, LLP, or such other counsel as may be approved by the Administrative Agent. AFFILIATE. With respect to any Person, any other Person which directly or indirectly, controls, is controlled by or is under common control with such Person. "Control" means the power, directly or indirectly, (a) to vote ten percent (10%) or more of the Capital Stock (on a fully diluted basis) of a Person having ordinary voting power for the election of directors, managing members or general partners (as applicable); or (b) to direct or cause the direction of the management and policies of a Person (whether by contract or otherwise). ALLOCATED ESCROW AMOUNT. The total amount of Environmental Escrow Funds allocated to each Remediation Location under the Business Plan. AMORTIZATION PAYMENT(S). Collectively, all required Minimum Amortization Payments and Late Sale Amortization Payments. APPLICABLE MARGIN. With respect to the Real Property Term Loans and the Equipment Term Loans, 7.75% per annum. APPLICABLE PENSION LEGISLATION. At any time, any pension or retirement benefits legislation (be it national, federal, provincial, territorial or otherwise) then applicable to the Parent or any of its Subsidiaries. APPROVED FUND. Any Fund that is administered or managed 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. APPROVED PLANT C RELOCATION COSTS. All costs and expenses incurred by the Parent and its Subsidiaries associated with the relocation and consolidation of the operations of the Parent and its Subsidiaries of Plant C, as are reasonably satisfactory to the Administrative Agent. ASSIGNMENT AND ACCEPTANCE. An assignment and acceptance entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by SECTION 18.2), and accepted by the Administrative Agent, in substantially the form of EXHIBIT B or any other form approved by the Administrative Agent. AVAILABILITY RESERVE. The "Availability Reserve" under and as defined in the Revolving Credit Agreement. BALANCE SHEET DATE. September 30, 2006. BORROWER. As defined in the preamble hereto. BORROWING BASE CERTIFICATE. Each Borrowing Base Certificate delivered by the Borrower to the Revolving Credit Agent and/or Revolving Credit Lenders pursuant to the Revolving Credit Agreement. BUSINESS DAY. Any day on which commercial banking institutions in Boston, Massachusetts, are open for the transaction of banking business. BUSINESS PLAN. The "Quaker Fabric Bank Presentation" by Alvarez and Marsal, dated May 19, 2006, as supplemented on September 29, 2006, October 30, 2006, and November 9, 2006, as the same may be updated from time to time; PROVIDED, HOWEVER, that any additional change in the projected sale proceeds for any parcel of Real Property reflected therein may only be made with the express written consent of the Administrative Agent. CAPITAL ASSETS. Fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises and goodwill); PROVIDED that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with GAAP. 2 CAPITAL EXPENDITURES. Amounts paid or Indebtedness incurred by the Parent or any Subsidiary of the Parent in connection with (i) the purchase or lease by the Parent or such Subsidiary of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with GAAP or (ii) the lease of any assets by the Parent or such Subsidiary as lessee under any Synthetic Lease to the extent that such assets would have been Capital Assets had the Synthetic Lease been treated for accounting purposes as a Capitalized Lease. CAPITALIZED LEASES. Leases under which the Parent or any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP. CAPITAL STOCK. Any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing (including convertible debt instruments). CASUALTY EVENT. With respect to any property (including any interest in property) of the Parent or any Subsidiary of the Parent, any loss of, damage to, or condemnation or other taking of, such property for which the Parent or such Subsidiary receives insurance proceeds, proceeds of a condemnation award or other compensation. CHANGE OF CONTROL. An event or series of events by which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than Nortex Holdings, Inc. or any Affiliate thereof, becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have "beneficial ownership" of all securities that such person or group has the right to acquire (such right, an "option right"), whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 30% or more of the equity securities of the Parent entitled to vote for members of the board of directors or equivalent governing body of the Parent on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right); (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Parent ceases to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors); or 3 (c) any Person, other than Nortex Holdings, Inc. or any Affiliate thereof, or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Parent, or control over the equity securities of the Parent entitled to vote for members of the board of directors or equivalent governing body of the Parent on a fully-diluted basis (and taking into account all such securities that such Person or group has the right to acquire pursuant to any option right) representing 30% or more of the combined voting power of such securities. CLOSING DATE. The first date on which the conditions set forth in SECTIONS 10 have been satisfied and any Term Loan is to be made hereunder. CLOSING FEE. See SECTION 5.1. CODE. The Internal Revenue Code of 1986. COLLATERAL. All of the property, rights and interests of (a) the Borrower, (b) the Parent, (c) each Subsidiary of the Parent, and (d) all other Guarantors from time to time party to the Guaranties that are or are intended to be subject to the Liens created by the Security Documents. COLLATERAL UPDATE CERTIFICATE. Each Collateral Update Certificate delivered by the Borrower to the Revolving Credit Agent and/or Revolving Credit Lenders pursuant to the Revolving Credit Agreement. COMMITMENT. With respect to each Lender, the Dollar amount set forth on SCHEDULE 1 hereto as the amount of such Lender's commitment (a) to make the Equipment Term Loan to the Borrower, and (b) to make the Real Property Term Loan to the Borrower. COMMITMENT PERCENTAGE. With respect to each Lender, the percentage set forth on SCHEDULE 1 hereto reflecting such Lender's commitment to make the Equipment Term Loan and the Real Property Term Loan. COMPLIANCE CERTIFICATE. See SECTION 7.4(D). CONSOLIDATED OR CONSOLIDATED. With reference to any term defined herein, shall mean that term as applied to the accounts of the Parent and its Subsidiaries, consolidated in accordance with GAAP. 4 CONSOLIDATED EBITDA. For any period, (a) the net income (or deficit) of the Parent and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP) for such period, plus (b) to the extent deducted in calculating net income (i) income taxes accrued during such period, (ii) interest and fees in respect of Indebtedness (including amounts accrued or paid in respect of Derivative Agreements) during such period (whether or not actually paid in cash during such period), (iii) depreciation, amortization and other non-cash charges (including asset impairment charges) accrued for such period, (iv) extraordinary losses during such period, (v) costs and expenses incurred by the Parent and its Subsidiaries in connection with the Parent's retention of the Financial Consultant, (vi) severance charges incurred by the Parent and its Subsidiaries, (vii) up to $300,000 per month of plant consolidation expenses specifically identified to the satisfaction of the Administrative Agent, and (viii) transaction costs incurred during such period in connection with the transactions contemplated hereby and the Revolving Credit Agreement not to exceed $2,600,000 in the aggregate, minus (c) to the extent such items were added in calculating net income (i) extraordinary gains during such period and (ii) proceeds received during such period in respect of Casualty Events and dispositions of any property (other than dispositions in the ordinary course of business on ordinary business terms) CONSOLIDATED INTEREST EXPENSE. For any period, the sum, without duplication, for the Parent and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of the following: (a) all interest in respect of Indebtedness required to be paid or accrued during such period (whether or not actually paid during such period), but excluding capitalized debt acquisition costs (including fees and expenses related to this Term Loan Agreement and the Revolving Credit Agreement) plus (b) the net amounts payable (or minus the net amounts receivable) in respect of Derivative Agreements accrued during such period (whether or not actually paid or received during such period) excluding reimbursement of legal fees and other similar transaction costs and further excluding payments required by reason of the early termination of Derivative Agreements in effect on the date hereof plus (c) all fees, including letter of credit fees and expenses (but excluding reimbursement of legal fees and any early termination fee paid by the Borrower pursuant to Section 2.3 of the Existing Credit Agreement in connection with the Borrower's reduction of the Total Commitment (as defined in the Existing Credit Agreement) effective as of February 3, 2006) incurred hereunder during such period. COPYRIGHT MORTGAGE. The Memorandum of Grant of Security Interest in Copyrights, dated as of the Closing Date, made by the Borrower and the Guarantors in favor of the Administrative Agent, in form and substance satisfactory to the Administrative Agent. DEFAULT. See SECTION 12.1. DEFAULT RATE. An interest rate equal to (i) the LIBOR Rate PLUS (ii) the Applicable Margin PLUS (iii) 2% per annum, to the fullest extent permitted by applicable laws. DELINQUENT LENDER. See SECTION 14.5.3. DERIVATIVE AGREEMENT. Any forward contract, futures contract, swap, option or other similar agreement or arrangement (including, without limitation, caps, floors, collars and similar agreements), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices (including foreign exchange lines). 5 DISTRIBUTION. The declaration or payment of any dividend on or in respect of any shares of any class of Capital Stock of the Parent or any Subsidiary of the Parent, other than dividends payable solely in shares of common stock of the Parent or such Subsidiary; the payment or prepayment of principal of, premium, if any, or interest on, or purchase, redemption, defeasance, retirement or other acquisition of with respect to any shares of any class of Capital Stock of the Parent or any Subsidiary of the Parent, directly or indirectly through a Subsidiary of such Person or otherwise (including the setting apart of assets for a sinking or other analogous fund to be used for such purpose); the return of capital by the Parent or any Subsidiary of the Parent to its shareholders as such; or any other distribution on or in respect of any shares of any class of Capital Stock of the Parent or any Subsidiary of the Parent. DOLLARS OR $. Dollars in lawful currency of the United States of America. DOMESTIC LENDING OFFICE. Initially, the office of each Lender designated as such in SCHEDULE 1 hereto; thereafter, such other office of such Lender, if any, located within the United States that will be making or maintaining Term Loans. DOMESTIC SUBSIDIARY. Any Subsidiary that is organized under the laws of the United States of America, any state or territory thereof or the District of Columbia. ELIGIBLE ASSIGNEE. Any of (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by (i) the Administrative Agent and (ii) unless a Default or an Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed). ELIGIBLE EQUIPMENT. All of the Equipment owned by the Borrower and the Guarantors except for any Equipment to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Equipment from time to time in its reasonable credit judgment. Eligible Equipment shall not include any Equipment of any of the Borrower or the Guarantors that: (a) is not owned by such Person free and clear of all Liens and encumbrances, except the Liens in favor of Administrative Agent, on behalf of the Lenders, and other Permitted Liens; (b) is not subject to a first priority perfected Lien in favor of Administrative Agent on behalf of the Lenders; (c) as to which any of the applicable representations or warranties pertaining to Equipment set forth in the Loan Documents is untrue in any material respect; (d) is not covered by casualty insurance reasonably acceptable to Administrative Agent; (e) is otherwise unacceptable to Administrative Agent in its reasonable credit judgment; or (f) which is not included in the Equipment Appraisal Report. 6 ELIGIBLE REAL PROPERTY. All of the Real Property owned or leased by the Borrower except for any Real Property to which any of the exclusionary criteria set forth below applies. The Administrative Agent shall have the right to establish, modify or eliminate Reserves against Eligible Real Property from time to time in its reasonable credit judgment. Eligible Real Property shall not include any Real Property of any of the Borrower that: (a) is not owned or leased by the Borrower free and clear of all Liens and encumbrances, except the Liens in favor of Administrative Agent, on behalf of the Lenders, and other Permitted Liens; (b) is not subject to a first priority perfected Lien in favor of Administrative Agent on behalf of the Lenders; (c) as to which any of the applicable representations or warranties pertaining to Real Property and environmental matters set forth in the Loan Documents is untrue in any material respect; (d) as to which the Administrative Agent shall not be satisfied with the Borrower's material compliance with all zoning, environmental and other laws, ordinances, rules and regulations affecting or relating to such Real Property; (e) as to which (i) any condemnation shall have occurred or shall have been threatened, (ii) any significant damage by fire or other casualty has been suffered which has not been repaired within 180 days since the date of such casualty, (iii) any law, regulation, ordinance, moratorium, injunctive proceeding, restriction, litigation, action, citation or similar proceeding or matter shall have been enacted, adopted, or threatened by any third party or Governmental Authority, which would have, in the Administrative Agent's reasonable credit judgment, a material adverse effect on the value of such Real Property; (f) is not covered by casualty insurance reasonably acceptable to Administrative Agent; or (g) which is not included in the Real Property Appraisal Report. EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained or contributed to by the Parent, the Borrower or any ERISA Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan. ENVIRONMENTAL CLAIM. Any notice, notification, claim, administrative, regulatory or judicial action, suit, judgment, demand, decree or other communication by any Person or Governmental Authority requiring, alleging or asserting liability with respect to the Parent or any of its Subsidiaries or the Real Property pursuant to Environmental Laws, whether for damages, contribution, indemnification, cost recovery, compensation, injunctive relief, investigatory, assessment, monitoring, response, remedial or cleanup costs, damages to natural resources, real property damage, personal injuries, fines or penalties arising out of, based on or resulting from or related to (a) the presence or alleged presence, use, Release or threatened Release of any Hazardous Substances originating, at or from, migrating to or from or otherwise affecting, the Real Property or any part thereof, (b) any fact, circumstance, condition or occurrence forming the basis of any violation, or alleged violation, of any Environmental Law by the Parent or any of its Subsidiaries, the Real Property or any part thereof, or (c) any alleged injury or threat of injury to health, safety or the environment by the Parent or any of its Subsidiaries or relating the Real Property or any part thereof. 7 ENVIRONMENTAL CONDITIONS. means any environmental condition (a) constituting or which with the passage of time or lack of Remediation would or would likely constitute a violation of Environmental Laws, including but not limited to the presence of any Hazardous Substances requiring reporting and/or the performance of response actions under Massachusetts General Laws Chapter 21E, or (b) that requires reporting, investigation, assessment, monitoring, remediation or other response actions or would allow any Governmental Authority to record a lien or encumbrance in the land records with respect to the Real Property or an Environmental Claim. Submission to the Massachusetts Department of Environmental Protection of a Class A or B Response Action Outcome Statement by a Licensed Site Professional (as defined in Mass. Gen. L. ch. 21E, ss.2) pursuant to, and in compliance with, the Massachusetts Contingency Plan (310 CMR 40.0000) shall be deemed confirmation that any Environmental Condition(s) addressed in such Response Action Outcome Statement no longer exists. ENVIRONMENTAL LAW(S). As defined in SECTION 6.19. ENVIRONMENTAL ESCROW FUNDS. As defined in Section 4.1(a). ENVIRONMENTAL REPORT. The certain report dated November 3, 2006 prepared by Environmental Resource Management. EQUIPMENT. As defined in UCC Article 9. EQUIPMENT APPRAISAL REPORT. The appraisal report on fixed assets issued by Hilco Appraisal Services, LLC on July 12, 2006, as updated, modified or supplemented from time to time as provided in this Agreement. EQUIPMENT APPRAISAL SHORTFALL. At any time, the amount by which the aggregate outstanding principal amount of the Equipment Term Loan exceeds seventy percent (70%) of the Net Orderly Liquidation Value of the Equipment established from time to time by the Equipment Appraisal Report. EQUIPMENT APPRAISAL SHORTFALL NOTICE. See SECTION 3.1.4(A)(I). EQUIPMENT APPRAISAL SHORTFALL PREPAYMENT. See SECTION 3.1.4(A)(II). EQUIPMENT SALE. A sale or other disposition by the Borrower of any Equipment. EQUIPMENT TERM LOAN. The term loan advanced to the Borrower pursuant to SECTION 2.2. EQUIPMENT TERM LOAN COMMITMENT AMOUNT. An amount equal to the lesser of (i) 70% of the aggregate Net Orderly Liquidation Value of the Borrower's Eligible Equipment, minus any Reserves established by the Lenders in their reasonable discretion, and (ii) $12,100,000. 8 EQUIPMENT TERM NOTES. See SECTION 2.3. ERISA. The Employee Retirement Income Security Act of 1974. ERISA AFFILIATE. Any Person which is treated as a single employer with the Parent or any Subsidiary of the Parent under Section 414 of the Code. ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. ESCROW ACCOUNT. An interest bearing escrow account established in the name of the Administrative Agent with the Escrow Agent containing (i) the Environmental Escrow Funds, and (ii) the Plant Consolidation Escrow Amount. ESCROW AGENT. GB Merchant Partners, LLC, acting in its capacity as escrow agent with respect to the Escrow Account, or another depository institution mutually acceptable to the Administrative Agent and the Borrower. EUROCURRENCY RESERVE RATE. For any day, the maximum rate (expressed as a decimal) at which any bank subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "EUROCURRENCY LIABILITIES" (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. EVENT OF DEFAULT. See SECTION 12.1. EXCESS REVOLVING CREDIT AVAILABILITY. As of any date of determination thereof, the difference between (a) the lesser of (i) the Total Commitment at such time and (ii) the Borrowing Base at such time, and (b) the Revolving Exposure at such time, as each such term is defined in the Revolving Credit Agreement as in effect on the date hereof. EXCLUDED TAXES. With respect to the Administrative Agent and any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located, (c) in the case of a Non-U.S. Lender, any withholding tax that is imposed on amounts payable to such Non-U.S. Lender at the time such Non-U.S. Lender becomes a party hereto, and (d) any taxes imposed on a Lender as a result of such Lender's failure to comply with SECTION 5.2.3. EXISTING CREDIT AGREEMENT. The Revolving Credit and Term Loan Agreement, dated as of May 18, 2005 (as amended as of July 27, 2005, October 25, 2005, December 30, 2005, March 22, 2006, and May 6, 2006), among the Parent, Quaker Fabric Corporation of Fall River, the Lenders, the Administrative Agent, and the Issuing Bank and Cash Management Bank named therein. FEES. The Closing Fee and each other fee payable to the Administrative Agent and/or the Lenders pursuant to this Agreement and the other Loan Documents. 9 FINANCIAL CONSULTANT. Alvarez and Marsal, or another nationally recognized financial consultant reasonably satisfactory to the Administrative Agent. FISCAL QUARTER(S). The thirteen (13) or fourteen (14) week periods, the first of which shall commence on the first day of each Fiscal Year, and each of which shall be referred to as "FQ1", "FQ2", "FQ3" and "FQ4", respectively. FISCAL YEAR. The fifty-two (52) or fifty-three (53) week period ending on the Saturday closest to January 1 of each calendar year. FIXED ASSET COLLATERAL. All Collateral consisting of Real Property, Fixtures, Equipment of the Borrower, the Parent, each Subsidiary of the Parent, and any other Guarantor from time to time party to the Guaranties, which is subject to a mortgage, lien or security interest pursuant to the Term Loan Documents, together with all identifiable proceeds of the foregoing. FIXED CHARGE COVERAGE RATIO. As at any date of determination, the ratio of (a) (i) Consolidated EBITDA for the four Fiscal Quarter period ending on such date of determination MINUS (ii) the aggregate amount of all Non-Financed Capital Expenditures made during such period MINUS (iii) the aggregate amount paid, or required to be paid (without duplication), in cash in respect of the current portion of all income taxes for such period MINUS (iv) the aggregate amount of dividends and distributions permitted to be paid by the Parent under SECTION 8.4 (if any) and actually paid in cash during such period PLUS (v) tax refunds received in cash during such period to (b) the sum for the Parent and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), of (i) the aggregate amount of Consolidated Interest Expense for such period and (ii) the aggregate amount of regularly scheduled payments of principal in respect of Indebtedness for borrowed money (including the principal component of any payments in respect of Capitalized Leases) paid or required to be paid during such period (excluding payments made pursuant to SECTIONS 3.1.3, 3.1.4, 3.1.5 and 3.1.6). FIXTURE(S). As defined in UCC Article 9. FOREIGN SUBSIDIARY. Any Subsidiary that is not a Domestic Subsidiary. FUND. Any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business. GAAP. (i) When used in SECTION 9, whether directly or indirectly through reference to a capitalized term used therein, means (A) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the Fiscal Year ended on December 31, 2005, and (B) to the extent consistent with such principles, the accounting practice of the Parent and its Subsidiaries reflected in the Parent's financial statements for the period ended on the Balance Sheet Date, and (ii) when used in general, other than as provided above, means principles that are (A) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (B) consistently applied with past financial statements of the Parent and its Subsidiaries adopting the same principles, provided that in each case referred to in this definition of "GAAP" a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than qualifications regarding changes in GAAP and as to normal year-end adjustments) as to financial statements in which such principles have been properly applied. 10 GOVERNING DOCUMENTS. With respect to any Person, its certificate or articles of incorporation, certificate of formation, or, as the case may be, certificate of limited partnership, its by-laws, operating agreement or, as the case may be, partnership agreement or other constitutive documents and all shareholder agreements, voting trusts and similar arrangements applicable to any of its Capital Stock. GOVERNMENTAL AUTHORITY. Any foreign, federal, state, provincial, regional, local municipal or other government, or any department, commission, board, bureau, agency, public authority or instrumentality thereof, or any court or arbitrator. GUARANTIES. The Guaranties made by the Guarantors in favor of the Lenders and the Administrative Agent pursuant to which such Guarantors guarantee to the Lenders and the Administrative Agent the payment and performance in full of the Obligations. GUARANTORS. Collectively, (i) the Parent, Quaker Mexico and Quaker Textile, and (ii) any other direct or indirect Domestic Subsidiary of the Parent which is not a Borrower. GUARANTEED PENSION PLAN. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Parent, the Borrower or any ERISA Affiliate, the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. HAZARDOUS SUBSTANCES. As defined in SECTION 6.19. INDEBTEDNESS. As to any Person and whether recourse is secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication: (a) every obligation of such Person for money borrowed, (b) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses, (c) every reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances, or similar facilities issued for the account of such Person, 11 (d) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), (e) every obligation of such Person under any Capitalized Lease, (f) every obligation of such Person under any Synthetic Lease, (g) all sales by such Person of (i) accounts or general intangibles for money due or to become due, (ii) chattel paper, instruments or documents creating or evidencing a right to payment of money or (iii) other receivables (collectively "RECEIVABLES"), whether pursuant to a purchase facility or otherwise, other than in connection with the disposition of the business operations of such Person relating thereto or a disposition of defaulted receivables for collection (or as a sale of claims in bankruptcy) and not as a financing arrangement, and together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith, (h) every obligation of such Person (an "EQUITY RELATED PURCHASE OBLIGATION") to purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock issued by such Person or any rights measured by the value of such Capital Stock, (i) every obligation of such Person under any Derivative Agreement, (j) every obligation in respect of Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent that such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such Person is not liable therefor and such terms are enforceable under applicable law, and (k) every obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guarantying or otherwise acting as surety for, any obligation of a type described in any of clauses (a) through (j) (the "PRIMARY obligation") of another Person (the "PRIMARY OBLIGOR"), in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase of) any security for the payment of such primary obligation, (ii) to purchase property, securities or services for the purpose of assuring the payment of such primary obligation, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such primary obligation. The "amount" or "principal amount" of any Indebtedness at any time of determination represented by (1) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with GAAP, (2) any Capitalized Lease shall be the present value of the aggregate of the rentals obligation under such Capitalized Lease payable over the term thereof that is not subject to termination by the lessee, (3) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than the Parent or any of its wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or interest earned on such investment, (4) any Synthetic Lease shall be the stipulated loss value, termination value or other equivalent amounts, (5) any derivative contract shall be the maximum amount of any termination or loss payment required to be paid by such Person if such derivative contract were, at the time of determination, to be terminated by reason of any event of default or early termination event thereunder, whether or not such event of default or early termination event has in fact occurred, (6) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or purchase price and (7) any guaranty or other contingent liability referred to in clause (k) shall be an amount equal to the stated or determinable amount of the primary obligation in respect of which such guaranty or other contingent obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. 12 INTERCREDITOR AGREEMENT. That certain Intercreditor Agreement dated as of the date hereof by and among the Revolving Credit Agent, the Administrative Agent, the Borrower and the Guarantors. INVESTMENTS. All loans, advances (other than commission, travel and similar advances to officers, directors and employees made in the ordinary course of business), extensions of credit (other than accounts receivable arising in the ordinary course of business provided that in no event shall such extension of credit exceed 180 days in accordance with its terms), deposit account or contribution of capital to any Person or any investment in, or purchase or other acquisition of, the Capital Stock of, or in respect of any guaranty of the obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (i) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (ii) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (iii) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (iv) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (ii) may be deducted when paid; and (v) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. LATE SALE AMORTIZATION PAYMENT. See SECTION 3.1.3(A)(II). LENDER OR LENDERS. 1903 Debt Fund, LP, and the other lending institutions listed on SCHEDULE 1 hereto and any other person who becomes an assignee of any rights and obligations of a Lender pursuant to SECTION 18. 13 LIBOR BUSINESS DAY. Any day on which commercial banks are open for international business (including dealings in U.S. dollar deposits) in London. LIBOR RATE. The rate of interest equal to (i) the rate determined by the Administrative Agent at which Dollar deposits for an interest period of one month are offered as of 11:00 am London time on the LIBOR Business Day preceding the date of determination based on information presented on Page 3750 of the Dow Jones Market Service (formerly known as the Telerate Service) or such other commercially available source providing such information and designated by the Administrative Agent, divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate. If the rate described above does not appear on the Dow Jones Market Service or such other commercially available source providing such information and designated by the Administrative Agent on any applicable interest determination date, the LIBOR Rate shall be the rate (rounded upward, if necessary, to the nearest one hundred-thousandth of a percentage point), determined on the basis of the offered rates for one month deposits in Dollars which are offered by four major banks in the London interbank market at approximately 11:00 a.m. London time, on the LIBOR Business Day preceding the date of determination. The principal London office of each of the four major London banks will be requested to provide a quotation of its Dollar deposit offered rate. If at least two such quotations are provided, the rate for that date will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that date will be determined on the basis of the rates quoted for loans in Dollars to leading European banks for a period of time comparable to such one month period offered by major banks in New York City at approximately 11:00 a.m. New York City time, on the LIBOR Business Day preceding the date of determination. LICENSES. See SECTION 6.27. LIENS. Any encumbrance, mortgage, deed of trust, assignment, attachment, deposit arrangement, lien (statutory, judgment or otherwise), pledge, hypothecation, charge, restriction or other security interest, security agreement, or any interest of any kind securing any obligation of any entity or person, whether such interest is based on common law, civil law, statute or contract. LOAN DOCUMENTS. This Term Loan Agreement, the Notes, the Guaranties, the Security Documents, the Intercreditor Agreement and any other agreement between the Borrower and/or the Guarantors and the Administrative Agent and/or any Lender relating to the transaction contemplated hereby. MATURITY DATE. May 18, 2010. MINIMUM AMORTIZATION PAYMENTS. See SECTION 3.1.1(A). MINIMUM PROCEEDS. As to any parcel of Real Property, 92.5% of projected sale proceeds for such Real Property, as set forth in the Business Plan. MORTGAGED PROPERTY. Any Real Property which is subject to a Mortgage. MORTGAGE(S). (a) The mortgage(s) and, if applicable, deed(s) of trust, dated on or prior to the Closing Date, from the Borrower to the Administrative Agent with respect to the fee and, if applicable, leasehold interests of the Borrower in the properties listed on SCHEDULE 1.1(A) hereto, and (b) any other deeds of mortgage, deeds of trust, or deeds of leasehold mortgage executed and delivered to the Administrative Agent after the Closing Date pursuant to SECTION 7.16 hereof, in each case, in form and substance satisfactory to the Administrative Agent. 14 MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by the Parent, the Borrower or any ERISA Affiliate. NET ORDERLY LIQUIDATION VALUE. With respect to any fixed assets other than Real Property, the net appraised orderly liquidation value of such fixed assets, as determined from time to time by the Administrative Agent by reference to the most recent Equipment Appraisal Report. NET PROCEEDS. With respect to any Real Property Sale, and Equipment Sale or the sale of any other Collateral by the Borrower or any Guarantor, an amount equal to: (a) cash payments received by the applicable party arising from such sale; MINUS (b) any bona fide direct costs incurred in connection with such sale, including (i) income or gains Taxes payable by the applicable seller and its stockholders or members, partners or owners of such stockholders and as a result of any gain recognized in connection with such sale during the tax period in which such sale occurs, (ii) payment of the outstanding Indebtedness (other than the Term Loans and the obligations under the Revolving Credit Agreement) that is secured by a Lien on the assets in question and that is required to be repaid under the terms thereof as a result of such sale (including principal, premium, or penalty, if any, interest, costs, expenses and other amounts), (iii) reasonable and customary broker's fees, commissions and professionals fees paid to Persons that are not Affiliates of the Parent or any of its Subsidiaries and incurred in consummating any such sale, and (iv) any cash reserve for any indemnification payments (fixed or contingent) attributable to seller's indemnities, representations and warranties to the purchaser in respect of such sale undertaken by the applicable seller in connection with such sale; PROVIDED that upon release of any such cash reserve, the amount of cash released shall be considered Net Proceeds. NON-FINANCED CAPITAL EXPENDITURES Capital Expenditures paid in cash and not financed with Indebtedness for borrowed money; PROVIDED that Capital Expenditures financed with the proceeds of Revolving Loans under the Revolving Credit Agreement shall be deemed to constitute "Non-Financed Capital Expenditures" for purposes of this Agreement. NON-U.S. LENDER. See SECTION 5.2.3. NOTES. Collectively, the Equipment Term Notes and the Real Property Term Notes. OBLIGATIONS. All indebtedness, obligations and liabilities of the Parent, the Borrower and their Subsidiaries to any of the Lenders, the Administrative Agent, or any of their Affiliates, individually or collectively, existing on the date of this Term Loan Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Term Loan Agreement or any of the other Loan Documents or any Derivative Agreement or in respect of any of the Term Loans made, or any obligations under Derivative Agreements or other instruments at any time evidencing any thereof. 15 OUTSTANDING or OUTSTANDING. With respect to the Term Loans, the aggregate unpaid principal thereof as of any date of determination. PARENT. As defined in the preamble hereto. PATENT AGREEMENT. The Patent Collateral Assignment and Security Agreement, dated as of the Closing Date, made by the Borrower and the Guarantors in favor of the Administrative Agent, in form and substance satisfactory to the Administrative Agent. PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities. PERFECTION CERTIFICATES. The Perfection Certificates referenced to and defined in the Security Agreement. PERMITTED LIENS. Liens permitted by SECTION 8.3.1 hereof. PERSON. Any individual, corporation, limited liability company, partnership, limited partnership, trust, unincorporated association, business, or other legal entity, or any Governmental Authority. PLANT C SALE PROCEEDS. As defined in SECTION 4.2(A). PLANT C LOCATION. The real property and improvements located at 1082 Davol Street, Fall River, Massachusetts. PLANT CONSOLIDATION ESCROW AMOUNT. The information technology, design, build-out and rental costs associated with the relocation and consolidation of the Plant C facilities, as are reasonably satisfactory to the Administrative Agent. PLEDGE AGREEMENT. The Pledge Agreement, executed by the Parent and the Borrower in favor of the Administrative Agent, in form and substance satisfactory to the Administrative Agent. PROJECTIONS. Those certain treasury cash flow forecasts of receipts and disbursements delivered by the Borrower to the Administrative Agent on or before the Closing Date, as such forecasts may be updated from time to time pursuant to SECTION 7.4(M). QUAKER MEXICO. Quaker Fabric Mexico, SA de CV, a corporation organized under the laws of Mexico. QUAKER TEXTILE. Quaker Textile Corporation, a Massachusetts corporation. 16 REAL PROPERTY. All real property at any time owned or leased (as lessee or sublessee) by the Parent or any Subsidiary of the Parent, including, without limitation, such real property set forth on SCHEDULE 1.1(A) hereto. REAL PROPERTY APPRAISAL REPORT. See SECTION 3.1.3(B). REAL PROPERTY APPRAISAL SHORTFALL. At any time, the amount by which the aggregate outstanding amount of the Real Property Term Loan exceeds the sum of (i) the aggregate Adjusted Real Property Value of all parcels of Real Property, plus (ii) the then outstanding Sale Proceeds Credit Balance, if any. REAL PROPERTY APPRAISAL SHORTFALL NOTICE. See SECTION 3.1.3(B)(I). REAL PROPERTY APPRAISAL SHORTFALL PREPAYMENT. See SECTION 3.1.3(B)(II). REAL PROPERTY APPRAISAL VALUE. With respect to each parcel of Real Property, the market value of such Real Property, as set forth in the Real Property Appraisal Report, and including any value of such Real Property as may be determined by the Administrative Agent pursuant to appraisals delivered to and approved by the Administrative Agent in its reasonable discretion after the Closing Date. REAL PROPERTY SALE. A sale or other disposition by the Borrower of a parcel of Real Property, or in the case of leased Real Property, an assignment of the leasehold estate. REAL PROPERTY TERM LOAN. The term loan advanced to the Borrower pursuant to SECTION 2.1. REAL PROPERTY TERM LOAN COMMITMENT AMOUNT. An amount equal to the lesser of (i) 50% of the aggregate Real Property Appraisal Value for each Eligible Real Property, minus any Reserves established by the Lenders in their reasonable discretion, and (ii) $12,500,000. REAL PROPERTY TERM NOTES. See SECTION 3.1.3(B). RECORD. The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Lender with respect to any Term Loan referred to in such Note. REGISTER. See SECTION 18.3. RELATED PARTIES. With respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. RELEASE. Any past or present release, spill, emission, leaking, pumping, injecting, pouring, emptying, escaping, dumping, deposit, disposal, discharge, dispersal, leaching, migration into the indoor or outdoor environment of Hazardous Substances, including, without limitation, the movement of Hazardous Substances through ambient air, soil, surface water, sediments, ground water, wetlands, land or subsurface strata. 17 REMEDIATION. The investigation, assessment, monitoring, removal, abatement, treatment, risk assessment, institutional controls, deed restrictions and/or activity and use limitations, containment, payment of compliance or oversight fees, and all other activities required under Environmental Laws to respond to an Environmental Condition. REMEDIATION COSTS. With respect to each Remediation Location, the costs of conducting a Remediation of all Environmental Conditions at such Remediation Location. REMEDIATION LOCATION(S). Collectively, the Borrower's locations referred to in the Environmental Report. REMEDIATION REPORT. For each Remediation Location, an assessment and remediation plan (and all associated costs) prepared by a Licensed Site Professional (as defined in Mass. Gen. L. ch. 21E) of Environmental Conditions known at that time for each Remediation Location. REQUIRED LENDERS. As of any date, any one or more Lenders holding at least fifty-one percent (51%) of the outstanding principal balance of the Term Loans. RESERVES. As determined by the Administrative Agent in the exercise of its reasonable credit judgment and upon written notice delivered to the Borrower, such amounts as the Administrative Agent may establish (a) to reflect (i) any Default or Event of Default, or (ii) events, conditions, contingencies or risks which do or may have a material adverse effect on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent and its Subsidiaries to fulfill their obligations under this Term Loan Agreement or the other Loan Documents, or (b) to reflect the belief of the Administrative Agent that any collateral report or financial information furnished by or on behalf of the Borrower to the Administrative Agent or any of the Lenders is or may have been incomplete, inaccurate or misleading in any material respect, or (c) to reflect events, conditions, contingencies or risks which would reasonably be expected to have a material adverse effect on the value of the Collateral, taken as a whole, or the value of the security interests and other rights of the Administrative Agent and the Lenders in the Collateral (including the enforceability, perfection or priority thereof), or (d) to reflect any costs and expenses (or anticipated costs and expenses) determined by the Administrative Agent in order to realize on the Collateral. RESTRICTED PAYMENT. In relation to the Parent and any Subsidiary of the Parent, any (a) Distribution or (b) any payment made to any Affiliates of the Parent or a Subsidiary of the Parent in respect of management, consulting or other similar services provided to the Parent or a Subsidiary of the Parent. REVOLVING CREDIT AGENT. Bank of America, N.A., and its successors in such capacity under the Revolving Credit Agreement. REVOLVING CREDIT AGREEMENT. The Amended and Restated Revolving Credit Agreement, dated as of November 9, 2006, among the Borrower, the Parent, the Revolving Credit Agent and the Lenders named therein, as amended from time to time. REVOLVING CREDIT DOCUMENTS. The Revolving Credit Agreement and each other document, instrument and agreement from time to time executed pursuant to the foregoing, including, without limitation, the Revolving Credit Security Documents. 18 REVOLVING CREDIT SECURITY DOCUMENTS. The "Guaranties", the "Security Agreement", the "Copyright Mortgage", the "Patent Agreement", the "Pledge Agreement", the "Mortgages", the "Trademark Agreement" (each as defined in the Revolving Credit Agreement), and all other instruments and documents, including without limitation Uniform Commercial Code financing statements and other equivalent registration documents, control agreements and the like, required to be executed or delivered pursuant to, or in connection with, the Revolving Credit Agreement or any other "Loan Document" (as defined in the Revolving Credit Agreement). REVOLVING LOAN(S). As defined in the Revolving Credit Agreement. SALE PROCEEDS CREDIT. With respect to any Real Property Sale, the amount by which (a) the sum of (i) the Net Proceeds realized upon such Real Property Sale, plus (ii) the aggregate amount of Late Sale Amortization Payments paid by the Borrower as a result of the failure to sell such Real Property on or before the date therefor set forth in the Business Plan, if any, plus (iii) the aggregate amount of any Sale Proceeds Credit previously applied to reduce such Late Sale Amortization Payments, is greater than (b) the Minimum Proceeds established for such parcel of Real Property. SALE PROCEEDS CREDIT BALANCE. At any time, the aggregate amount of all unapplied Sale Proceeds Credits. SALE PROCEEDS SHORTFALL. With respect to any Real Property Sale, the positive difference, if any, between (a) the Adjusted Real Property Value of the applicable parcel of Real Property, and (b) the Adjusted Net Proceeds received by Borrower in respect of such Real Property Sale. SARBANES-OXLEY ACT. The Sarbanes-Oxley Act of 2002. SECURITY AGREEMENT. The Security Agreement, dated as of the Closing Date, among the Borrower, the Guarantors and the Administrative Agent. SECURITY DOCUMENTS. The Guaranties, the Security Agreement, the Copyright Mortgage, the Patent Agreement, the Mortgages, the Trademark Agreement, Pledge Agreement and all other instruments and documents, including without limitation Uniform Commercial Code financing statements and other equivalent registration documents, control agreements and the like, required to be executed or delivered pursuant to, or in connection with, this Term Loan Agreement or any other Loan Document. SENIOR MANAGEMENT. The chairman, president, chief executive officer, chief financial officer, any executive vice president, any senior vice president, the vice-president - legal and environmental, the treasurer, the controller, or the general counsel of the Parent or a Subsidiary of the Parent. 19 SUBSIDIARY. Any corporation, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock. SYNTHETIC LEASE. Any lease of goods or other property, whether real or personal, which is treated as an operating lease under GAAP and as a loan or financing for U.S. income tax purposes. TAXES. All present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto. TERM LOAN(S). The Equipment Term Loan and the Real Property Term Loan. TERM LOAN AGREEMENT. This Term Loan Agreement, including the Schedules and Exhibits hereto. TITLE INSURANCE COMPANY. Stewart Title Guaranty Company, or another nationally recognized title insurance company reasonably acceptable to the Administrative Agent. TITLE POLICY. In relation to each Mortgaged Property, an ALTA standard form title insurance policy issued by the Title Insurance Company in such amount as may be determined by the Administrative Agent insuring the priority of the Mortgage of such Mortgaged Property and that the Parent or one of its Subsidiaries holds marketable fee simple or leasehold title to such Mortgaged Property, subject only to Permitted Liens and which shall not contain exceptions for mechanics liens, persons in occupancy or matters which would be shown by a survey (except as may be permitted by such Mortgage), shall not insure over any matter except to the extent that any such affirmative insurance is acceptable to the Administrative Agent in its reasonable credit judgment, and shall contain such endorsements and affirmative insurance as the Administrative Agent in its discretion may require, including but not limited to (a) comprehensive endorsement, (b) variable rate of interest endorsement, (c) usury endorsement, (d) revolving credit endorsement, (e) tie-in endorsement, (f) doing business endorsement and (g) ALTA form 3.1 zoning endorsement. TOTAL COMMITMENT. The sum of the Commitments of the Lenders, as in effect from time to time. TRADEMARK AGREEMENT. The Trademark Collateral Security and Pledge Agreement, dated as of the Closing Date, made by the Borrower and the Guarantors in favor of the Administrative Agent and the Assignments of Trademarks executed in connection therewith, in form and substance satisfactory to the Administrative Agent. UCC. The Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the Commonwealth of Massachusetts; PROVIDED, that to the extent that the UCC is used to define any term herein or in any other Loan Document and such term is defined differently in different Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern; PROVIDED FURTHER, that if, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to the Administrative Agent's Lien on any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the Commonwealth of Massachusetts, the term "UCC" shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions. 20 VOTING STOCK. Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency. 1.2. RULES OF INTERPRETATION. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Term Loan Agreement. (b) The singular includes the plural and the plural includes the singular. (c) Unless otherwise expressly indicated, a reference to any law or regulation includes any amendment or modification to such law or regulation. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by GAAP applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, have the meanings assigned to them therein, with the term "instrument" being that defined under Article 9 of the Uniform Commercial Code. (h) Reference to a particular "Section" refers to that section of this Term Loan Agreement unless otherwise indicated. (i) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Term Loan Agreement as a whole and not to any particular section or subdivision of this Term Loan Agreement. (j) Unless otherwise expressly indicated, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including," the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including." 21 (k) This Term Loan Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are, however, cumulative and are to be performed in accordance with the terms thereof. (l) This Term Loan Agreement and the other Loan Documents are the result of negotiation among, and have been reviewed by counsel to, among others, the Administrative Agent, the Borrower and the Guarantors and are the product of discussions and negotiations among all parties. Accordingly, this Term Loan Agreement and the other Loan Documents are not intended to be construed against the Administrative Agent or any of the Lenders merely on account of the Administrative Agent's or any Lender's involvement in the preparation of such documents. (m) If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Term Loan Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. 2. TERM LOANS. 2.1. REAL PROPERTY TERM LOAN. Subject to the terms and conditions set forth in this Term Loan Agreement, each Lender agrees to lend to the Borrower on the Closing Date its Real Property Term Loan in an amount equal to such Lender's Commitment Percentage of the Real Property Term Loan Commitment Amount. Any portion of the Real Property Term Loan Commitment Amount not advanced on the Closing Date may not be borrowed thereafter, except as otherwise provided in Section 4.1(c). 2.2. EQUIPMENT TERM LOAN. Subject to the terms and conditions set forth in this Term Loan Agreement, each Lender agrees to lend to the Borrower on the Closing Date an Equipment Term Loan in an amount equal to such Lender's Commitment Percentage of the Equipment Term Loan Commitment Amount. Any portion of the Equipment Term Loan Commitment Amount not advanced on the Closing Date may not be borrowed thereafter. 2.3. NOTES. The Real Property Term Loan and the Equipment Term Loan shall be evidenced by separate promissory notes of the Borrower in substantially the form of EXHIBIT C hereto (each a "REAL PROPERTY TERM NOTE" or "EQUIPMENT TERM NOTE", as applicable, and collectively referred to herein as the "NOTES"), each dated the Closing Date (or such other date on which a Lender may become a party hereto in accordance with SECTION 18 hereof) and completed with appropriate insertions. Each Lender shall receive a Real Property Term Note and an Equipment Term Note payable to the order of such Lender in a principal amount equal to such Lender's Commitment Percentage of the aggregate amount of the Real Property Term Loan and the Equipment Term Loan, respectively, and representing the obligation of the Borrower to pay to such Lender such principal amount or, if less, the outstanding amount of such Lender's Commitment Percentage of each of the Real Property Term Loan and Equipment Term Loan, respectively, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each Lender to make or cause to be made a notation on such Lender's Term Note Record reflecting the original principal amount of such Lender's Commitment Percentage of each of the Real Property Term Loan and Equipment Term Loan, respectively, and, at or about the time of such Lender's receipt of any principal payment on such Lender's Real Property Term Note and/or Equipment Term Note, an appropriate notation on such Lender's Term Note Record reflecting such payment(s). The aggregate unpaid amount set forth on such Lender's Term Note Record shall be PRIMA FACIE evidence of the principal amount thereof owing and unpaid to such Lender with respect to the Real Property Term Loan and Equipment Term Loan, as applicable, but the failure to record, or any error in so recording, any such amount on such Lender's Term Note Record shall not affect the obligations of the Borrower hereunder or under any Term Note or to make payments of principal of and interest on any Term Note when due. 22 2.4. INTEREST ON LOANS. Except as otherwise provided in SECTION 5.11, the Real Property Term Loan and the Equipment Term Loan shall bear interest at the rate per annum equal to the LIBOR Rate as in effect from time to time PLUS the Applicable Margin. The Borrower promises to pay interest on the Real Property Term Loan and the Equipment Term Loan or any portion thereof in arrears on the last day of each calendar month, commencing November 30, 2006, and on the Maturity Date. 3. REPAYMENT OF LOANS. 3.1. REAL PROPERTY TERM LOAN. 3.1.1. MINIMUM AMORTIZATION PAYMENTS. (a) Subject to the following provisions of this SECTION 3.1, upon the sales of the last parcel of Real Property contemplated to be sold in Fiscal Years 2006 and 2007, as set forth in the Business Plan, and the sale of one additional parcel of Real Property in Fiscal Year 2008, the Borrower shall commence to repay the principal of the Real Property Term Loan in equal monthly installments of $100,000 (each, a "MINIMUM AMORTIZATION PAYMENT") payable on the last day of each calendar month (each a "MINIMUM AMORTIZATION PAYMENT DATE"). (b) Notwithstanding the foregoing: (i) no Minimum Amortization Payment shall be required for the month ending July 31, in any Fiscal Year; and (ii) no Minimum Amortization Payment shall be required on any Minimum Amortization Payment Date to the extent that as of such Minimum Amortization Payment Date, the Lenders have received since the first day of the then current Fiscal Year, Late Sale Amortization Payments, mandatory prepayments and voluntary prepayments on account of the Real Property Term Loan, in an amount no less than the aggregate scheduled Minimum Amortization Payments on account of the Real Property Term Loan during such period. 3.1.2. LATE SALE AMORTIZATION PAYMENTS. (a) In the event one or more parcels of Real Property are not sold or otherwise disposed of by the Borrower on or before the applicable scheduled dates set forth in the Business Plan, the Borrower shall repay the principal balance of the Real Property Term Loan, beginning with the month in which the first such Real Property Sale should have occurred, in an amount equal to $150,000 per month (each a "LATE SALE AMORTIZATION PAYMENT"), payable on the last day of each month. The Borrower shall continue to make Late Sale Amortization Payments until the first to occur of (i) the date that the Borrower consummates the Real Property Sale(s) of the parcel(s) of Real Property that triggered the requirement to make Late Sale Amortization Payments, and (ii) the date on which the aggregate amount of (x) Late Sale Amortization Payments made by the Borrower, plus (y) any Sale Proceeds Credit Balance previously applied to reduce or eliminate any Late Sale Amortization Payment(s), if any, have equaled or exceeded the aggregate Minimum Proceeds for all such parcels of Real Property that triggered the requirement to make Late Sale Amortization Payments. 23 (b) Notwithstanding the foregoing: (i) no Late Sale Amortization Payment shall be required for the month ending July 31, in any Fiscal Year; and (ii) any Late Sale Amortization Payment may be eliminated or reduced to the extent of the amount of the then current Sale Proceeds Credit Balance, if any. (c) Real Properties scheduled for sale under the Business Plan shall be subject to substitution by the Borrower with other Real Properties scheduled for sale. (d) The Late Sale Amortization Payments required to be made pursuant to this SECTION 3.1.2 shall be in addition to any Minimum Amortization Payments and mandatory prepayments on the Real Property Term Loan required hereunder, except as expressly set forth in SECTION 3.1.1(B) above. 3.1.3. MANDATORY PREPAYMENTS OF THE REAL PROPERTY TERM LOAN. (a) REAL PROPERTY SALE PREPAYMENTS. The Borrower shall make mandatory prepayments of the principal amount of the Real Property Term Loan upon consummation of any Real Property Sale, in an amount equal to the 100% of the Net Proceeds realized upon such Real Property Sale, subject to the following: (i) SALE PROCEEDS CREDIT. In the event that the Borrower realizes a Sale Proceeds Credit with respect to any Real Property Sale, the Sale Proceeds Credit may be applied to, and shall reduce, any required Late Sale Amortization Payment(s), and any prepayments required under (x) SECTION 3.1.3(A)(II) with respect to any Sale Proceeds Shortfall(s), and (y) SECTION 3.1.3(B)(II) with respect to any Appraisal Shortfall(s), until the Sales Proceeds Credit Balance is reduced to zero. 24 (ii) SALE PROCEEDS SHORTFALL. In the event that a Sale Proceeds Shortfall occurs with respect to any Real Property Sale, the Borrower shall make an additional payment of principal on the Real Property Term Loan in an amount equal to the Sale Proceeds Shortfall (less any applicable Sale Proceeds Credit) for such parcel of Real Property. (b) REAL PROPERTY APPRAISAL PREPAYMENTS. (i) REAL PROPERTY APPRAISALS. The Borrower shall engage Hilco Appraisal Services, LLC or another nationally recognized appraisal company reasonably acceptable to the Administrative Agent to conduct an annual appraisal of the Real Property to take place in the month of November of each Fiscal Period and deliver a report on the value of each parcel of Real Property (the "REAL PROPERTY APPRAISAL REPORT"). Based on evaluation of the Real Property Appraisal Report, the Administrative Agent shall determine whether a Real Property Appraisal Shortfall exists, and shall so notify the Borrower in writing (a "REAL PROPERTY APPRAISAL SHORTFALL NOTICE"). If the Real Property Appraisal Shortfall identified by reference to the applicable Real Property Appraisal Report represents a decrease in value of the Real Property of more than thirty percent (30%) over the most recent Real Property Appraisal Report delivered to the Administrative Agent, the Borrower may, within twenty (20) Business Days after delivery of the Real Property Appraisal Shortfall Notice, establish either that a Real Property Appraisal Shortfall does not exist or that the aggregate amount of the Real Property Appraisal Shortfall is less than that set forth in the Real Property Appraisal Shortfall Notice, and shall notify the Administrative Agent in writing of the same (a "REAL PROPERTY APPRAISAL SHORTFALL RESPONSE"). Administrative Agent shall consider any such Real Property Appraisal Shortfall Response by the Borrower in good faith, and shall notify the Borrower of its determination to make any adjustments to the Real Property Appraisal Shortfall amount based upon the Real Property Appraisal Shortfall Response. The Borrower's failure to deliver a Real Property Appraisal Shortfall Response within the time frame set forth above shall be deemed acceptance by the Borrower of the Real Property Appraisal Shortfall set forth in the Real Property Appraisal Shortfall Notice. (ii) REAL PROPERTY APPRAISAL SHORTFALL PREPAYMENT. If a Real Property Appraisal Shortfall exists, the Borrower shall be required to prepay the principal of the Real Property Term Loan in an amount equal to the applicable Real Property Appraisal Shortfall (less any applicable Sale Proceeds Credit, if any) (a "REAL PROPERTY APPRAISAL SHORTFALL PREPAYMENT"). A Real Property Appraisal Shortfall Prepayment shall be paid by Borrower as follows: 25 (x) on the date twenty five (25) Business Days after delivery to the Borrower of the Real Property Appraisal Shortfall Notice, the Borrower shall pay to Administrative Agent, for the account of the Lenders, the lesser of (A) $500,000, and (B) the amount of the applicable Real Property Appraisal Shortfall; and (y) thereafter, on the last Business Day of each of the next succeeding three (3) calendar months following the end of the month during which the prepayment described in SECTION 3.1.3(B)(II)(X) is payable, the Borrower shall pay to the Administrative Agent, for the account of the Lenders, the greater of (A) $150,000, and (B) one third of the remaining unpaid amount of the Real Property Appraisal Shortfall Prepayment, but in no event more than the amount of the applicable remaining Real Property Appraisal Shortfall. 3.1.4. MANDATORY PREPAYMENTS OF THE EQUIPMENT TERM LOAN. (a) FIXED ASSET APPRAISAL PREPAYMENTS. (i) EQUIPMENT APPRAISALS. The Borrower shall engage Hilco Appraisal Services, LLC or another nationally recognized appraisal company reasonably acceptable to the Administrative Agent to update or render a semi-annual Equipment Appraisal Report to take place in the months of April and October of each Fiscal Period. Based on evaluation of the Equipment Appraisal Report, the Administrative Agent shall determine whether an Equipment Appraisal Shortfall exists, and shall so notify the Borrower in writing (an "EQUIPMENT APPRAISAL SHORTFALL NOTICE"). (ii) EQUIPMENT APPRAISAL SHORTFALL PREPAYMENT. Upon receipt of the Equipment Appraisal Shortfall Notice, the Borrower shall be required to prepay the principal of the Equipment Term Loan in an amount equal to the applicable Equipment Appraisal Shortfall (an "EQUIPMENT APPRAISAL SHORTFALL PREPAYMENT") within five (5) Business Days after delivery to the Borrower of the Equipment Appraisal Shortfall Notice. (b) EQUIPMENT SALE PREPAYMENTS. The Borrower shall make mandatory prepayments of the principal amount of the Equipment Term Loan upon consummation of any Equipment Sale, in an amount equal to the 100% of the Net Proceeds realized upon such Equipment Sale. 3.1.5. ADDITIONAL TERM LOAN PREPAYMENTS. Concurrently with the receipt by the Parent or any Subsidiary of the Parent of: (a) net cash proceeds from the issuance by the Parent or any Subsidiary of any debt (other than debt permitted under SECTION 8.2) or equity securities (other than equity securities issued in connection with any compensatory employee benefit or option plan); or (b) net cash proceeds received by the Parent or any Subsidiary from Casualty Events which have not been utilized by the Parent or such Subsidiary to repair or replace the property so damaged, destroyed or taken within one hundred and eighty (180) days of receipt of such proceeds; 26 the Borrower shall pay to the Administrative Agent for the respective accounts of the Lenders an amount equal to one hundred percent (100%) of such proceeds, to be applied in the manner set forth in SECTION 3.1.7; provided, that (i) to the extent that any amounts received as a result of any Casualty Event related to Collateral other than Fixed Asset Collateral are applied to prepay the Revolving Loans and permanently reduce the Commitments under the Revolving Credit Agreement, such amounts shall not be required to be applied to prepay the Term Loans pursuant to SECTION 3.1.5(B), (ii) the Borrower shall only be required to apply 50% pursuant to SECTION 3.1.5 of the net cash proceeds from the issuance by the Parent or any Subsidiary of any debt or equity securities so long as 50% of such proceeds are applied to prepay the Revolving Loans. Notwithstanding the foregoing, the provisions of this SECTION 3.1.5(B) shall not impair any restrictions set forth in the Loan Documents with respect to the incurrence of Indebtedness by the Parent or any of its Subsidiaries. 3.1.6. OPTIONAL PREPAYMENTS OF TERM LOANS. The Borrower shall have the right at any time to prepay the Real Property Term Loan and the Equipment Term Loan on or before the Maturity Date, as a whole, or in part, in minimum amounts of $500,000, upon not less than five (5) Business Days prior written notice to the Administrative Agent; PROVIDED, that (a) each partial prepayment shall be allocated among the Lenders, in proportion, as nearly as practicable, to the respective outstanding amount of each such Lender's Real Property Term Note or Equipment Term Note, as the case may be, with adjustments to the extent practicable to equalize any prior prepayments not exactly in proportion, (b) any prepayment of principal of the Term Loans shall include all interest accrued to the date of prepayment and shall be applied pro rata among the Lenders, and (c) the Borrower shall pay a prepayment fee to the Administrative Agent, for the account of the Lenders, in connection with any such voluntary prepayment, as follows: (i) if such prepayment is made on or prior to the first anniversary of the Closing Date, an amount equal to 2.50% of the amount prepaid; (ii) if such prepayment is made after the first anniversary of the Closing Date but on or prior to the second anniversary of the Closing Date, an amount equal to 1.75% of the amount prepaid; (iii) if such prepayment is made after the second anniversary of the Closing Date but on or prior to the third anniversary of the Closing Date, an amount equal to 1.50% of the amount prepaid; and (iv) if such prepayment is made after the third anniversary of the Closing Date but prior to the Maturity Date, an amount equal to 1.00% of the amount prepaid. 27 No amount repaid with respect to the Term Loans may be reborrowed. Unless a Default or an Event of Default has occurred and continues to exist, the Borrower may allocate any amount payable pursuant to this SECTION 3.1.6 between the Term Loans in its discretion. 3.1.7. APPLICATION OF PREPAYMENTS. (a) Subject to the terms of the Intercreditor Agreement, all payments made pursuant to SECTIONS 3.1.3(A) and 3.1.3(B) shall be applied as follows: FIRST, to repay all amounts outstanding under the Real Property Term Loan, until paid in full, pro rata among the Lenders, in accordance with their respective Commitment Percentages; and SECOND, to all amounts outstanding under the Equipment Term Loan, until paid in full, pro rata among the Lenders, in accordance with their respective Commitment Percentages. (b) All payments made pursuant to SECTION 3.1.4(A) and, subject to the terms of the Intercreditor Agreement, SECTION 3.14(B), shall be used to repay all amounts outstanding under the Equipment Term Loan, until paid in full, pro rata among the Lenders in accordance with their respective Commitment Percentages. (c) All payments made pursuant to SECTION 3.1.5 and, except as otherwise provided in SECTION 3.1.6, SECTION 3.1.6, shall be applied between the Real Property Term Loan and the Equipment Term Loan in such manner as determined by the Administrative Agent in its sole discretion. (d) All prepayments of the Term Loans shall be allocated among the Lenders in proportion, as nearly as practicable, to the respective outstanding amounts of each such Lender's Notes or loan accounts, as the case may be, with adjustments to the extent practicable to equalize any prior prepayments not exactly in proportion. No amounts repaid with respect to the Term Loans pursuant to this SECTION 3.1.7 may be reborrowed under this Term Loan Agreement. 3.1.8. MATURITY DATE. Notwithstanding any other provision in this Term Loan Agreement, the entire principal balance of the Term Loans, together with all accrued and unpaid interest, any payment required to be made under this ARTICLE 3, and all other outstanding Obligations, shall be due and payable on the Maturity Date, unless due sooner as a result of acceleration hereunder. 4. ENVIRONMENTAL AND PLANT CONSOLIDATION ESCROWS. 4.1. ENVIRONMENTAL ESCROW. (a) On the Closing Date, The Administrative Agent shall retain from the proceeds of the Real Property Term Loan the sum of one million dollars ($1,000,000.00) (the "ENVIRONMENTAL ESCROW FUNDS"), which amount shall be deposited by the Administrative Agent in the Escrow Account. The Environmental Escrow Funds shall be available to the Borrower, and, following the occurrence of an Event of Default, the Administrative Agent and the Lenders, to fund the Remediation Costs with respect to each of the Remediation Locations. 28 (b) The Administrative Agent will release to the Borrower all or a portion of the Environmental Escrow Funds for each Remediation Location in an amount not exceeding the Allocated Escrow Amount for such Remediation Location (unless otherwise agreed by the Administrative Agent) to pay or reimburse the Borrower for payment of, the reasonable costs of undertaking a Remediation of the Environmental Conditions at a Remediation Location or reimburse the Borrower for Remediation offsets, credits or work performed by a purchaser of a Remediation Location, upon delivery of reasonable evidence delivered by the Borrower to the Administrative Agent supporting the total aggregate amount of such costs and, if applicable, showing that such amounts have been paid by the Borrower; provided, that for each such Remediation Location, such Remediation is performed in accordance with the recommendations set forth in the Remediation Report reasonably satisfactory to the Administrative Agent. (c) With respect to any Remediation Location, (i) in the event that the Administrative Agent reasonably determines that no Remediation is necessary in order to eliminate Environmental Conditions at such Remediation Location as may be required by Environmental Law, or (ii) (A) after completion of all required Remediation of Environmental Conditions at such Remediation Location, or (B) upon consummation of the sale of such Remediation Location, there remains unapplied any Allocated Escrow Amount for such Remediation Location, the balance of such Allocated Escrow Amount (including any interest earned thereon) shall be applied as follows: FIRST, against any Sale Proceeds Shortfall (less any Sale Proceeds Credit) arising from the sale of such Real Property, if applicable, SECOND, to any Appraisal Shortfall (less any Sales Proceeds Credit) then due and payable, THIRD, to any Late Sale Amortization Payments (less any Sales Proceeds Credit) then due and payable, FOURTH, to any Equipment Appraisal Shortfall then due and payable and, FIFTH, to the Borrower, as a Real Property Term Loan advance. (d) Notwithstanding any provision in this SECTION 4.1 to the contrary, the Borrower's obligations under this Agreement with respect to any environmental matters, including but not limited to its obligations under SECTIONS 6.19, 7.5.6 and 8.9, shall not be limited by the existence of any Environmental Escrow Funds. The Borrower acknowledges that the Administrative Agent shall not be deemed responsible under Environmental Laws or otherwise for any Environmental Condition at any Remediation Location. 4.2. PLANT CONSOLIDATION ESCROW. (a) In the event that the Borrower consummates a sale of the Plant C Location, the Borrower shall cause the purchaser to deliver the Net Proceeds of such sale to the Administrative Agent (the "PLANT C SALE PROCEEDS"). The Administrative Agent shall deposit one million dollars ($1,000,000.00) of such Plant C Sale Proceeds (the "Plant Consolidation Escrow Amount") in the Escrow Account to fund Plant C Consolidation Costs, as further described below. Any remaining Plant C Sale Proceeds shall be applied against the outstanding Obligations as provided herein. (b) Provided that there exists no Default or Event of Default has occurred and continues to exist, the Administrative Agent will cause the Escrow Agent to release funds constituting the Plant C Consolidation Escrow Amount (together with any interest thereon) to the Borrower on a periodic basis, in an amount equal to the reasonable Plant C Consolidation Costs incurred by the Borrower, based upon reasonable evidence delivered by the Borrower to the Administrative Agent supporting the total aggregate amount of such costs. Advances on account of the Plant C Consolidation Escrow Account shall be made no more frequently than monthly, and in a minimum amount of at least $50,000.00, unless otherwise agreed by the Administrative Agent. 29 5. CERTAIN GENERAL PROVISIONS. 5.1. CLOSING FEE. The Borrower shall pay to the Administrative Agent on the Closing Date a closing fee in the amount of $500,000 (the "CLOSING FEE"). The Closing Fee shall be fully earned and due and payable on the Closing Date. 5.2. FUNDS FOR PAYMENTS. 5.2.1. PAYMENTS TO ADMINISTRATIVE AGENT. All payments of principal and interest on Term Loans, Fees and any other amounts due hereunder or under any of the other Loan Documents (unless the provisions of this Term Loan Agreement require otherwise) shall be made on the due date thereof to the Administrative Agent in Dollars for the respective accounts of the Lenders and the Administrative Agent, at the Administrative Agent's Office or at such other place that the Administrative Agent may from time to time designate, in each case no later than 12:00 noon (Boston, Massachusetts, time or other local time at the place of payment) and in immediately available funds. 5.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without recoupment, setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein (other than Excluded Taxes) unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Administrative Agent, for the account of the Lenders or (as the case may be) the Administrative Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Lenders or the Administrative Agent to receive the same net amount which the Lenders or the Administrative Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Administrative Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document. 30 5.2.3. NON-U.S. LENDERS. Each Lender and the Administrative Agent that is not a U.S. Person as defined in Section 7701(a)(30) of the Code for federal income tax purposes (a "NON-U.S. LENDER") hereby agrees that, if and to the extent it is legally able to do so, it shall, prior to the date on which it becomes a Lender hereunder, deliver to the Borrower and the Administrative Agent, as applicable, such certificates, documents or other evidence, as and when required by the Code or Treasury Regulations issued pursuant thereto, including (a) in the case of a Non-U.S. Lender that is a "bank" for purposes of Section 881(c)(3)(A) of the Code, two (2) duly completed copies of Internal Revenue Service Form W-8BEN or Form W-8ECI and any other certificate or statement of exemption required by Treasury Regulations, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Lender or the Administrative Agent establishing that with respect to payments of principal, interest or fees hereunder it is (i) not subject to United States federal withholding tax under the Code because such payment is effectively connected with the conduct by such Lender or Administrative Agent of a trade or business in the United States, or (ii) totally exempt from United States federal withholding tax under a provision of an applicable tax treaty, and (b) in the case of a Non-U.S. Lender that is not a "bank" for purposes of Section 881(c)(3)(A) of the Code, a certificate in form and substance reasonably satisfactory to the Administrative Agent and the Borrower and to the effect that (i) such Non-U.S. Lender is not a "bank" for purposes of Section 881(c)(3)(A) of the Code, is not subject to regulatory or other legal requirements as a bank in any jurisdiction, and has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any governmental authority, any application made to a rating agency or qualification for any exemption from any tax, securities law or other legal requirements, (ii) is not a ten percent (10%) shareholder for purposes of Section 881(c)(3)(B) of the Code, and (iii) is not a controlled foreign corporation receiving interest from a related person for purposes of Section 881(c)(3)(C) of the Code, together with a properly completed Internal Revenue Service Form W-8 or W-9, as applicable (or successor forms). Each Lender or the Administrative Agent agrees that it shall, promptly upon a change of its lending office or the selection of any additional lending office, to the extent the forms previously delivered by it pursuant to this section are no longer effective, and promptly upon the Borrower's or the Administrative Agent's reasonable request after the occurrence of any other event (including the passage of time) requiring the delivery of a Form W-8BEN, Form W-8ECI, Form W-8 or W-9 in addition to or in replacement of the forms previously delivered, deliver to the Borrower and the Administrative Agent, as applicable, if and to the extent it is properly entitled to do so, a properly completed and executed Form W-8BEN, Form W-8ECI, Form W-8 or W-9, as applicable (or any successor forms thereto). 5.3. COMPUTATIONS. All computations of interest on the Term Loans, any Fees or any other amount due hereunder shall, unless otherwise expressly provided herein, be based on a 360-day year and paid for the actual number of days elapsed. Whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest and fees shall accrue during such extension. 5.4. INTEREST LIMITATION. Notwithstanding any other term of this Term Loan Agreement or any other document referred to herein or therein, the maximum amount of interest which may be charged to or collected from any person liable hereunder by the Lenders shall be absolutely limited to, and shall in no event exceed, the maximum amount of interest which could lawfully be charged or collected under applicable law (including, to the extent applicable, the provisions of Section 5197 of the Revised Statutes of the United States of America, as amended or 12 U.S.C. Section 85, as amended), so that the maximum of all amounts constituting interest under applicable law, howsoever computed, shall never exceed as to any Person liable therefor such lawful maximum, and any term of this Term Loan Agreement or any other document referred to herein or therein which could be construed as providing for interest in excess of such lawful maximum, shall be and hereby is made expressly subject to and modified by the provisions of this paragraph. 31 5.5. INTENTIONALLY OMITTED. 5.6. INTENTIONALLY OMITTED. 5.7. ADDITIONAL COSTS, ETC. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or the Administrative Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Lender or the Administrative Agent, to any Tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Term Loan Agreement, the other Loan Documents, such Lender's Commitment or the Term Loans, or change in the basis of taxation of payments to such Lender or the Administrative Agent (other than Taxes, levies, imposts. charges, fees, deductions or withholdings covered by SECTION 5.2.2 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or the Administrative Agent), or (b) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Term Loan Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of an office of any Lender or the Administrative Agent, or (c) impose on any Lender or the Administrative Agent any other conditions or requirements with respect to this Term Loan Agreement, the other Loan Documents, such Lender's Commitment, the Term Loans, and the result of any of the foregoing is: (i) to increase the cost to any Lender of making, funding, issuing, renewing, extending or maintaining any of the Term Loans or such Lender's Commitment, or (ii) to reduce the amount of principal, interest, or other amount payable to such Lender or the Administrative Agent on account of such Lender's Commitment or any of the Term Loans, or (iii) to require such Lender or the Administrative Agent to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or the Administrative Agent from the Borrower hereunder, 32 then, and in each such case, the Borrower will, upon demand made by such Lender or the Administrative Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Lender or the Administrative Agent such additional amounts as will be sufficient to compensate such Lender or the Administrative Agent for such additional cost, reduction, payment or foregone interest or other sum upon presentation by such Lender or the Administrative Agent of a certificate in accordance with SECTION 5.9 hereof; PROVIDED that the Borrower shall not be liable to any Lender or the Administrative Agent for costs incurred more than one hundred and twenty (120) days prior to receipt by the Borrower of such certificate from such Lender or the Administrative Agent, as applicable, unless such costs were incurred prior to such 120-day period solely as a result of such present or future applicable law being retroactive to a date which occurred prior to such 120-day period. 5.8. CAPITAL ADEQUACY. If after the date hereof any Lender or the Administrative Agent determines that (i) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (ii) compliance by such Lender or the Administrative Agent or any corporation controlling such Lender or the Administrative Agent with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on such Lender's or the Administrative Agent's commitment with respect to any Term Loans to a level below that which such Lender or the Administrative Agent could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or the Administrative Agent's then existing policies with respect to capital adequacy and assuming full utilization of such entity's capital) by any amount deemed by such Lender, or the Administrative Agent to be material, then such Lender or the Administrative Agent may notify the Borrower of such fact upon presentation of a certificate in accordance with SECTION 5.9 hereof. To the extent that the amount of such reduction in the return on capital is not reflected in the LIBOR Rate, the Borrower and such Lender shall thereafter attempt to negotiate in good faith, within thirty (30) days of the day on which the Borrower receives such notice, an adjustment to the compensation payable hereunder which will adequately compensate such Lender in light of these circumstances. If the Borrower and such Lender are unable to agree to such adjustment within thirty (30) days of the date on which the Borrower receives such notice, then commencing on the date of such notice (but not earlier than the effective date of any such increased capital requirement), the fees payable hereunder shall increase by an amount that will, in the Administrative Agent's or such Lender's reasonable determination, provide adequate compensation; PROVIDED that the Borrower shall not be liable to any Lender or the Administrative Agent for costs incurred more than one hundred and twenty (120) days prior to receipt by the Borrower of such notice. Each Lender shall allocate such cost increases among its customers in good faith and on an equitable basis. 33 5.9. CERTIFICATE. A certificate setting forth any additional amounts payable pursuant to SECTION 5.7 or SECTION 5.8 and a brief explanation of such amounts which are due, submitted by any Lender or the Administrative Agent to the Borrower, shall be PRIMA FACIE evidence that such amounts are due and owing. 5.10. INTENTIONALLY OMITTED. 5.11. INTEREST AFTER DEFAULT. Immediately upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay interest on the principal amount of all outstanding Obligations at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable laws. 5.12. COLLATERAL SECURITY AND GUARANTIES. Each of the Parent and the Borrower covenants and agrees that: (a) Pursuant to the terms of the Security Documents, the Obligations shall be secured by a perfected first priority security interest (subject only to Permitted Liens) in the Fixed Asset Collateral, and a perfected second priority security interest (subject only to Permitted Liens) in all other Collateral. (b) If at any time the Parent or any of its Subsidiaries grants any security interest to the Revolving Credit Agent or any lender party to the Revolving Credit Agreement, or any of their respective successors, assigns or transferees, on any property of the Parent or such Subsidiary, or any other party, then the Parent, such Subsidiary or such other party, as the case may be, shall simultaneously grant to the Administrative Agent a security interest in such property, and such security interest shall be subject to the Intercreditor Agreement. (c) The Obligations shall also be guaranteed pursuant to the terms of the Guaranties. 6. REPRESENTATIONS AND WARRANTIES. Each of the Parent and the Borrower represents and warrants to the Lenders and the Administrative Agent as follows: 6.1. CORPORATE AUTHORITY, ETC. 6.1.1. EXISTENCE, GOOD STANDING. (a) Each of the Parent and its Subsidiaries (i) is a corporation (or similar business entity) duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, (ii) has taken all actions which, by reason of its ownership of property or carrying on of business, are required to be taken by it under the laws of any jurisdiction, wherein it owns property or carries on business, except where the failure to do so would not materially and adversely affect the Borrower and the Guarantors (taken as a whole), and (iii) has all corporate authority (or the equivalent company) power to own its property and conduct its business as now conducted and as presently contemplated. 34 (b) Each of the Parent and its Subsidiaries has adequate power and authority and has full legal right to enter into each of the Loan Documents to which it is or is to become a party, to perform, observe and comply with all of its agreements and obligations under each of such documents, and to make all of the borrowings and obtain the extensions of credit contemplated by this Term Loan Agreement. 6.1.2. AUTHORIZATION. The execution and delivery by each of the Parent and its Subsidiaries of each of the Loan Documents executed and delivered on the Closing Date to which, by the terms of such document, it is a party, the performance by each of the Parent and its Subsidiaries of all of its agreements and obligations under each of such documents, and the making by the Borrower of all of the borrowings contemplated by this Term Loan Agreement, are within the corporate (or the equivalent company) authority of the Parent and each of its Subsidiaries, as applicable, have been duly authorized by all necessary corporate or other action on the part of the Parent and its Subsidiaries, as applicable, and do not and will not (i) except as otherwise expressly contemplated by the Loan Documents, conflict with, or result in a breach of any material term, condition or provision of, or constitute a default under or result in the creation of any mortgage, lien, pledge, charge, security interest or other encumbrance upon any of the property of the Parent or its Subsidiaries, under any agreement, trust deed, indenture, mortgage or other instrument to which the Parent or any of its Subsidiaries is a party or by which the Parent or any of its Subsidiaries or any of the property of the Parent or any of its Subsidiaries is bound, the consequences of which would have a material and adverse effect on the financial condition, assets or operations of the Borrower and the Guarantors (taken as a whole), (ii) violate or contravene any provision of any law, regulation, order, ruling or interpretation thereunder or any decree, order or judgment of any court or governmental or regulatory authority, bureau, agency or official (all as from time to time in effect and applicable to the Parent or any of its Subsidiaries) except where such violation or contravention would not materially and adversely affect the financial condition, assets or operations of the Borrower and the Guarantors (taken as a whole), (iii) require any waivers, consents or approvals by any of the creditors of the Parent or any of its Subsidiaries which have not been obtained (except when failure to do so would not materially and adversely affect the financial condition, assets or operations of the Borrower and the Guarantors (taken as a whole), (iv) in the case of the Parent and its Subsidiaries, require any consents or approvals by any shareholders or members of such Person, (except such as will be obtained on or prior to the Closing Date and will be in full force and effect on and as of the Closing Date), (v) require any approval, consent, order, authorization or license by, or giving notice to, or taking any other action with respect to, any governmental or regulatory authority or agency under any provision of any law applicable to the Parent or any of its Subsidiaries, except those actions which have been taken or will be taken prior to the Closing Date and except where failure to take such actions would not materially and adversely affect the financial condition, assets or operations of the Borrower and the Guarantors (taken as a whole), or (vi) conflict with any provision of the Governing Documents of the Parent or any Subsidiary of the Parent. 35 6.1.3. DELIVERY. Each of the Parent and its Subsidiaries has duly executed and delivered each of the Loan Documents to which it is a party and each of such documents is in full force and effect. 6.1.4. ENFORCEABILITY. The execution and delivery of this Term Loan Agreement and the other Loan Documents to which the Parent or any of its Subsidiaries is or is to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. 6.2. FINANCIAL STATEMENTS; PROJECTIONS. (a) There has been furnished to the Administrative Agent the audited consolidated balance sheet of the Parent and its Subsidiaries as at December 31, 2005, and consolidated statements of income and cash flow of the Parent and its Subsidiaries for the Fiscal Year then ended, certified by PriceWaterhouseCoopers. Such balance sheet and statements of income and cash flow have been prepared in accordance with GAAP and fairly present the financial condition of the Parent and its Subsidiaries as at the close of business on the date thereof and the results of operations for the Fiscal Year then ended. There are no contingent liabilities of the Parent or any of its Subsidiaries as of such date involving material amounts, known to the officers of the Parent or the Borrower, which were not disclosed in such balance sheet and the notes related thereto (b) There has been furnished to the Administrative Agent an unaudited consolidated balance sheet of the Parent and its Subsidiaries as at September 30, 2006, and unaudited consolidated statements of income and cash flow of the Parent and its Subsidiaries for the period(s) then ended. Such balance sheet and statements of income and cash flow have been prepared in accordance with GAAP and fairly present the financial condition of the Parent and its Subsidiaries as at the close of business on the date thereof and the results of operations for the period(s) then ended. There are no contingent liabilities of the Parent or any of its Subsidiaries as of such date involving material amounts, known to the officers of the Parent or the Borrower, which were not disclosed in such balance sheet and the notes related thereto. (c) There has also been furnished to the Administrative Agent the Projections and the Business Plan, in each case, on a consolidated basis. To the knowledge of the Parent and its Subsidiaries, no facts exist that (individually or in the aggregate) would result in any material change in any of such projections (taken as a whole). The Projections and the Business Plan are based upon reasonable estimates and assumptions and reflect the reasonable estimates of the Parent and its Subsidiaries of the results of operations and other information projected therein (it being understood that such projections are not a guarantee of future performance). 36 6.3. SOLVENCY. As of the Closing Date and after giving effect to the Term Loans hereunder and the other transactions contemplated hereby: (a) the aggregate value of all properties of the Parent and its Subsidiaries, on a consolidated basis, at their present fair saleable value exceed the amount of all the probable debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of the Parent and its Subsidiaries as they become absolute and mature; (b) the present fair saleable value of the assets of the Parent and its Subsidiaries, on a consolidated basis, is not less than the amount that will be required to pay the probable liability on their debts as they become absolute and mature; (c) the Parent and its Subsidiaries will not, on a consolidated basis, have an unreasonably small capital with which to conduct their business operations as heretofore conducted; and (d) the Parent and its Subsidiaries do not, on a consolidated basis, intend to incur debts or liabilities beyond their ability to pay such debts and liabilities as they mature. 6.4. NO MATERIAL ADVERSE CHANGES, ETC. Since the Balance Sheet Date, there has occurred no material adverse change in the financial condition or business of the Parent or any of its Subsidiaries, taken as a whole. Since the Balance Sheet Date, neither the Parent nor any Subsidiary of the Parent has made any Restricted Payment (other than Restricted Payments permitted under Section 8.4). 6.5. ABSENCE OF MORTGAGES AND LIENS. Except with respect to Permitted Liens, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry or other public office, that purports to cover, affect or give notice of any present or possible future Lien on, or security interest in, any of the material assets or property of the Parent or any Subsidiary of the Parent or of any of the rights relating thereto. 6.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Parent and its Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others unless the failure of such possession would not have a material adverse effect on the business, assets or operations of the Borrower and the Guarantors (taken as a whole). Attached hereto as SCHEDULE 6.6 is a true, correct and complete list of all patents, patent applications, federally registered copyrights, trademarks, trademark applications, trade names and other intellectual property owned by the Parent or any Subsidiary of the Parent as of the Closing Date. 6.7. LITIGATION. Except as set forth in SCHEDULE 6.7 hereto, there are no actions, suits, proceedings or investigations of any kind pending, or, to the best knowledge of the Senior Management after all due investigation appropriate under the circumstances, threatened against the Parent or any of its Subsidiaries, before any court, tribunal or administrative agency or board that would be likely to, either in any case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of the Borrower and the Guarantors, taken as a whole, or materially impair the right of the Borrower and the Guarantors, taken as a whole, to carry on business substantially as now conducted by them, or that questions the validity of this Term Loan Agreement or any of the other Loan Documents. 37 6.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Except as set forth on SCHEDULE 6.8, neither the Parent nor any of its Subsidiaries is subject to any charter, partnership or other legal restriction, or any judgment, decree, order, law, statute, rule or regulation that has or is expected in the future to have a material adverse effect on the business, assets or financial condition of the Borrower or the Guarantors, taken as a whole. Except as listed on SCHEDULE 6.8 hereto, neither the Parent nor any of its Subsidiaries is a party to any contract or agreement that has or is expected, in the judgment of the Parent's or the Borrower's officers, to have any material adverse effect on the business of the Borrower and the Guarantors, taken as a whole. 6.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Parent nor any of its Subsidiaries is in violation of any provision of its Governing Documents or, except for environmental matters more specifically dealt with in SECTION 6.19, any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that could materially and adversely affect the financial condition, properties or business of the Parent and its Subsidiaries. 6.10. TAX STATUS. Except as set forth on SCHEDULE 6.10, the Parent and its Subsidiaries (i) have made or filed all federal, provincial and all material state, provincial and foreign income and all other material tax returns, reports and declarations required by any jurisdiction to which any of them is subject, (ii) have paid all material Taxes and other governmental assessments and charges imposed on them, except those being contested in good faith and by appropriate proceedings and for which the Parent and its Subsidiaries have set aside on their books reasonably adequate provisions therefor (unless foreclosure or other enforcement action has been commenced in respect thereof or any Lien has attached as security therefor, in which case such exception does not apply), and (iii) have set aside on their books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid Taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, except those being contested in good faith and as to which adequate reserves are maintained, and the officers of the Parent and the Borrower know of no basis for any such claim. 6.11. NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. 6.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Parent nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor is it an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. 38 6.13. EMPLOYEE BENEFIT PLANS. 6.13.1. IN GENERAL. Each Employee Benefit Plan and each Guaranteed Pension Plan has been maintained and operated in compliance in all material respects with applicable law including without limitation the provisions of ERISA and all Applicable Pension Legislation and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions, other than as set forth on SCHEDULE 6.13.1 attached hereto. The Parent and the Borrower have heretofore delivered to the Administrative Agent the most recently completed annual report, Form 5500, with all required attachments, and actuarial statement required to be submitted under Section 103(d) of ERISA, with respect to each Guaranteed Pension Plan. 6.13.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit Plan which is an employee welfare benefit plan within the meaning of Section 3(1) or Section 3(2)(B) of ERISA, no benefits are due unless the event giving rise to the benefit entitlement occurs prior to plan termination (except as required by Title I, Part 6 of ERISA). The Parent, the Borrower or an ERISA Affiliate, as appropriate, may terminate each such Plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) in the discretion of the Parent, the Borrower or such ERISA Affiliate without liability to any Person, other than for benefits which have accrued prior to termination. 6.13.3. GUARANTEED PENSION PLANS. Each contribution required to be made to a Guaranteed Pension Plan, whether required to be made to avoid the incurrence of an accumulated funding deficiency, the notice or lien provisions of Section 302(f) of ERISA, or otherwise, has been timely made. No waiver of an accumulated funding deficiency or extension of amortization periods has been received with respect to any Guaranteed Pension Plan and none of the Parent, the Borrower nor any ERISA Affiliate is obligated to or has posted security in connection with an amendment to a Guaranteed Pension Plan pursuant to Section 307 of ERISA or Section 401(a)(29) of the Code. No liability to the PBGC (other than required insurance premiums, all of which have been paid) has been incurred by the Parent, the Borrower or any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event, or any other event or condition which presents a material risk of termination of any Guaranteed Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed Pension Plan (which in each case occurred within twelve months of the date of this representation), and on the actuarial methods and assumptions employed for that valuation, the aggregate benefit liabilities of all such Guaranteed Pension Plans within the meaning of Section 4001 of ERISA did not exceed the aggregate value of the assets of all such Guaranteed Pension Plans. 6.13.4. MULTIEMPLOYER PLANS. None of the Parent, the Borrower nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of assets described in Section 4204 of ERISA. None of the Parent, the Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA or is at risk of entering reorganization or becoming insolvent, or that any Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA. 39 6.14. REGULATIONS U AND X. The proceeds of the Term Loans shall be used solely for the purposes specified in SECTION 7.11. No portion of any Term Loan is to be used for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. 6.15. TRUE COPIES OF GOVERNING DOCUMENTS. The Parent and the Borrower have furnished or caused to be furnished to each of the Lenders true and complete copies of the Governing Documents (together with any amendments thereto) of the Parent and each Subsidiary of the Parent. 6.16. FISCAL YEAR. The Parent has a Fiscal Year which is the fifty-two (52) or fifty-three (53) week period ending on the Saturday closest to January 1 of each calendar year. 6.17. PERFECTION OF SECURITY INTERESTS. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary or advisable, under applicable United States federal and state law, to establish and perfect the Administrative Agent's (i) first-priority Lien and security interest in the assets constituting Fixed Asset Collateral, and (ii) second priority Lien and security interest in all other Collateral. The Collateral and the Administrative Agent's rights with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses. The Borrower and the Guarantors party to the Security Agreements are the owners of the Collateral free from any Lien, except for Permitted Liens. 6.18. SUBSIDIARIES, ETC. The Parent does not have any Subsidiaries except as set forth on SCHEDULE 6.18 hereto, as such schedule may be updated from time to time by the Borrower in accordance with SECTION 8.11. 6.19. ENVIRONMENTAL COMPLIANCE. With respect to the past and present condition and usage of the Real Property and the operations conducted thereon: (a) Except as disclosed on SCHEDULE 6.19(A), none of the Parent, its Subsidiaries or any operator of the Real Property or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule, permit or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any other state, local, foreign or common law, statute, regulation, ordinance, order, decree or any other binding requirement of any Governmental Authority relating to health, safety or the environment (all of the foregoing, collectively, the "ENVIRONMENTAL LAWS"), which violation could reasonably be expected to have a material adverse effect on the business assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Term Loan Agreement or the other Loan Documents; 40 (b) (i) Except as set forth on SCHEDULE 6.19(A) hereto, as of the Closing Date, neither the Parent nor any of its Subsidiaries has received notice from any third party including, without limitation, any Governmental Authority, (A) that any one of them has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B; (B) that any hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) and any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws ("HAZARDOUS SUBSTANCES") which any one of them has generated, transported or disposed of has been found at any site at which a Governmental Authority has conducted or has ordered that the Parent or any Subsidiary of the Parent conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (C) that it is or shall be a named party to any claim, action, cause of action, complaint, or legal or administrative proceeding (in each case, contingent or otherwise) arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the Release of Hazardous Substances, and (ii) except as set forth on SCHEDULE 6.19(B), as such schedule may be updated from time to time by the Borrower (subject to the prior approval of the Administrative Agent), neither the Parent nor any of its Subsidiaries has received any notices referred to in clause (i) above identifying any event or condition that could materially and adversely affect the financial condition, properties or business of the Borrower and the Guarantors, taken as a whole; (c) Except as set forth on SCHEDULE 6.19(A) attached hereto: (i) no portion of the Real Property is used for the handling, processing, storage or disposal of Hazardous Substances except in material accordance with applicable Environmental Laws; and, to the best of the Parent's and Borrower's knowledge, no underground tank or other underground storage receptacle for Hazardous Substances is located on any portion of the Real Property; (ii) in the course of any activities conducted by the Parent, its Subsidiaries or operators of its properties, no Hazardous Substances have been generated or are being used on the Real Property except in material accordance with applicable Environmental Laws; (iii) there have been no Releases or threatened Releases of Hazardous Substances on, upon, into or from the properties of the Parent or its Subsidiaries, which Releases could reasonably be expected to have a material adverse effect on the value of any of the Real Property or on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or the Borrower to fulfill its obligations under this Term Loan Agreement or the other Loan Documents; (iv) to the best of the Parent's and the Borrower's knowledge, there have been no Releases on, upon, from or into any real property in the vicinity of any of the Real Property which, through soil or groundwater contamination, may have come to be located on, and which could reasonably be expected to have a material adverse effect on the value of any of the Real Property or adjacent properties or the environment or on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole) or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Term Loan Agreement or the other Loan Documents; and (v) in addition, to the best of the Parent's and the Borrower's knowledge, any Hazardous Substances that have been generated on any of the Real Property have been transported offsite only by carriers having an identification number issued by the EPA (or the equivalent thereof in any foreign jurisdiction), treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities have been and are, to the best of the Parent's and the Borrower's knowledge, operating in compliance with such permits and applicable Environmental Laws; 41 (d) None of the Parent or its Subsidiaries, any Mortgaged Property or any of the other Real Property is subject to any applicable Environmental Law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any Governmental Authority or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or as a condition to the recording of any Mortgage or to the effectiveness of any other transactions contemplated hereby; and (e) To the best of their knowledge after due inquiry, there are listed on SCHEDULE 6.19(E), all material environmental reports relating to the Parent and its Subsidiaries and their properties and operations, copies of which have been furnished to the Administrative Agent's Special Counsel. 6.20. BANK ACCOUNTS. SCHEDULE 6.20, as such schedule may be updated from time to time by the Borrower, sets forth the account numbers and location of all bank accounts of the Parent and its Subsidiaries. 6.21. LABOR CONTRACTS. Except as set forth on SCHEDULE 6.21, as of the Closing Date, neither the Parent nor any of its Subsidiaries is party to any collective bargaining agreement. Except as disclosed to the Administrative Agent and the Lenders in writing, (a) neither the Parent nor any of its Subsidiaries is a party to any collective bargaining agreement and (b) there are no material grievances, disputes or controversies with any union or other organization of the Parent's or any of its Subsidiary's employees, or threats of strikes or work stoppages. 6.22. DISCLOSURE. Neither this Term Loan Agreement nor any of the other Loan Documents contains any untrue statement of a material fact or omits to state a material fact (known to the Parent or any of its Subsidiaries in the case of any document or information not furnished by the Parent or any of its Subsidiaries) necessary in order to make the statements herein or therein not misleading. Except as disclosed to the Administrative Agent and the Lenders in writing, there is no fact known to the Parent or any of its Subsidiaries which could reasonably be expected to have a material adverse effect on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Term Loan Agreement or the other Loan Documents, exclusive of effects resulting from changes in general economic conditions, legal standards or regulatory conditions. 42 6.23. TITLE TO PROPERTIES; LEASES. 6.23.1. GENERAL. Except as set forth on SCHEDULE 6.23, the Parent and its Subsidiaries own all of the assets reflected in the consolidated balance sheet of the Parent and its Subsidiaries delivered to the Administrative Agent pursuant to SECTION 10.23, subject to no Liens or other rights of others, except Permitted Liens. 6.23.2. REAL PROPERTY. The Borrower has good, marketable and indefeasible title in fee to the Mortgaged Property free and clear of all Liens except Permitted Liens. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable legal requirements in connection with the transfer of the Mortgaged Property to the Borrower have been paid. Each Mortgage when properly recorded in the appropriate records, together with any Uniform Commercial Code Financing Statements required to be filed in connection therewith, will create (a) a valid, perfected first priority Lien on the Borrower's interest in the respective Mortgaged Property, (b) valid and perfected collateral assignments of, all leases relating to such Mortgaged Property, and (c) valid and perfected first priority security interests in all other related assets constituting Fixed Asset Collateral, all in accordance with the terms thereof, in each case subject only to any applicable Permitted Liens. All mortgage, recording, stamp, intangible or other similar taxes required to be paid by any Person under applicable legal requirements in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents have been paid. No condemnation or other material proceeding has been commenced or, to Borrower's best knowledge, is contemplated with respect to all or part of the Mortgaged Property or for the relocation of roadways providing access to the Mortgaged Property. There are no claims for payment for work, labor or materials affecting the Mortgaged Property which are or may become a Lien prior to, or of equal priority with, the Liens created by the Loan Documents. Other than as disclosed to the Administrative Agent, there are no outstanding options to purchase or rights of first refusal affecting all or any portion of the Mortgaged Property. To the best of the Borrower's knowledge, the ALTA survey delivered by Borrower with respect to each parcel of Mortgaged Property does not fail to reflect any material matter affecting the applicable Mortgaged Property or the title thereto. To the best of Borrower's knowledge, all of the improvements included in determining the appraised value of each parcel of Mortgaged Property lie wholly within the boundaries and building restriction lines of such Mortgaged Property, and no improvement on an adjoining property encroaches upon such Mortgaged Property, and no easement or other encumbrance upon the Real Property encroaches upon any of the improvements, except in each case those insured against by the title insurance policy insuring the Lien of the applicable Mortgage. Each parcel comprising each Mortgaged Property is a separate tax lot and is not a portion of any other tax lot that is not a part of the applicable Mortgaged Property. To Borrower's knowledge, there are no pending or proposed special or other assessments for public improvements or otherwise affecting any of the Mortgaged Property, or any contemplated improvements to the Mortgaged Property that may result in such special or other assessments. 43 6.24. CERTAIN TRANSACTIONS. Except for arm's length transactions pursuant to which the Parent, the Borrower, any of the Guarantors or any of their Subsidiaries make payments in the ordinary course of business upon terms no less favorable than the Parent, the Borrower, the Guarantors or such Subsidiary could obtain from third parties, none of the officers, directors, or employees of the Parent, the Borrower, the Guarantors or any of their Subsidiaries is presently a party to any transaction with the Parent, the Borrower, the Guarantors or any of their Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Parent and the Borrower, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 6.25. FIXED ASSETS. The Borrower has previously furnished to the Lenders a schedule of fixed assets constituting part of the Equipment Appraisal Report. Other than as set forth on SCHEDULE 6.25, the Borrower has not sold any fixed assets reflected in the most recent Equipment Appraisal Report delivered to the Lenders. 6.26. FOREIGN ASSETS CONTROL REGULATIONS, ETC. None of the requesting or borrowing of the Term Loans or the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. Section 1 et seq., as amended) (the "TRADING WITH THE ENEMY Act") or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the "FOREIGN ASSETS CONTROL REGULATIONS") or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the "EXECUTIVE ORDER"), and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore, neither the Parent nor any of its Subsidiaries or other Affiliates (i) is or will become a "blocked person" as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations, or (ii) engages or will engage in any dealings or transactions, or be otherwise associated, with any such "blocked person." 6.27. COMPLIANCE. The Borrower and each parcel of Mortgaged Property and the use thereof comply in all material respects with all applicable legal requirements (including with respect to parking and applicable zoning and land use laws, regulations and ordinances) or constitute permitted, preexisting conditions with respect thereto. Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority, the violation of which could reasonably be expected to have a material adverse effect on the business, assets or financial condition of the Borrower or the Guarantors, taken as a whole. In the event that all or any part of the improvements on any of the Mortgaged Property are destroyed or damaged, said improvements can be legally reconstructed to their condition prior to such damage or destruction, and thereafter exist for the same use without violating any material zoning or other ordinances applicable thereto and without the necessity of obtaining any variances or special permits (provided that a casualty affecting more than 50% of the assessed value of the structure may require such relief if not then in conformity with the zoning bylaw). No legal proceedings are pending or, to the best of Borrower's knowledge, threatened with respect to the zoning of the Real Property the consequences of which could reasonably be expected to have a material adverse effect on the business, assets or financial condition of the Borrower or the Guarantors, taken as a whole. Neither the zoning nor any other right to construct, use or operate the Real Property is in any way dependent upon or related to any property other than the Real Property. All material certifications, permits, licenses and approvals, including certificates of completion and occupancy permits required for the legal use, occupancy and operation of the Real Property (collectively, the "LICENSES"), have been obtained and are in full force and effect. The use being made of the Real Property is in conformity with the certificates of occupancy issued for the Real Property and all other restrictions, covenants and conditions affecting the Real Property. 44 6.28. CONTRACTS. There are no service, maintenance or repair contracts affecting the Mortgaged Property that are not terminable on one month's notice or less without cause and without penalty or premium. All such service, maintenance or repair contracts affecting the Real Property have been entered into at arms-length in the ordinary course of Borrower's business and provide for the payment of fees in amounts and upon terms comparable to existing market rates. 6.29. UTILITIES AND PUBLIC ACCESS. Excluding the Bleachery Pond property, there is reasonable utility and public access to the Real Property. 6.30. PHYSICAL CONDITION. The Real Property is in good condition, order and repair in all material respects; there exists no structural or other material defect or damages to the Real Property, whether latent or otherwise. The Borrower has not received notice from any insurance company or bonding company of any defect or inadequacy in the Real Property, or any part thereof, which would materially adversely affect its insurability or cause the imposition of extraordinary premiums or charges thereon or any termination of any policy of insurance or bond. Except as may be expressly disclosed on the compilation drawing of the Mortgage Property certified to the Administrative Agent, no portion of the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards. 7. AFFIRMATIVE COVENANTS OF THE PARENT AND THE BORROWER. Each of the Parent and the Borrower covenants and agrees that, so long as any Term Loan is outstanding or any Lender has any obligation to make any Term Loans: 7.1. PUNCTUAL PAYMENT. Each of the Parent and the Borrower will duly and punctually pay or cause to be paid when due all principal and interest on the Term Loans, the Fees and all other Obligations and amounts provided for in this Term Loan Agreement and the other Loan Documents to which it is a party and will cause to be paid any amounts owing by any of Subsidiary of the Parent, all in accordance with the terms of this Term Loan Agreement and such other Loan Documents. 7.2. MAINTENANCE OF OFFICE. Each of the Parent and the Borrower will maintain its chief executive office in Fall River, Massachusetts or at such other place as the Parent and the Borrower shall designate upon written notice to the Administrative Agent, where notices, presentations and demands to or upon the Parent or the Borrower in respect of the Loan Documents to which the Parent or the Borrower is a party may be given or made. 45 7.3. RECORDS AND ACCOUNTS. Each of the Parent and the Borrower will (i) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with, and all financial statements provided for herein shall be prepared in accordance with GAAP consistently applied; (ii) maintain adequate accounts and reserves for all taxes (including incomes taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves; and (iii) at all times, maintain independent certified public accountants as the Parent's and the Borrower's accountants which shall be satisfactory to the Administrative Agent. 7.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Parent and the Borrower will deliver to each of the Lenders: (a) as soon as practicable, but in any event not later than ninety (90) days after the end of each Fiscal Year, the consolidated balance sheet of the Parent and its Subsidiaries, as at the end of such year, and the related consolidated statements of income and retained earnings and consolidated statement of cash flow for such year, each setting forth in comparative form the figures for the previous Fiscal Year and all such consolidated financial statements to be in reasonable detail, prepared in accordance with GAAP consistently applied, and certified without qualification and without expression of uncertainty as to the ability of the Parent and its Subsidiaries to continue as going concerns, by PricewaterhouseCoopers or by other independent certified public accountants satisfactory to the Administrative Agent (PROVIDED, that for the 2006 Fiscal Year only, such certification may be issued with a going concern qualification if such qualification is reasonable and necessary in the reasonable judgment of the independent certified public accountant), together with (i) a written statement from such accountants to the effect that they have read a copy of this Term Loan Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; PROVIDED that such accountants shall not be liable to the Lenders for failure to obtain knowledge of any Default or Event of Default; and (ii) a copy of their accountants' management letter (if any) for such Fiscal Year; (b) as soon as practicable, but in any event within forty-five (45) days after the end of each Fiscal Quarter, unaudited quarterly consolidated and consolidating financial statements of the Parent and its Subsidiaries for such Fiscal Quarter (i.e., the consolidated and consolidating balance sheet of the Parent and its Subsidiaries, as at the end of such Fiscal Quarter, and the related consolidated and consolidating statements of income and retained earnings and consolidated and consolidating statement of cash flow for such Fiscal Quarter) and the unaudited consolidated and consolidating financial statements of the Parent and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, each prepared in accordance with GAAP consistently applied, together with a certification by the principal financial or accounting officer(s) of the Parent that the information contained in such financial statements fairly presents in all material respects the financial condition of the Parent and its Subsidiaries (as a whole) on the date thereof (subject to year-end adjustments); 46 (c) as soon as practicable, but in any event within thirty (30) days after the end of each month in each Fiscal Year, unaudited monthly consolidated and consolidating financial statements of Parent and its Subsidiaries for such month (i.e., the consolidated and consolidating balance sheet of the Parent and its Subsidiaries, as at the end of such month, and the related consolidated and consolidating statements of income and retained earnings and consolidated and consolidating statement of cash flow for such month) and the unaudited consolidated and consolidating financial statements of the Parent and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, each, prepared in accordance with GAAP consistently applied, together with a certification by the principal financial or accounting officer(s) of the Parent that the information contained in such financial statements fairly presents in all material respects the financial condition of the Parent and its Subsidiaries (as a whole) on the date thereof (subject to year-end adjustments); (d) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement certified by the principal financial or accounting officer(s) of the Parent in substantially the form of EXHIBIT A hereto (a "COMPLIANCE CERTIFICATE"), (i) setting forth in reasonable detail computations evidencing compliance with the covenants contained in SECTION 9 and (if applicable) reconciliations to reflect changes in GAAP since the Balance Sheet Date, and (ii) stating that such officer(s) has caused this Term Loan Agreement to be reviewed and has no knowledge of any Default or Event of Default during such Fiscal Quarter or at the end of such year, or if such officer(s) has such knowledge, specifying each Default or Event of Default and the nature thereof; (e) as requested by the Administrative Agent, such other information relating to the Collateral as the Administrative Agent shall reasonably request; (f) concurrently with delivery of the same to the Revolving Credit Agent, copies of (i) Borrowing Base Certificates, (ii) Collateral Update Certificates, (iii) inventory and accounts receivable aging reports, and (iv) all other material reports and material notices and other written information delivered by the Parent and its Subsidiaries to the Revolving Credit Agent and/or the Revolving Lenders pursuant to the Revolving Credit Agreement and the other Revolving Credit Documents; (g) not later than December 31st of each calendar year, the annual business plan of the Parent and its Subsidiaries for the succeeding Fiscal Year on a monthly basis in reasonable detail, including projected consolidated balance sheets, statements of income and retained earnings and cash flow statements of the Parent and its Subsidiaries for the succeeding Fiscal Year on a monthly basis, in each case in the same format as the audited balance sheet, statement of income and retained earnings and cash flow statement respectively; 47 (h) promptly after the sending or filing thereof, copies of all reports which the Parent or any Subsidiary of the Parent sends to any of its security holders, and copies of all reports and registration statements which the Parent or any Subsidiary of the Parent files with the Securities and Exchange Commission or any national securities exchange (including, without limitation, all 10-K, 10-Q and 8-K reports), which reports are required to be sent to security holders or so filed by law or by regulation or under the terms of the Parent's listing agreement with NASDAQ or any other stock exchange; (i) from time to time such other financial data and information (including accountants' management letters) as the Administrative Agent or any Lender may reasonably request; (j) simultaneously with the delivery of the financial statements referred to in subsection (c) above, a Compliance Certificate setting forth in reasonable detail computations evidencing compliance with the financial covenants contained in SECTION 9; (k) [intentionally omitted]; (l) on Wednesday of each week, a comparison of actual results for the immediately prior one week period to the previously projected results for such one week period as set forth in the Projections; and (m) within five (5) Business Days after the end of each month, updated 13 week projections reflecting any changes to the previously provided Projections. 7.5. NOTICES. 7.5.1. DEFAULTS. The Parent and the Borrower will promptly notify the Administrative Agent in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice to the Parent or its Subsidiaries or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Term Loan Agreement or any other note, evidence of indebtedness, indenture or other obligation for borrowed money in excess of $500,000 to which or with respect to which the Parent or any of its Subsidiaries is a party or obligor, whether as principal, guarantor, surety or otherwise, the Parent shall forthwith give written notice thereof to the Administrative Agent, describing the notice or action and the nature of the claimed default. The Borrower shall promptly notify the Administrative Agent in writing of the occurrence of any default or event of default under the Revolving Credit Agreement, stating the nature of such default or event of default. 7.5.2. NOTICE OF LITIGATION AND JUDGMENTS. The Parent and the Borrower will give notice to the Administrative Agent in writing within fifteen (15) days of Senior Management becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Parent or any of its Subsidiaries or to which the Parent or any of its Subsidiaries is or becomes a party involving (i) an uninsured claim against the Parent or any of its Subsidiaries that would reasonably be expected to result in damages of more than $1,000,000 against the Parent or any of its Subsidiaries or have a material adverse effect on the Borrower and the Guarantors taken as a whole, or (ii) any litigation proceeding against Persons with which the Parent or any of its Subsidiaries has a business relationship which is likely to materially and adversely affect the business, financial condition, assets or operations of the Borrower and the Guarantors (taken as a whole) and stating the nature and status of such litigation or proceedings. The Parent will give notice to the Administrative Agent, in writing, in form and detail satisfactory to the Administrative Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against the Parent or any of its Subsidiaries in an amount in excess of $1,000,000. 48 7.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Parent and the Borrower will, immediately upon becoming aware thereof, notify the Administrative Agent and each of the Lenders in writing of any setoff, claims (including, with respect to the Real Property, Environmental Claims), withholdings or other defenses in amounts greater than $250,000 to which any of the Collateral, or the Administrative Agent's rights with respect to the Collateral, are subject. 7.5.4. NOTICES CONCERNING INVENTORY COLLATERAL. The Parent and the Borrower shall provide to the Administrative Agent prompt notice of (a) any quarterly physical count of the Parent's or any of its Subsidiaries' inventory, together with a copy of the results thereof certified by the Parent or such Subsidiary, (b) any determination by the Parent or any of its Subsidiaries that the inventory levels of the Parent or such Subsidiary are not adequate to meet the sales projections of the Parent or such Subsidiary, and (c) any failure of the Parent or any of its Subsidiaries to pay rent at any leased location, which failure continues for more than ten (10) days following the day on which such rent is due and payable by the Parent or such Subsidiary. 7.5.5. NOTIFICATION OF ADDITIONAL INTELLECTUAL PROPERTY RIGHTS. Within ten (10) days of the end of each Fiscal Quarter, the Parent and the Borrower will (a) notify the Administrative Agent in writing of (i) any patents, patent applications, patent application disclosures filed with any patent office during such Fiscal Quarter or which the intellectual property committee of the Parent or such Subsidiary has approved for filing during such Fiscal Quarter as a patent application, registered copyrights or mask works registered during such Fiscal Quarter, applications for registration of copyrights or mask works filed during such Fiscal Quarter, trademark and service mark registrations during such Fiscal Quarter, trademark and service mark registration applications filed during such Fiscal Quarter, trademarks, service marks and trade names for which the intellectual property committee of the Parent or such Subsidiary has approved filing trademark registration applications during such Fiscal Quarter, all of the foregoing whether a foreign or United States right and whether owned by the Parent or such Subsidiary, to the extent not listed on SCHEDULE 6.6, (ii) the abandonment of any of the foregoing during such Fiscal Quarter, and (b) deliver to the Administrative Agent (x) a list of the fifty (50) most valuable copyrights of the Parent and its Subsidiaries as of the end of such Fiscal Quarter (based on the revenue derived therefrom) and (y) evidence that such fifty (50) copyrights have been registered with the United States Copyright Office, or applications regarding the same have been filed with the United States Copyright Office. 49 7.5.6. ENVIRONMENTAL EVENTS. The Parent and the Borrower will promptly give notice to the Administrative Agent and each of the Lenders (a) of any violation of any Environmental Law that the Parent or any of its Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any Governmental Authority, and (b) upon Senior Management becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, of any Governmental Authority that, in the case of clauses (a) or (b) above, could have a material and adverse affect on the financial position, business, operations, or affairs of the Borrower and the Guarantors (taken as a whole). 7.5.7. NOTIFICATION REGARDING THE REAL PROPERTY. The Borrower will promptly give notice to the Administrative Agent and each of the Lenders of receipt or knowledge of any notice or correspondence by a Governmental Authority concerning the Real Property along with a copy of any such notice or correspondence by the Governmental Authority, including, but not limited to any notice of casualty loss and eminent domain proceedings. 7.6. LEGAL EXISTENCE; MAINTENANCE OF PROPERTIES. (a) Except as permitted by SECTION 8.5, the Parent and the Borrower will do and will cause each of their Subsidiaries to do all things necessary to (i) in the case of each of the Parent and the Borrower, maintain in full force and effect its legal existence and good standing under the laws of its jurisdiction of organization or incorporation, (ii) maintain its qualification to do business in each state or other jurisdiction in which the failure to do so would have a material adverse effect on the condition, financial or otherwise, of the Borrower and the Guarantors (taken as a whole), and (iii) maintain all of its rights and franchises, except where the failure to maintain such right or franchise would not have a material adverse effect on the conduct of the business of the Borrower and the Guarantors taken as a whole. (b) Each of the Parent and the Borrower (i) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of the Parent's business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Parent and the Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, and (iii) will, and will cause each of its Subsidiaries to, continue to engage primarily in the businesses now conducted by them and in related or complementary businesses; PROVIDED that nothing in this SECTION 7.6(B) shall prevent either the Parent or the Borrower from discontinuing the operation and maintenance of any of its properties or any of those of its Subsidiaries if such discontinuance is, in the judgment of the Parent and the Borrower, desirable in the conduct of its or their business and that do not in the aggregate materially adversely affect the business of the Parent and its Subsidiaries on consolidated basis. 7.7. INSURANCE. Each of the Parent and the Borrower will and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent and in accordance with the terms of the Security Documents. Each of the Parent and the Borrower will, and will cause each of its Subsidiaries to, maintain insurance, in form, substance and amounts satisfactory to the Administrative Agent, on the Mortgaged Properties in accordance with the terms of the Mortgages. 50 7.8. TAXES. Each of the Parent and the Borrower will, and will cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all Taxes, assessments and other governmental charges imposed upon it and its real properties, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a Lien or charge upon any of its property; provided that any such Tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Parent, the Borrower or such Subsidiary shall have set aside on its books adequate reserves with respect thereto; and provided further that the Parent and each Subsidiary of the Parent will pay all such Taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose or otherwise enforce any Lien that may have attached as security therefor. 7.9. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. Each of the Parent and the Borrower will, and will cause each of its Subsidiaries to, comply with (i) the applicable laws and regulations wherever its business is conducted, including all Environmental Laws, (ii) the provisions of its Governing Documents, (iii) all agreements and instruments by which it or any of its properties may be bound and (iv) all applicable decrees, orders, and judgments, PROVIDED, that in each case, such compliance shall be required by this Term Loan Agreement only where noncompliance with Sections 7.9(i)-(iv) would have a material adverse effect on the business, assets, operations or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of either the Parent or the Borrower to fulfill its obligations under this Term Loan Agreement or the other Loan Documents. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government or any central bank or other fiscal or monetary authority shall become necessary or required in order that the Parent, the Borrower or any of their Subsidiaries may fulfill any of its obligations hereunder or any of the other Loan Documents to which the Parent, the Borrower or such Subsidiary is a party, the Parent and the Borrower will, or (as the case may be) will cause such Subsidiary to, promptly take or cause to be taken all reasonable steps within the power of the Parent, the Borrower or such Subsidiary to obtain such authorization, consent, approval, permit or license, and upon request of the Administrative Agent, to furnish the Administrative Agent and the Lenders with evidence thereof. 7.10. EMPLOYEE BENEFIT PLANS. Each of the Parent and the Borrower will (i) promptly upon filing (if required by applicable law) the same with the Department of Labor or Internal Revenue Service upon request of the Administrative Agent, furnish to the Administrative Agent a copy of the most recent actuarial statement required to be submitted under Section 103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish to the Administrative Agent any notice, report or demand sent or received in respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA. 51 7.11. USE OF PROCEEDS. The proceeds of the Term Loans contemplated to be advanced or made available to the Borrower shall be used solely for (i) repayment of a portion of the outstanding obligations of the Borrower under the Existing Credit Agreement, and (ii) to fund certain fees and expenses related to the Revolving Credit Agreement and the transactions contemplated hereby. 7.12. CERTAIN CHANGES. Each of the Parent and the Borrower shall notify the Administrative Agent, in writing, not less than thirty (30) days prior (i) to any change in its chief executive office, its name or the type of its organization, (ii) the acquisition of any real estate pursuant to SECTION 7.16, or (iii) the acquisition of any asset in any jurisdiction other than those jurisdictions specified on the Parent's and the Borrower's Perfection Certificate. 7.13. CONDUCT OF BUSINESS. Except as permitted by SECTION 8.5, each of the Parent and the Borrower will and will cause their Subsidiaries to continue to engage primarily in the businesses engaged in by the Parent, the Borrower and their Subsidiaries on the Closing Date, or such businesses as are reasonably related or complementary to the businesses engaged in by the Parent, the Borrower and their Subsidiaries on the Closing Date. 7.14. FURTHER ASSURANCES. Each of the Parent and the Borrower will, and will cause each of their Subsidiaries to, cooperate with the Lenders and the Administrative Agent and execute such further instruments and documents as the Lenders or the Administrative Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Term Loan Agreement and the other Loan Documents. 7.15. INSPECTION OF PROPERTIES AND BOOKS, ETC. 7.15.1. GENERAL. The Parent and the Borrower shall permit the Lenders, through the Administrative Agent or any of the Lenders' other designated representatives, at the Borrower's expense (such expense to include a $850 per day field examination charge plus all out of pocket expenses related thereto), to visit and inspect any of the properties of the Parent or any of its Subsidiaries, to examine the books of account of the Parent and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of the Parent and its Subsidiaries with, and to be advised as to the same by, its and their officers, and to conduct examinations and verifications (whether by internal commercial finance examiners or independent auditors satisfactory to the Administrative Agent (which may be affiliated with one or more of the Lenders)) of the Collateral, all at such reasonable times and intervals and with prior notice as the Administrative Agent or any Lender may reasonably request. 7.15.2. APPRAISALS. At the request of the Administrative Agent or the Required Lenders, which requests may be made annually with respect to Real Property and semi-annually with respect to Equipment, and without duplication of any such appraisals required by the Revolving Credit Agent and Revolving Credit Lenders, (or with such other frequency as the Administrative Agent shall request upon the occurrence and during the continuation of a Default or an Event of Default), the Parent and the Borrower will obtain and deliver to the Administrative Agent and the Lenders appraisal reports in form and substance and from appraisers satisfactory to the Administrative Agent, stating (a) the then current fair market, net orderly liquidation value and forced liquidation values of all or any portion of the Real Property and Equipment owned by the Parent or any of its Subsidiaries, and (b) the then current business value of the Parent and its Subsidiaries. Each such appraisal shall be conducted and made at the expense of the Borrower. 52 7.15.3. COMMUNICATIONS WITH ACCOUNTANTS. Upon the Administrative Agent's reasonable request, each of the Parent and the Borrower will request that the Parent's and the Borrower's independent certified public accountants communicate with the Administrative Agent, and, if accompanied by the Administrative Agent, the Lenders, with respect to the financial condition of the Parent or any of its Subsidiaries; PROVIDED that the Parent and the Borrower shall participate in all such communications. 7.15.4. ENVIRONMENTAL ASSESSMENTS. No more frequently than once during each calendar year (or with such other frequency as the Administrative Agent shall request upon the occurrence and continuation of a Default or an Event of Default), the Administrative Agent may, for the purpose of assessing and ensuring the value of any Mortgaged Property, obtain one or more environmental assessments or audits of such Mortgaged Property prepared by a hydrogeologist, an independent engineer or other qualified consultant or expert approved by the Administrative Agent to evaluate or confirm (a) whether any Hazardous Substances are present in the soil or water at such Mortgaged Property, and (b) whether the use and operation of such Mortgaged Property complies with all Environmental Laws. Environmental assessments may include without limitation detailed visual inspections of such Mortgaged Property including any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, surface water samples and ground water samples, as well as such other investigations or analyses as the Administrative Agent deems appropriate. All such environmental assessments shall be conducted and made at the expense of the Borrower. 7.16. ADDITIONAL MORTGAGED PROPERTY. At any time following the Closing Date, upon request of the Administrative Agent, each of the Parent and the Borrower shall, and shall cause each of its Subsidiaries to, forthwith (but in any event within sixty (60) days following any such request therefor) deliver to the Administrative Agent for the benefit of the Lenders a fully executed mortgage or deed of trust over any or all parcels of Real Property acquired or leased by the Parent, the Borrower or such Subsidiary after the Closing Date, each of which shall be in form and substance satisfactory to the Administrative Agent and shall be deemed to be a Security Document hereunder, together with such title insurance policies, surveys, environmental site assessments, evidences of insurance with the Administrative Agent named as loss payee and additional insured, legal opinions and other documents and certificates with respect to such Real Property as the Administrative Agent may reasonably request. Each of the Parent and the Borrower further agrees that, following the taking of such actions with respect to such Real Property, the Administrative Agent shall have, for the benefit of the Lenders, a valid and enforceable first priority mortgage or deed of trust over such Real Property, free and clear of all defects and encumbrances except for Permitted Liens. 53 7.17. INTENTIONALLY OMITTED. 7.18. DOMESTIC SUBSIDIARIES. The Parent shall cause each Domestic Subsidiary of the Parent (other than the Borrower) to be a Guarantor at all times. 7.19. LANDLORD WAIVERS. The Borrower shall use commercially reasonable efforts to obtain and deliver to the Administrative Agent, landlord waivers, in form and substance reasonably satisfactory to the Administrative Agent, relating to each of the leased properties listed on SCHEDULE 10.20. 7.20. INTENTIONALLY OMITTED. 7.21. FINANCIAL CONSULTANT. The Parent and the Borrower shall continue to retain, at the Borrower's and Guarantors' expense, the Financial Consultant on terms and conditions satisfactory to the Administrative Agent, for a period of not less than three (3) months after the Closing Date, as its financial consultant. Parent acknowledges that the Financial Consultant has been chosen solely by the Parent and the Financial Consultant will be an agent only of the Parent, and not of the Administrative Agent or any Lender, in all respects. At any time and from time to time, the Borrower and the Guarantors shall make the Financial Consultant, its officers and other consultants of the Parent and its Subsidiaries available, whether by telephone or in person to review and discuss the Parent's and its Subsidiaries' financial condition; PROVIDED that the Parent shall have the option to participate in such communications. 7.22. POST CLOSING OBLIGATIONS. The Borrower shall comply with each of the following post-closing obligations within the time frames indicated: (a) Within thirty (30) days following the Closing Date, the Borrower shall deliver to the Administrative Agent the Articles of Organization and Bylaws of Quaker Mexico, or such other documents corresponding to the same under Mexican law; and (b) Within fifteen (15) days following the Closing Date, the Borrower shall use commercially reasonable efforts to deliver to the Administrative Agent landlord waivers, in form and substance reasonably satisfactory to the Administrative Agent, with respect to the Real Properties located at 54 Graham Road, Fall River, Massachusetts and 81 Commerce Drive, Fall River, Massachusetts. 8. NEGATIVE COVENANTS OF THE PARENT AND THE BORROWER. Each of the Parent and the Borrower covenants and agrees that, so long as any Term Loan is outstanding or any Lender has any obligation to make any Term Loans: 8.1. INVESTMENTS. Neither the Parent nor the Borrower will or will permit any of their Subsidiaries to make any Investment in any Person, except for Investments which consist of: (a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Parent or any Subsidiary of the Parent; (b) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks having total assets in excess of $100,000,000; 54 (c) securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" if rated by Moody's, and not less than "A 1" if rated by S&P; (d) overnight Investments in money market funds with portfolios comprised of the items described in clauses (a) through (c) above; (e) Investments consisting of the Guaranties; (f) Investments existing on the date hereof and listed on SCHEDULE 8.1; (g) Investments with respect to Indebtedness permitted by SECTION 8.2(D) so long as such entities remain Subsidiaries of the Borrower; (h) Investments (i) by the Parent in Domestic Subsidiaries of the Parent, and (ii) by the Borrower in Domestic Subsidiaries of the Borrower; (i) Investments consisting of loans and advances to employees for moving, entertainment, travel, housing and other similar expenses in the ordinary course of business not to exceed $250,000 in the aggregate at any time outstanding; and (j) Notes receivable and securities received in connection with the insolvency or inability to pay of any of the Parent's or the Borrower's account debtors in an aggregate amount not to exceed at any time the greater of (i) $3,000,000 and (ii) ten percent (10%) of the outstanding face amount of the Borrower's accounts receivable at such time; PROVIDED, HOWEVER, such Investments shall be permitted hereunder only to the extent such Investments (if held by the Parent or any Domestic Subsidiary of the Parent) are subject to a second priority security interest in favor of the Administrative Agent, securing the Obligations free of all Liens other than Permitted Liens. 8.2. RESTRICTIONS ON INDEBTEDNESS. The Parent and the Borrower will not, and will not permit any of their Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than: (a) Indebtedness created hereunder; (b) Indebtedness existing on the Closing Date which is set forth in SCHEDULE 8.2; (c) other Indebtedness incurred after the Closing Date (determined on a consolidated basis without duplication in accordance with GAAP) in respect of Capitalized Leases and/or secured by Liens permitted under SECTION 8.3(H), in an aggregate principal amount at any time outstanding not in excess of $2,500,000; 55 (d) Indebtedness of a Domestic Subsidiary of the Borrower to the Borrower; PROVIDED that, in each case, such Indebtedness is evidenced by a note which is pledged to the Administrative Agent; (e) Indebtedness of the Parent or any Subsidiary of the Parent in respect of Derivative Agreements; (f) Indebtedness of the Parent and its Subsidiaries consisting of (i) the Priority Bank Debt (as defined in the Intercreditor Agreement), and (ii) any refinancings thereof; PROVIDED that the committed amount of such Indebtedness is not increased at the time of such refinancing and such refinancing and the intercreditor arrangements with the holders of such Indebtedness are otherwise on terms and conditions satisfactory to the Administrative Agent; and (g) Indebtedness of the Parent and its Subsidiaries consisting of the financing of insurance premiums incurred in the ordinary course of business. 8.3. RESTRICTIONS ON LIENS. 8.3.1. PERMITTED LIENS. Neither the Parent nor the Borrower will, nor will they permit any of their Subsidiaries to, create, incur, assume or permit to exist any Lien on any of its property or assets of any character now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except (the following being called "PERMITTED LIENS"): (a) Liens created hereunder or under the other Loan Documents; (b) any Lien on any property or asset of the Parent or any Subsidiary of the Parent existing on the date hereof and set forth in SCHEDULE 8.3.1, PROVIDED that (i) such Lien shall not apply to any other property or asset of the Parent or any Subsidiary of the Parent and (ii) such Lien shall secure only those obligations which it secures on the date hereof; (c) Liens imposed by any Governmental Authority for taxes, assessments or charges not yet delinquent or which are being contested in good faith and by appropriate proceedings if adequate reserves with respect thereto are maintained on the books of the Parent and Subsidiaries of the Parent in accordance with GAAP and which reserves shall be acceptable to the Administrative Agent; (d) landlords', carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens, and vendors' Liens imposed by statute or common law not securing the repayment of Indebtedness, arising in the ordinary course of business which are not overdue for a period of more than sixty (60) days or which are being contested in good faith and by appropriate proceedings and Liens securing judgments (including, without limitation, pre-judgment attachments); 56 (e) pledges or deposits under worker's compensation, unemployment insurance and other social security legislation and pledges or deposits to secure the performance of bids, tenders, trade contracts (other than for borrowed money), leases (other than Capitalized Leases), utility purchase obligations, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of Real Property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not, in the aggregate, materially detract from the value of the Real Property of the Parent or any Subsidiary of the Parent or materially interfere with the ordinary conduct of the business of the Parent or any Subsidiary of the Parent; (g) Liens consisting of bankers' liens and rights of setoff, in each case, arising by operation of law, and Liens on documents presented in letter of credit drawings; (h) Liens on Capital Assets acquired, constructed or improved by the Parent or any Subsidiary of the Parent, PROVIDED that (i) such Liens secure Indebtedness (including Indebtedness with respect to Capitalized Leases) permitted by SECTION 8.2(C), (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within ninety 90 days after such acquisition or the completion of such construction or improvement or were in effect at the time the Parent or a Subsidiary of the Parent acquired the assets or stock, (iii) the Indebtedness secured thereby does not exceed the cost of acquiring, constructing or improving such fixed or capital assets, and (iv) such security interests shall not apply to any other property or assets of the Parent or its Subsidiaries; (i) Other nonconsensual Liens; PROVIDED that the aggregate amount of obligations secured thereby does not exceed $100,000 at any time; (j) Liens created under the Revolving Credit Agreement and the other Revolving Credit Documents to secure the Indebtedness permitted under SECTION 8.2(F) and any Liens securing any permitted refinancing thereof; and (k) Liens on insurance policies and the proceeds thereof pursuant to insurance premium financing arrangements permitted under SECTION 8.2(G). 8.3.2. RESTRICTIONS ON NEGATIVE PLEDGES AND UPSTREAM LIMITATIONS. The Parent and the Borrower will not, nor will they permit any of their Subsidiaries to (a) enter into or permit to exist any arrangement or agreement (excluding this Term Loan Agreement, the other Loan Documents and the Revolving Credit Documents) which directly or indirectly prohibits the Parent or any of its Subsidiaries from creating, assuming or incurring any Lien upon its properties, revenues or assets or those of any of its Subsidiaries whether now owned or hereafter acquired, or (b) enter into any agreement, contract or arrangement (excluding this Term Loan Agreement the other Loan Documents and the Revolving Credit Documents) restricting the ability of any Subsidiary of the Parent and the Borrower to pay or make dividends or distributions in cash or kind to the Parent or the Borrower, to make loans, advances or other payments of whatsoever nature to the Parent or the Borrower, or to make transfers or distributions of all or any part of its assets to the Parent or the Borrower; in each case other than customary anti-assignment provisions contained in leases and licensing agreements entered into by the Parent or any Subsidiary in the ordinary course of its business, but only if consents by the counterparty thereto have been obtained by the Parent or its Subsidiaries in form and substance satisfactory to the Administrative Agent. 57 8.4. RESTRICTED PAYMENTS. The Parent, the Borrower and their Subsidiaries will not make any Restricted Payments other than Distributions to the Parent from a Subsidiary of the Parent or to the Borrower from a Subsidiary of the Borrower. 8.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS. 8.5.1. MERGERS AND ACQUISITIONS. Neither the Parent nor the Borrower will, or will permit any of their Subsidiaries to, become a party to any merger or consolidation, or agree to or effect any asset acquisition or stock acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices) except for (i) the merger or consolidation of one or more of the Subsidiaries of the Borrower with and into the Borrower, (ii) the merger or consolidation of two or more Subsidiaries of the Borrower. 8.5.2. DISPOSITION OF ASSETS. (a) Neither the Parent nor the Borrower will, or will permit any of their Subsidiaries to, become a party to or agree to or effect any disposition of any assets, other than (i) the sale of inventory, the licensing of intellectual property and the disposition of obsolete assets, in each case in the ordinary course of business consistent with past practices, and (ii) the sales of the Real Property, fixtures, machinery and equipment contemplated by the Business Plan; PROVIDED that (x) the amount of Net Proceeds received by the Borrower from a sale of Real Property is greater than or equal to the amount of Minimum Proceeds for such sale of Real Property, or if less than such amount, the Borrowers receives the prior written consent of the Administrative Agent for such sale, and (y) all of the Net Proceeds from such sale are applied, contemporaneously upon receipt, in accordance with SECTION 3.1.7. (b) In connection with any disposition of assets permitted under this SECTION 8.5.2, each of the Lenders hereby authorizes the Administrative Agent to execute and deliver any collateral releases necessary to release its Liens on such assets; PROVIDED, that in the case of any Mortgaged Property, the Lenders hereby authorize the Administrative Agent to release its Lien on any parcel of Mortgaged Property upon consummation of any Real Property Sale yielding Adjusted Net Proceeds equal to or greater than the Minimum Proceeds for such parcel of Mortgaged Property. 8.6. SALE AND LEASEBACK. Neither the Parent nor the Borrower will, or will permit any of their Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Parent or any Subsidiary of the Parent shall sell or transfer any property owned by it in order then or thereafter to lease such property (other than short-term or transitional leases entered into in connection with the disposition of any Real Property and/or consolidation of operations) that the Parent or any Subsidiary of the Parent intends to use for substantially the same purpose as the property being sold or transferred. 58 8.7. CHANGE OF FISCAL YEAR. The Parent will not at any time change its Fiscal Year without the prior written consent of the Required Lenders. 8.8. EMPLOYEE BENEFIT PLANS. Neither the Parent, the Borrower nor any ERISA Affiliate will: (a) engage in any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code which could result in a material liability for the Parent or any of its Subsidiaries; or (b) permit any Guaranteed Pension Plan to incur an "accumulated funding deficiency", as such term is defined in Section 302 of ERISA, whether or not such deficiency is or may be waived; or (c) fail to contribute to any Guaranteed Pension Plan to an extent which, or terminate any Guaranteed Pension Plan in a manner which, could result in the imposition of a Lien or encumbrance on the assets of the Parent or any of its Subsidiaries pursuant to Section 302(f) or Section 4068 of ERISA; or (d) amend any Guaranteed Pension Plan in circumstances requiring the posting of security pursuant to Section 307 of ERISA or Section 401(a)(29) of the Code. 8.9. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Parent and the Borrower will not, and will not permit any of their Subsidiaries to, (a) use any of the Real Property or any portion thereof for the handling, processing, storage or disposal of Hazardous Substances, (b) cause or permit to be located on any of the Real Property any underground tank or other underground storage receptacle for Hazardous Substances, (c) generate any Hazardous Substances on any of the Real Property, (d) conduct any activity at any Real Property or use any Real Property in any manner so as to cause a Release or threatened Release of Hazardous Substances on, upon or into the Real Property, or (e) otherwise conduct any activity at any Real Property or use any Real Property in any manner that would violate any Environmental Law or bring such Real Property in violation of any Environmental Law, unless, in each case, such violation, use, condition, generation or activity could not reasonably be expected to have a material adverse effect on the value of such Real Property or the business, assets, operations or financial condition of the Borrower and the Guarantors, taken as a whole, or the ability of the Parent, the Borrower or any of their Subsidiaries to fulfill its obligations under this Term Loan Agreement or the other Loan Documents. 8.10. CHANGE IN TERMS OF GOVERNING DOCUMENTS. The Parent and the Borrower shall not effect or permit any change in or amendment to the Governing Documents of the Parent or any of its Subsidiaries, which could reasonably be expected to adversely affect the Lenders. 59 8.11. CREATION OF SUBSIDIARIES. Neither the Parent nor the Borrower shall, or shall permit any of their Subsidiaries to, create or permit to exist any Subsidiary unless (a) one hundred percent (100%) of the Capital Stock or other equity interests of such Subsidiary are owned by the Guarantors or the Borrower, (b) prior to the formation of such Subsidiary, the Parent and the Borrower shall notify the Administrative Agent and the Lenders thereof in writing and deliver to the Administrative Agent an updated SCHEDULE 6.18, (c) contemporaneously with the formation of any Domestic Subsidiary, the Parent and the Borrower shall, and shall cause each of their Subsidiaries to, (i) take all steps as may be necessary or advisable in the opinion of the Administrative Agent to pledge to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, on a perfected, second-priority basis, all of the Capital Stock or other equity interests of such Domestic Subsidiary pursuant to a pledge agreement in form and substance satisfactory to the Administrative Agent, which such pledge agreement shall be a Pledge Agreement and a Security Document hereunder, (ii) cause any such Domestic Subsidiary to guaranty all of the Obligations hereunder pursuant to a guaranty in form and substance satisfactory to the Administrative Agent, which such guaranty shall be a Guaranty and a Security Document hereunder, (iii) cause any such Subsidiary to take all steps as may be necessary or advisable in the opinion of the Administrative Agent to grant to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, a first priority, perfected security interest in the Fixed Asset Collateral owned by such Subsidiary and a second priority security interest in and to all other Collateral (subject to the Liens of the Revolving Credit Agent under the Revolving Credit Agreement and related documents) owned by such Subsidiary, as collateral security for such Guaranty, pursuant to security documents, mortgages, pledges and other documents in form and substance satisfactory to the Administrative Agent, each of which documents shall be a Security Document hereunder, and (iv) deliver to the Administrative Agent all such evidence of corporate or other authorization, legal opinions (including local counsel opinions where applicable) and other documentation as the Administrative Agent may request, and (d) contemporaneously with the formation of any Foreign Subsidiary, the Parent and the Borrower shall, and shall cause each of their Subsidiaries to, take all steps as may be necessary or advisable in the opinion of the Administrative Agent to pledge to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent (subject to the Liens of the Revolving Credit Agent under the Revolving Credit Agreement), sixty-five percent (65%) of the Capital Stock or other equity interests of such Foreign Subsidiary pursuant to a pledge agreement in form and substance satisfactory to the Administrative Agent, which such pledge agreement shall be a Pledge Agreement and a Security Document hereunder. 8.12. TRANSACTIONS WITH AFFILIATES. The Parent and the Borrower will not, and will not permit any of their Subsidiaries to, engage in any transaction with any Affiliate (excluding Domestic Subsidiaries of the Parent) of the Parent (other than for services by individuals as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such Affiliate or, to the knowledge of the Parent and the Borrower, any corporation, partnership, trust or other entity in which any such Affiliate has a substantial interest or is an officer, director, trustee or partner, on terms more favorable to such Person than would have been obtainable on an arm's-length basis in the ordinary course of business. 8.13. INTENTIONALLY OMITTED. 8.14. BUSINESS ACTIVITIES. The Parent and the Borrower will not, and will not permit any of their Subsidiaries to, engage directly or indirectly (whether through Subsidiaries or otherwise) in any type of business other than the businesses conducted by them on the Closing Date and in related businesses. 60 9. FINANCIAL COVENANTS OF THE PARENT AND THE BORROWER. Each of the Parent and the Borrower covenants and agrees that, so long as any Term Loan is outstanding or any Lender has any obligation to make any Term Loans and based on the consolidated financial statements of the Parent and its Subsidiaries delivered in accordance with the terms hereof: 9.1. FIXED CHARGE COVERAGE RATIOS. Each of the Parent and the Borrower covenants and agrees that, so long as any Term Loan is outstanding and based on the consolidated financial statements of the Parent and its Subsidiaries delivered in accordance with the terms hereof: (a) at any time during any Fiscal Quarter (x) ending prior to or at the end of FQ3 of 2008 and (y) during which Excess Revolving Credit Availability (before the application of the Availability Reserve) is less than the sum of (1) $4,250,000, plus (2) any increases in the Availability Reserve following the Closing Date, plus (3) $500,000, the Parent and the Borrower shall not permit the Fixed Charge Coverage Ratio, determined as of the end of the most recently ended Fiscal Quarter, to be less than 1.00:1.00, and (b) at any time during any Fiscal Quarter (x) ending after FQ3 of 2008 and (y) during which Excess Revolving Credit Availability (before application of the Availability Reserve) is less than the sum of (1) $4,250,000, plus (2) any increases in the Availability Reserve following the Closing Date, plus (3) $2,500,000, the Parent and the Borrower shall not permit the Fixed Charge Coverage Ratio, determined as of the end of the most recently ended Fiscal Quarter, to be less than 1.00:1.00. 9.2. CAPITAL EXPENDITURES. During any period referenced in the table set forth below, the Parent and the Borrower will not, and will not allow any of their Subsidiaries to, make Capital Expenditures that exceed the aggregate amount set forth in the table below opposite such period: - -------------------------------------------------------------------------- Period Amount - -------------------------------------------------------------------------- Fiscal Year 2006 $10,000,000 - -------------------------------------------------------------------------- Fiscal Year 2007 $12,000,000 - -------------------------------------------------------------------------- Fiscal Year 2008 and for each Fiscal Year $15,000,000 thereafter - -------------------------------------------------------------------------- 61 10. CLOSING CONDITIONS. The obligations of the Lenders to make the Term Loans shall be subject to the satisfaction of the following conditions precedent, in each case, in form and substance satisfactory to the Administrative Agent and the Lenders: 10.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Lenders. Each Lender shall have received a fully executed copy of each such document. 10.2. CERTIFIED COPIES OF GOVERNING DOCUMENTS. Each of the Lenders shall have received from the Guarantors, the Borrower and each of their Subsidiaries a copy, certified by a duly authorized officer of such Person or other appropriate Person to be true and complete on the Closing Date, of each of its Governing Documents as in effect on such date of certification. 10.3. CORPORATE OR OTHER ACTION. All corporate (or other) action necessary for the valid execution, delivery and performance by the Guarantors, the Borrower and each of their Subsidiaries of this Term Loan Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Lenders shall have been provided to each of the Lenders. 10.4. INCUMBENCY CERTIFICATE. Each of the Lenders shall have received from the Guarantors, the Borrower and each of their Subsidiaries an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of such Guarantor, the Borrower or such Subsidiary, and giving the name and bearing a specimen signature of each individual who shall be authorized: (a) to sign, in the name and on behalf of each such Person, each of the Loan Documents to which the Borrower, the Guarantors or such Subsidiary are or are to become a party; and (b) to give notices and to take other action on its behalf under the Loan Documents. 10.5. VALIDITY OF LIENS. The Security Documents shall be effective to create in favor of the Administrative Agent a legal, valid and enforceable first priority perfected security interest in and Lien upon the Fixed Asset Collateral and a second priority perfected security interest in and Lien upon all other Collateral (subject to the Liens of the Revolving Credit Agent under the Revolving Credit Agreement). All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Administrative Agent to protect and preserve such security interests shall have been duly effected. The Administrative Agent shall have received evidence thereof in form and substance satisfactory to the Administrative Agent. 10.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Administrative Agent shall have received from the Guarantors, the Borrower and their Subsidiaries a completed and fully executed Perfection Certificate and the results of UCC searches (and the equivalent thereof in all applicable foreign jurisdictions) with respect to the Collateral, indicating no Liens other than Permitted Liens and otherwise in form and substance satisfactory to the Administrative Agent. 10.7. CERTIFICATES OF INSURANCE. The Administrative Agent shall have received (a) a certificate of insurance from an independent insurance broker dated as of the Closing Date, naming the Administrative Agent as loss payee and/or additional insured, as applicable, identifying insurers, types of insurance, insurance limits, and policy terms, and otherwise describing the insurance obtained in accordance with the provisions of the Security Agreements, and (b) certified copies of all policies evidencing such insurance (or certificates therefore signed by the insurer or an agent authorized to bind the insurer). 62 10.8. INTENTIONALLY OMITTED. 10.9. BORROWING BASE CERTIFICATES AND COLLATERAL UPDATE CERTIFICATE. The Administrative Agent shall have received a copy of an executed Borrowing Base Certificate, which Borrowing Base Certificate shall demonstrate Excess Revolving Credit Availability (after giving effect to the payment of all fees and expenses, the issuance of all letters of credit under the Revolving Credit Agreement and the funding of the Term Loans and all Revolving Loans to be paid, issued or funded on the Closing Date) of not less than the sum of (i) $1,000,000 plus (ii) accounts payable that are more than seven (7) days past due in excess of $3,250,000, and (b) a copy of the Collateral Update Certificate and any other reports relative to the Collateral delivered on the Closing Date to the Revolving Credit Agent and/or the Revolving Credit Lenders. 10.10. ACCOUNTS RECEIVABLE AGING REPORT. The Administrative Agent shall have received from the Borrower the most recent inventory report and accounts receivable aging report of the Borrower delivered to the Revolving Credit Agent pursuant to the Revolving Credit Agreement. 10.11. PAYMENT OF CLOSING FEES. The Borrower shall have paid to the Administrative Agent any Fees required to be paid by them on the Closing Date. 10.12. INTENTIONALLY OMITTED. 10.13. OPINIONS OF COUNSEL. Each of the Lenders and the Administrative Agent shall have received a favorable legal opinion addressed to the Lenders and the Administrative Agent, dated as of the Closing Date, in form and substance satisfactory to the Lenders and the Administrative Agent, from Wilmer Cutler Pickering Hale and Dorr LLP, counsel to the Parent and its Subsidiaries. 10.14. SURVEY, TAXES, ETC. The Administrative Agent shall have received (a) ALTA surveys with respect to each parcel of Mortgaged Property if necessary to eliminate any exceptions that would otherwise be contained in the Title Policies relating to matters which would be shown by a survey, (b) a flood zone certificate with respect to each parcel of Mortgaged Property located in a "flood zone", and (c) evidence of payment of real estate taxes and municipal charges on all Real Property not delinquent on or before the Closing Date.. 10.15. TITLE INSURANCE. The Administrative Agent shall have received a Title Policy covering each Mortgaged Property (or commitments to issue such policies, with all conditions to issuance of the Title Policy deleted by an authorized agent of the Title Insurance Company) together with proof of payment of all fees and premiums for such policies, from the Title Insurance Company and in amounts satisfactory to the Administrative Agent, insuring the interest of the Administrative Agent and each of the Lenders as mortgagee under the Mortgages. 63 10.16. HAZARDOUS WASTE ASSESSMENTS. The Administrative Agent shall have received environmental reports and hazardous waste site assessments from environmental engineers and evidence of compliance with environmental laws, in form and substance satisfactory to the Administrative Agent, covering all Real Property and all other real property in respect of which the Parent or any of its Subsidiaries may have material liability, whether contingent or otherwise, for dumping or disposal of Hazardous Substances. 10.17. INTENTIONALLY OMITTED. 10.18. NO MATERIAL ADVERSE CHANGE. Since the Balance Sheet Date, as determined by the Administrative Agent, there has occurred no material adverse change in the financial condition, business, assets, liabilities or business prospects of the Borrower and the Guarantors, taken as a whole. 10.19. LANDLORD WAIVERS. The Administrative Agent shall have received landlord waivers, each in form and substance satisfactory to the Administrative Agent, relating to each of the leased properties listed on SCHEDULE 10.20 hereto. 10.20. LANDLORD CONSENTS. The Parent and its Subsidiaries shall have delivered to the Administrative Agent all consents required for the Administrative Agent to receive, as part of the Security Documents, a collateral assignment of each material leasehold of personal property, and a mortgage of each material leasehold of real property, together in each case with such estoppel certificates as the Administrative Agent may request. 10.21. COLLATERAL EXAMINATIONS/APPRAISALS. The Administrative Agent shall have received the results of collateral examinations and appraisals performed with respect to the Collateral, including without limitation, the Equipment Appraisal Report, each in form and substance satisfactory to the Administrative Agent. 10.22. FINANCIAL STATEMENT AND PROJECTIONS. The Administrative Agent shall have received the financial statements and projections referred to in SECTION 6.2, each in form and substance satisfactory to the Administrative Agent 10.23. REFERENCES. The Administrative Agent shall have received, in each case, satisfactory trade control check and background and reference checks on: (i) the Parent and the Borrower and (ii) their executive officers and chairman; in each case, as determined by the Administrative Agent in its sole discretion. The Parent and the Borrower hereby consent to execute or cause execution of any documents necessary to effectuate such checks 10.24. INTERCREDITOR AGREEMENT ET. AL. The Intercreditor Agreement shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Lenders. Each Lender shall have received a fully executed copy of the Intercreditor Agreement. The Revolving Credit Agent shall have executed and delivered such mortgage subordination agreements and other documents, instruments and agreements reasonably required by the Administrative Agent in order to effectively subordinate the liens of the Revolving Credit Agent in the Fixed Asset Collateral to the liens of the Administrative Agent in such Fixed Asset Collateral, and certified copies of the Revolving Credit Agreement and related documents. 64 10.25. NO LEGAL 10.27. IMPEDIMENT. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it illegal for such Lender to make the Term Loans to be funded by it on the Closing Date. 10.27. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the transactions contemplated by this Term Loan Agreement, the other Loan Documents and all other documents incident thereto shall be satisfactory in substance and in form to the Lenders and to the Administrative Agent and the Administrative Agent's Special Counsel, and the Lenders, the Administrative Agent and such counsel shall have received all information and such counterpart originals or certified or other copies of such documents as the Administrative Agent may reasonably request. 10.28. REPRESENTATIONS TRUE; NO DEFAULT OR EVENT OF DEFAULT. Each of the representations and warranties of the Parent and any of its Subsidiaries contained in the term Loan Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Term Loan Agreement shall be true as of the Closing Date, and no Default or Event of Default shall have occurred and be continuing, and no condition shall exist which constitutes an Event of Default. 10.29. EXCHANGE LIMITATIONS. There exists no reason whatsoever, including, without limitation, by reason of the application of any so-called "currency exchange" laws, rules or regulations (as in effect at the time of any proposed borrowings hereunder) which could reasonably be expected to interfere with the Borrower satisfying any of its Obligations in full at such time as such Obligations become due and payable pursuant to the terms hereof. 11. INTENTIONALLY OMITTED. 12. EVENTS OF DEFAULT; ACCELERATION; ETC. 12.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Borrower shall fail to pay any principal of the Term Loans when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) the Parent, the Borrower or any of their Subsidiaries shall fail to pay any interest on the Term Loans, the Fees, or other sums due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment and such failure shall continue for three (3) days after written notice of such failure has been given to the Parent and the Borrower by the Administrative Agent; (c) either the Parent or the Borrower shall fail to comply with any of its covenants contained in SECTIONS 7.1, 7.2, 7.4, 7.5, 7.6(A)(I), 7.6(B)(III), 7.7, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16, 7.18, 7.21, 7.22, ARTICLE 8 or ARTICLE 9 of this Term Loan Agreement or any of the covenants contained in any of the Mortgages; 65 (d) the Parent or any of its Subsidiaries shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this SECTION 12.1) for thirty (30) days after written notice of such failure has been given to the Parent and the Borrower by the Administrative Agent; (e) any representation or warranty of the Parent or any of its Subsidiaries in this Term Loan Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to or in connection with this Term Loan Agreement shall prove to have been false in any material respect upon the date when made; (f) the Parent or any of its Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Parent or any of its Subsidiaries or of any substantial part of the assets of the Parent or any of its Subsidiaries or shall commence any case or other proceeding relating to the Parent or any of its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application (including bankruptcy application) shall be filed or any such case or other proceeding shall be commenced against the Parent or any of its Subsidiaries or the Parent or any of its Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within sixty (60) days following the filing thereof; (g) a decree or order (including a bankruptcy order) is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Parent or any of its Subsidiaries bankrupt or insolvent, or approving a petition or bankruptcy application in any such case or other proceeding, or a decree or order (including a bankruptcy order) for relief is entered in respect of the Parent or any Subsidiary of the Parent in an involuntary case under bankruptcy laws as now or hereafter constituted; (h) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, any final judgment against the Parent and any of its Subsidiaries (considered collectively) that, with other outstanding final judgments, undischarged, against the Parent and its Subsidiaries (considered collectively) exceeds in the aggregate $1,000,000; (i) (A) the Parent, the Borrower or any ERISA Affiliate incur any liability to the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate amount exceeding $1,000,000, or the Parent, the Borrower or any ERISA Affiliate are assessed withdrawal liability pursuant to Title IV of ERISA by a Multiemployer Plan requiring aggregate annual payments exceeding $1,000,000, or any of the following occurs with respect to a Guaranteed Pension Plan: (i) an ERISA Reportable Event, or a failure to make a required installment or other payment (within the meaning of Section 302(f)(1) of ERISA), PROVIDED that the Administrative Agent determines in its reasonable discretion that such event (A) could be expected to -------- result in liability of the Parent or any of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and (B) could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC, for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan or for the imposition of a lien in favor of such Guaranteed Pension Plan; or (ii) the appointment by a United States District Court of a trustee to administer such Guaranteed Pension Plan; or (iii) the institution by the PBGC of proceedings to terminate such Guaranteed Pension Plan; 66 (j) the Parent or any of its Subsidiaries shall fail to pay at maturity, or within any applicable period of grace, any obligation for Indebtedness in excess of $500,000, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing Indebtedness in excess of $500,000 for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; (k) if any of the Loan Documents shall be cancelled, terminated, revoked or rescinded or the Administrative Agent's security interests, mortgages or liens in all or a substantial portion of the Collateral shall cease to be perfected, or shall cease to have the priority contemplated by the Security Documents and the Intercreditor Agreement, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Lenders, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Parent, its Subsidiaries, the Guarantors or any of their respective stockholders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; (l) if any material covenant, agreement or obligation of the Parent or the Borrower contained in or evidenced by the Loan Documents shall cease to be legal, valid, binding, or enforceable in accordance with the terms thereof other than as a result of a default or waiver thereof by the Administrative Agent; (m) a Change of Control shall occur; (n) there shall occur any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, expropriation, act of God or public enemy, or other casualty, which in any such case causes, for more than thirty (30) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of the Parent or any of its Subsidiaries if such event or circumstance is not covered by business interruption insurance and would have a material adverse effect on the business, assets, operation or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Term Loan Agreement or the other Loan Documents; 67 (o) the Parent or any of its Subsidiaries shall be enjoined, restrained or in any way prevented by the order of any Governmental Authority from conducting any part of their business and such order shall continue in effect for more than thirty (30) days unless such order would not have a material adverse effect on the business, assets, operation or financial condition of the Borrower and the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Term Loan Agreement or the other Loan Documents; (p) there shall occur the loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by the Parent or any of its Subsidiaries if such loss, suspension, revocation or failure to renew would have a material adverse effect on the business, assets, operation or financial condition of the Borrower or the Guarantors (taken as a whole), or the ability of the Parent or any Subsidiary of the Parent to fulfill its obligations under this Term Loan Agreement or the other Loan Documents; (q) any "event of default" under the Revolving Credit Agreement shall occur and be continuing; or (r) the subordination provisions in the Intercreditor Agreement relative to the liens of the Revolving Credit Agent in the Fixed Asset Collateral shall cease, in whole or in part, to be effective or cease to be legally valid, binding and enforceable against the Revolving Credit Agent and the holders of the Revolving Loans, then, and in any such event, so long as the same may be continuing, the Administrative Agent may, and upon the request of the Required Lenders shall, by notice in writing to the Borrower, declare all amounts owing with respect to this Term Loan Agreement and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each of the Parent and the Borrower; provided that in the event of any Event of Default specified in SECTIONS 12.1(F) or 12.1(G), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Administrative Agent or any Lender. 12.2. INTENTIONALLY OMITTED. 12.3. REMEDIES. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Lenders shall have accelerated the maturity of the Term Loans pursuant to SECTION 12.1, each Lender, if owed any amount with respect to the Term Loans, may, with the consent of the Required Lenders but not otherwise, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Term Loan Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Lender are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Lender. No remedy herein conferred upon any Lender or the Administrative Agent is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. 68 12.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following the occurrence or during the continuance of any Event of Default, the Administrative Agent or any Lender, as the case may be, receives any monies in connection with the enforcement of any of the Security Documents, or otherwise with respect to the realization upon any of the Collateral, such monies shall, subject to the Intercreditor Agreement, be distributed for application as follows: (a) FIRST, to the payment of, or (as the case may be) the reimbursement of the Administrative Agent for all fees, indemnities, costs, expenses, disbursements and other amounts (including charges and disbursements of counsel to the Administrative Agent) and losses payable to the Administrative Agent or incurred or sustained by the Administrative Agent in its capacity as such, including, without limitation, in connection with the collection of such monies by the Administrative Agent, for the exercise, protection or enforcement by the Administrative Agent of all or any of the rights, remedies, powers and privileges of the Administrative Agent under this Term Loan Agreement or any of the other Loan Documents or in respect of the Collateral or in support of any provision of adequate indemnity to the Administrative Agent against any Taxes or liens which by law shall have, or may have, priority over the rights of the Administrative Agent to such monies; (b) SECOND, to the payment of that portion of the Obligations constituting fees, indemnities, costs, expenses, disbursements and other amounts (including charges and disbursements of counsel to the Lenders but excluding principal and interest) payable to the Lenders (including amounts payable under SECTION 5.7), ratably among them in proportion to the amounts described in this clause SECOND payable to them; (c) THIRD, to the payment of that portion of the Obligations constituting accrued and unpaid interest on the Term Loans and other Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause THIRD payable to them; (d) FOURTH, ratably to the payment of that portion of the Obligations constituting unpaid principal of the Term Loans, ratably among the Lenders in proportion to the respective amounts described in this clause FOURTH payable to them (with such principal to be allocated between the Real Property Term Loan and the Equipment Term Loan in such manner determined by the Administrative Agent in its sole discretion); (e) FIFTH, to all other Obligations in such order or preference as the Required Lenders may determine; provided, however, that (i) distributions shall be made with respect to each type of Obligation owing to the Lenders among the Lenders pro rata, and (ii) the Administrative Agent may in its discretion make proper allowance to take into account any Obligations not then due and payable; 69 (f) SIXTH, upon payment and satisfaction in full or other provisions for payment in full satisfactory to the Lenders and the Administrative Agent of all of the Obligations, to the payment of any obligations required to be paid pursuant to Sections 9-608(a)(1)(C) or 9 615(a)(3) of the Uniform Commercial Code of the Commonwealth of Massachusetts; and (g) SEVENTH, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto. 13. SETOFF. Regardless of the adequacy of any collateral, if any Event of Default shall have occurred and be continuing, any deposits or other sums credited by or due from any of the Lenders to the Borrower or the Guarantors and any securities or other property of the Borrower or the Guarantors in the possession of such Lender or any of its Affiliates may, at any time, without demand or notice (any such notice being expressly waived by the Borrower and the Guarantors), in whole or in part, be applied to or set off by such Lender against the payment of Obligations and any and all other liabilities or obligations, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrower or the Guarantors to such Lender regardless of the adequacy of any other collateral securing the Term Loans. Each of the Lenders agrees with each other Lender that (i) if an amount to be set off is to be applied to Indebtedness of the Borrower or the Guarantors to such Lender, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by the Notes of such Lender, and (ii) if such Lender shall receive from the Borrower or the Guarantors or any other source, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes in the name of, such Lender by proceedings against the Borrower at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of its Notes, any amount in excess of its ratable portion of the payments received by all of the Lenders with respect to the debt evidenced by the Notes corresponding to all of the Lenders, such Lender will make such disposition and arrangements with the other Lenders with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Lender receiving in respect of the debt evidenced by the Notes in its name, its proportionate payment as contemplated by this Term Loan Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Lender, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. ANY AND ALL RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER OR THE GUARANTORS ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. 70 14. THE ADMINISTRATIVE AGENT. 14.1. AUTHORIZATION. (a) The Administrative Agent is authorized to take such action on behalf of each of the Lenders and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Administrative Agent, together with such powers as are reasonably incident thereto, including the authority, without the necessity of any notice to or further consent of the Lenders, from time to time to take any action with respect to any Collateral or the Security Documents which may be necessary to perfect, maintain perfected or insure the priority of the security interest in and liens upon the Collateral granted pursuant to the Security Documents, and, PROVIDED that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Administrative Agent. (b) The relationship between the Administrative Agent and each of the Lenders is that of an independent contractor. The use of the term "Administrative Agent" is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Administrative Agent and each of the Lenders. Nothing contained in this Term Loan Agreement nor the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Administrative Agent and any of the Lenders. (c) As an independent contractor empowered by the Lenders to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Administrative Agent is nevertheless a "representative" of the Lenders, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Lenders and the Administrative Agent with respect to all collateral security and guaranties contemplated by the Loan Documents. Such actions include the designation of the Administrative Agent as "secured party", "mortgagee" or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Lenders and the Administrative Agent. (d) The Administrative Agent is authorized and directed to consent to any sale or other disposition of Collateral permitted to be sold or disposed of hereunder, and to release its liens on such Collateral, and the Administrative Agent is authorized to rely on a certification from the Borrower that such sale or disposition is permitted hereunder (e) The Administrative Agent is authorized and directed to execute and deliver the Intercreditor Agreement on behalf of the Lenders and to act in accordance with the provisions thereof. Each of the Lenders agrees to be bound by the provisions thereof. 71 14.2. EMPLOYEES AND ADMINISTRATIVE AGENTS. The Administrative Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Term Loan Agreement and the other Loan Documents. The Administrative Agent may utilize the services of such Persons as the Administrative Agent in its sole discretion may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrower. 14.3. NO LIABILITY. Neither the Administrative Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall be liable to any Lender for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Administrative Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. 14.4. NO REPRESENTATIONS. 14.4.1. GENERAL. The Administrative Agent shall not be responsible for the execution or validity or enforceability of this Term Loan Agreement, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for any of the Loan Documents, or for the value of any such collateral security or for the validity, enforceability, or collectibility of any such amounts owing with respect to any of the Loan Documents, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Parent or any of its Subsidiaries, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for any of the Loan Documents or to inspect any of the properties, books or records of the Parent or any of its Subsidiaries. The Administrative Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Parent or the Borrower shall have been duly authorized or is true, accurate and complete. The Administrative Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Lenders, with respect to the credit worthiness or financial conditions of the Parent or any of its Subsidiaries. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Term Loan Agreement. 14.4.2. CLOSING DOCUMENTATION, ETC. For purposes of determining compliance with the conditions set forth in SECTION 10, each Lender that has executed this Term Loan Agreement shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document and matter either sent, or made available, by the Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be to be consent to or approved by or acceptable or satisfactory to such Lender, unless an officer of the Administrative Agent active upon the Borrower's account shall have received notice from such Lender not less than one (1) Business Day prior to the Closing Date specifying such Lender's objection thereto and such objection shall not have been withdrawn by notice to the Administrative Agent to such effect on or prior to the Closing Date. 72 14.5. PAYMENTS. 14.5.1. PAYMENTS TO ADMINISTRATIVE AGENT. A payment by the Borrower to the Administrative Agent hereunder or under any of the other Loan Documents for the account of any Lender shall constitute a payment to such Lender. The Administrative Agent agrees promptly to distribute to each Lender such Lender's pro rata share of payments received by the Administrative Agent for the account of such Lender except as otherwise expressly provided herein or in any of the other Loan Documents. 14.5.2. DISTRIBUTION BY ADMINISTRATIVE AGENT. If in the opinion of the Administrative Agent the distribution of any amount received by it in such capacity hereunder or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Administrative Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Administrative Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. 14.5.3. DELINQUENT LENDERS. Notwithstanding anything to the contrary contained in this Term Loan Agreement or any of the other Loan Documents, any Lender that fails (i) to make available to the Administrative Agent its PRO RATA share of any Term Loan in accordance with the terms of this Term Loan Agreement or (ii) to comply with the provisions of SECTION 13 with respect to making dispositions and arrangements with the other Lenders, where such Lender's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Term Loan Agreement, shall be deemed delinquent (a "DELINQUENT LENDER") and shall be deemed a Delinquent Lender until such time as such delinquency is satisfied. A Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Term Loans, interest, fees or otherwise, to the remaining applicable non-delinquent Lenders for application to, and reduction of, their respective pro rata shares of all outstanding Term Loans. The Delinquent Lender hereby authorizes the Administrative Agent to distribute such payments to the applicable non-delinquent Lenders in proportion to their respective pro rata shares of all applicable outstanding Term Loans. A Delinquent Lender shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all applicable outstanding Term Loans of the non-delinquent Lenders, the Lenders' respective PRO RATA shares of all outstanding Term Loans have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency 73 14.6. INTENTIONALLY OMITTED. 14.7. INDEMNITY. The Lenders ratably agree hereby to indemnify and hold harmless the Administrative Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Administrative Agent has not been reimbursed by the Borrower as required by SECTION 15), and liabilities of every nature and character arising out of or related to this Term Loan Agreement or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Administrative Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Administrative Agent's willful misconduct or gross negligence. 14.8. ADMINISTRATIVE AGENT AS LENDER. In its individual capacity, GB Merchant Partners, LLC shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Term Loans made by it as it would have were it not also the Administrative Agent. 14.9. RESIGNATION. The Administrative Agent may resign at any time by giving sixty (60) days prior written notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent. Unless a Default or Event of Default shall have occurred and be continuing, such successor Administrative Agent shall be reasonably acceptable to the Borrower. If no successor Administrative Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a financial institution having a rating of not less than "A" or its equivalent by Standard & Poor's Corporation. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation, the provisions of this Term Loan Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. 14.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Lender hereby agrees that, upon learning of the existence of a Default or Event of Default, it shall promptly notify the Administrative Agent thereof. The Administrative Agent hereby agrees that upon receipt of any notice under this SECTION 14.10 it shall promptly notify the other Lenders of the existence of such Default or Event of Default. 14.11. DUTIES IN THE CASE OF ENFORCEMENT. Subject to the terms of the Intercreditor Agreement, in case one or more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Administrative Agent shall, if (a) so requested by the Required Lenders and (b) the Lenders have provided to the Administrative Agent such additional indemnities and assurances against expenses and liabilities as the Administrative Agent may reasonably request, proceed to enforce the provisions of the Security Documents authorizing the sale or other disposition of all or any part of the Collateral and exercise all or any such other legal and equitable and other rights or remedies as it may have in respect of such Collateral. The Required Lenders may direct the Administrative Agent in writing as to the method and the extent of any such sale or other disposition, the Lenders hereby agreeing to indemnify and hold the Administrative Agent, harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, PROVIDED that the Administrative Agent need not comply with any such direction to the extent that the Administrative Agent reasonably believes the Administrative Agent's compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction. 74 14.12. ADMINISTRATIVE AGENT MAY FILE PROOFS OF CLAIM. (a) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial, administrative or like proceeding or any assignment for the benefit of creditors relative to the Parent or any of its Subsidiaries, the Administrative Agent (irrespective of whether the principal of any Term Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding, under any such assignment or otherwise: (i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Term Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under SECTIONS 5.1 and 15) allowed in such proceeding or under any such assignment; and (ii) subject to the Intercreditor Agreement, to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; (b) Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such proceeding or under any such assignment is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, nevertheless to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under SECTIONS 5.1 and 15). 75 (c) Nothing contained herein shall authorize the Administrative Agent to consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations owed to such Lender or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding or under any such assignment. 15. EXPENSES. The Borrower agrees to pay (i) the reasonable costs of producing and reproducing this Term Loan Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (ii) without duplication of any amounts paid by the Borrower pursuant to SECTION 5.2.2, any Taxes (including any interest and penalties in respect thereto) payable by the Administrative Agent or any of the Lenders (other than Excluded Taxes) on or with respect to the transactions contemplated by this Term Loan Agreement (the Borrower hereby agreeing to indemnify the Administrative Agent and each Lender with respect thereto), (iii) the reasonable fees, expenses and disbursements of the Administrative Agent's Special Counsel or any local counsel to the Administrative Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, amendments, modifications, approvals, consents or waivers hereto or hereunder, and proposed amendments, modifications, approvals, consents or waivers hereto or hereunder, (iv) the reasonable fees, expenses and disbursements of the Administrative Agent incurred by the Administrative Agent in connection with the preparation and syndication of the Loan Documents and other instruments mentioned herein, including, without limitation, collateral examination, appraisal expenses and environmental audits, (v) the reasonable fees, expenses and disbursements of the Administrative Agent incurred by the Administrative Agent in connection with the administration or interpretation of the Loan Documents and other instruments mentioned herein, including, without limitation, collateral examination, appraisal expenses and environmental audits, inspections, testing and reports, (vi) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys' fees and costs and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by the Administrative Agent or any Lender in connection with (A) the enforcement of or preservation of rights under any of the Loan Documents against the Guarantors, the Borrower or any of its Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default, and (B) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to any Lender's or the Administrative Agent's relationship with the Parent or any of its Subsidiaries, unless such Lender or the Administrative Agent, as applicable, is conclusively determined to have breached its obligations hereunder, (vii) any fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by the Administrative Agent or any of its Affiliates in establishing, maintaining or handling of any accounts for the collection of any of the Collateral, (viii) all reasonable fees, expenses and disbursements of the Administrative Agent incurred in connection with UCC searches, UCC filings, intellectual property searches, intellectual property filings, mortgage recordings and other personal and real property searches and filings, and (ix) all title insurance premiums and surveyor, engineering, appraisal and examination charges. The covenants of this SECTION 15 shall survive payment or satisfaction of all other Obligations. 76 16. INDEMNIFICATION. The Borrower agrees to indemnify and hold harmless the Administrative Agent and the Lenders, together with each of their Affiliates and their officers, directors, employees, agents, attorneys and advisors, from and against any and all claims, actions and suits whether groundless or otherwise, and from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of this Term Loan Agreement or any of the other Loan Documents or the transactions contemplated hereby including, without limitation, (i) any actual or proposed use by the Borrower or any of their Subsidiaries of the proceeds of any of the Term Loans, (ii) the reversal or withdrawal of any provisional credits granted by the Administrative Agent or any of its Affiliates upon the transfer of funds from bank agency or lock box accounts or in connection with the provisional honoring of checks or other items, (iii) the Parent or any of its Subsidiaries entering into or performing this Term Loan Agreement or any of the other Loan Documents, (iv) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Parent or any of its Subsidiaries comprised in the Collateral, or (v) with respect to the Parent and its Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the Release or threatened Release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding, PROVIDED, HOWEVER, that the Borrower shall not be liable to the Administrative Agent, any Lender, any of their Affiliates or any of their officers, directors, employees, agents and advisors for any of the foregoing to the extent that they arise from such Person's gross negligence, breach of contract or willful misconduct. In litigation, or the preparation therefor, the Lenders and the Administrative Agent shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrower under this ARTICLE 16 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The covenants contained in this ARTICLE 16 shall survive payment or satisfaction in full of all other Obligations. Each of the Administrative Agent and the Lenders agree to promptly notify the Borrower of any such claim, action, suit, liability, loss, damage or expense after becoming aware of the same; PROVIDED that the failure to provide such notice shall not affect the Borrower's obligations under this ARTICLE 16. 17. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Parent or any of its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Lenders and the Administrative Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Lenders of any of the Term Loans, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Term Loan Agreement or any of the other Loan Documents remains outstanding or any Lender has any obligation to make any Term Loans, and for such further time as may be otherwise expressly specified in this Term Loan Agreement. All statements contained in any certificate or other paper delivered to any Lender or the Administrative Agent at any time by or on behalf of the Parent or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Parent or such Subsidiary hereunder. 77 18. ASSIGNMENT AND PARTICIPATION. 18.1. GENERAL CONDITIONS. The provisions of this Term Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor the Parent may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (a) to an Eligible Assignee in accordance with the provisions of SECTION 18.2, (b) by way of participation in accordance with the provisions of SECTION 18.4 or (c) by way of pledge or assignment of a security interest subject to the restrictions of SECTION 18.6 (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Term Loan Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in SECTION 18.4 and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Term Loan Agreement or any of the other Loan Documents. 18.2. ASSIGNMENTS. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Term Loan Agreement (including all or a portion of its Commitment and the Term Loans at the time owing to it); PROVIDED that: (a) except in the cases of an assignment of the entire balance of the Term Loans at the time owing to it or of an assignment to a Lender or a Lender Affiliate, the aggregate amount of the Commitment (which for this purpose includes Term Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Term Loans of the assigning Lender subject to each such assignment (determined as of the date on which the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $2,000,000 unless each of the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); (b) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Term Loan Agreement with respect to the Term Loans or the Commitment assigned, it being understood that NON-PRO RATA assignments of or among any of the Commitments and the Term Loans are not permitted; 78 (c) any assignment of a Commitment and the Term Loans of any Lender must be approved by the Administrative Agent (whether or not the proposed assignee is itself a Lender with a commitment or would otherwise qualify as an Eligible Assignee); and (d) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. Subject to acceptance and recording thereof by the Administrative Agent pursuant to SECTION 18.3, from and after the effective date specified in each Assignment and Acceptance, the Eligible Assignee thereunder shall be a party to this Term Loan Agreement and, to the extent of the interest assigned by such Assignment and Acceptance have the rights and obligations of a Lender under this Term Loan Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Term Loan Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Term Loan Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of (i) SECTIONS 5.2.2, 5.7, 5.8, and 5.10 with respect to facts and circumstances occurring prior to the effective date of such assignment and (ii) SECTION 16 notwithstanding such assignment. Any assignment or transfer by a Lender of rights or obligations under this Term Loan Agreement that does not comply with this paragraph shall be treated for purposes of this Term Loan Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with SECTION 18.4. 18.3. REGISTER. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent's Office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Term Loans owing to, each Lender pursuant to the terms hereof from time to time (the "REGISTER"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Term Loan Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. 18.4. PARTICIPATIONS. Any Lender may at any time, without the consent of, or notice to, the Parent, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural person) (each, a "PARTICIPANT") in all or a portion of such Lender's rights and/or obligations under this Term Loan Agreement (including all or a portion of its Commitment and/or the Term Loans owing to it); PROVIDED that (a) such Lender's obligations under this Term Loan Agreement shall remain unchanged, (b) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (c) the Parent, the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Term Loan Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Term Loan Agreement and to approve any amendment, modification or waiver of any provision of this Term Loan Agreement; PROVIDED that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that would reduce the principal of or the interest rate on any Term Loans, extend the term or increase the amount of the Commitment of such Lender as it relates to such Participant or extend any regularly scheduled payment date for principal or interest. Subject to SECTION 18.5, the Parent and the Borrowers agree that each Participant shall be entitled to the benefits of SECTIONS 5.2.2, 5.7, 5.8 and 5.10 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to SECTION 18.2. To the extent permitted by law, each Participant also shall be entitled to the benefits of SECTION 13 as though it were a Lender, provided such Participant agrees to be subject to SECTION 13 as though it were a Lender. 79 18.5. PAYMENTS TO PARTICIPANTS. A Participant shall not be entitled to receive any greater payment under SECTIONS 5.2.2, 5.7 and 5.8 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant. 18.6. MISCELLANEOUS ASSIGNMENT PROVISIONS. A Lender may at any time grant a security interest in all or any portion of its rights under this Term Loan Agreement to secure obligations of such Lender, including without limitation (a) any pledge or assignment to secure obligations to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341 and (b) with respect to any Lender that is a Fund, to any lender or any trustee for, or any other representative of, holders of obligations owed or securities issued by such Fund as security for such obligations or securities or any institutional custodian for such Fund or for such lender; PROVIDED that no such grant shall release such Lender from any of its obligations hereunder, provide any voting rights hereunder to the secured party thereof, substitute any such secured party for such Lender as a party hereto or affect any rights or obligations of the Parent, the Borrower or the Administrative Agent hereunder. 18.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE PARENT. If any assignee Lender is an Affiliate of the Parent, then any such assignee Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to SECTION 12.1 or SECTION 12.2, and the determination of the Required Lenders shall for all purposes of this Term Loan Agreement and the other Loan Documents be made without regard to such assignee Lender's interest in any of the Term Loans. If any Lender sells a participating interest in any of the Term Loans to a Participant, and such Participant is the Parent or an Affiliate of the Parent, then such transferor Lender shall promptly notify the Administrative Agent of the sale of such participation. A transferor Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to SECTION 12.1 or SECTION 12.2 to the extent that such participation is beneficially owned by the Parent or any Affiliate of the Parent, and the determination of the Required Lenders shall for all purposes of this Term Loan Agreement and the other Loan Documents be made without regard to the interest of such transferor Lender in the Term Loans to the extent of such participation. 80 18.8. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Administrative Agent shall (a) record the information contained therein in the Register, and (b) give prompt notice thereof to the Borrower and the Lenders (other than the assigning Lender). Within five (5) Business Days after receipt of such notice, the Borrower, at its own expense, shall, if applicable, execute and deliver to the Administrative Agent, in exchange for each surrendered Note, a new Note to the order of such Assignee in an amount equal to the amount assumed by such Assignee pursuant to such Assignment and Acceptance and, if the assigning Lender has retained some portion of its obligations hereunder, a new Note to the order of the assigning Lender in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes. 18.9. SPECIAL PURPOSE FUNDING VEHICLE. Notwithstanding anything to the contrary contained in this SECTION 18, any Lender (a "GRANTING LENDER") may grant to a special purpose funding vehicle (an "SPC") of such Granting Lender, identified as such in writing from time to time delivered by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Term Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Term Loan Agreement, PROVIDED that (a) nothing herein shall constitute a commitment to make any Term Loan by any SPC, (b) the Granting Bank's obligations under this Term Loan Agreement shall remain unchanged, (c) the Granting Lender shall retain the sole right to enforce this Term Loan Agreement and to approve any amendment, modification or waiver of any provision of this Term Loan Agreement and (d) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Term Loan, the Granting Lender shall be obligated to make such Term Loan pursuant to the terms hereof. The making of a Term Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Term Loan were made by the Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any expense reimbursement, indemnity or similar payment obligation under this Term Loan Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Term Loan Agreement) that, prior to the date that is one year and one day after the later of (i) the payment in full of all outstanding senior indebtedness of any SPC and (ii) the Maturity Date, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar proceedings under the laws of the United States of America or any State thereof. In addition, notwithstanding anything to the contrary contained in this SECTION 18.9, any SPC may (A) with notice to, but (except as specified below) without the prior written consent of, the Parent, the Borrower or the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Term Loans to its Granting Lender or to any financial institutions (consented to by the Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing, the Borrower, which consents shall not be unreasonably withheld or delayed) providing liquidity and/or credit facilities to or for the account of such SPC to fund the Term Loans made by such SPC or to support the securities (if any) issued by such SPC to fund such Term Loans and (B) disclose on a confidential basis any non-public information relating to its Term Loans (other than financial statements referred to in SECTIONS 6.2 or 7.4) to any rating agency, commercial paper dealer or provider of a surety, guarantee or credit or liquidity enhancement to such SPC. In no event shall the Borrower be obligated to pay to an SPC that has made a Term Loan any greater amount than the Borrower would have been obligated to pay under this Term Loan Agreement if the Granting Lender had made such Term Loan. An amendment to this SECTION 18.9 without the written consent of an SPC shall be ineffective insofar as it alters the rights and obligations of such SPC. 81 19. NOTICES, ETC. Except as otherwise expressly provided in this Term Loan Agreement, all notices and other communications made or required to be given pursuant to this Term Loan Agreement shall be in writing and shall be (i) delivered in hand, (ii) mailed by United States registered or certified first class mail, postage prepaid, (iii) sent by overnight courier, or (iv) sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows: (a) if to the Parent or the Borrower, at 941 Grinnell Street, Fall River, MA 02721, Attention: Chief Financial Officer or at such other U.S. address for notice as the Parent or the Borrower shall last have furnished in writing to the Person giving the notice; (b) if to the Administrative Agent, (i) 101 Huntington Avenue, 10th floor, Boston, Massachusetts 02199, Attention: Judi Nevins, Loan Portfolio Analyst, and D. Michael Murray, Managing Director, or such other address for notice as the Administrative Agent shall last have furnished in writing to the Person giving the notice; and (ii) Alternative Investment Solutions, LLC, 433 Hackensack Ave, 11th floor, Hackensack, New Jersey 07601 Attention: Steve Yacubic, Account Officer; and (c) if to any Lender, at such Lender's address for its Domestic Lending Office set forth on SCHEDULE 1 hereto, or such other address for notice as such Lender shall have last furnished in writing to the Person giving the notice. Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof. 20. GOVERNING LAW. THIS TERM LOAN AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH OF THE PARENT AND THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS TERM LOAN AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE PARENT AND THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 19. EACH OF THE PARENT AND THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. 82 21. HEADINGS. The captions in this Term Loan Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 22. COUNTERPARTS. This Term Loan Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Term Loan Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. Delivery by facsimile by any of the parties hereto of an executed counterpart hereof or of any amendment or waiver hereto shall be as effective as an original executed counterpart hereof or of such amendment or waiver and shall be considered a representation that an original executed counterpart hereof or such amendment or waiver, as the case may be, will be delivered. 23. ENTIRE AGREEMENT, ETC. The Loan Documents are intended by the parties as the final, complete and exclusive statement of the transactions evidenced by the Loan Documents. All prior or contemporaneous promises, agreements and understandings, whether oral or written, are deemed to be superseded by the Loan Documents, and no party is relying on any promise, agreement or understanding not set forth in the Loan Documents. 24. WAIVER OF JURY TRIAL. EACH PARTY HERETO MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM BASED HEREON ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS TERM LOAN AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER RELATING TO THE ADMINISTRATION OF THE TERM LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREES THAT IT WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. Except as prohibited by law, each party hereto hereby waives any right it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. Each of the Parent and the Borrower (i) certifies that no representative, agent or attorney of any Lender or the Administrative Agent has represented, expressly or otherwise, that such Lender or the Administrative Agent would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that this waiver constitutes a material inducement for the Administrative Agent and the Lenders to execute this Term Loan Agreement and make the Term Loans. 83 25. CONSENTS, AMENDMENTS, WAIVERS, ETC. Any consent or approval required or permitted by this Term Loan Agreement to be given by all of the Lenders may be given, and any term of this Term Loan Agreement, the other Loan Documents or any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Parent or any of its Subsidiaries of any terms of this Term Loan Agreement, the other Loan Documents or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Required Lenders. Notwithstanding the foregoing, no amendment, modification or waiver shall: (a) without the written consent of the Parent, the Borrower and each Lender directly affected thereby: (i) reduce or forgive the principal amount of any Term Loans, or reduce the rate of interest on the Term Loans (other than interest accruing pursuant to SECTION 5.11 following the effective date of any waiver by the Required Lenders of the Event of Default relating thereto); (ii) increase the amount of the Total Commitment or any Lender's Commitment or extend the expiration date of the Total Commitment or any Lender's Commitment; (iii) postpone or extend the Maturity Date or any other regularly scheduled dates for payments of principal of, or interest on, the Term Loans or any fees or other amounts payable to such Lender or waive any Event of Default relating thereto (it being understood that (A) a waiver of the application of the Default Rate, (B) any vote to rescind any acceleration made pursuant to SECTION 12.1 of amounts owing with respect to the Term Loans and other Obligations and (C) any modifications of the provisions relating to amounts or timing of prepayments of Term Loans and other Obligations shall require only the approval of the Required Lenders); or 84 (iv) release the Borrower from any Obligations consisting of principal, interest, fees, reimbursement obligations, expenses, or indemnities, release all or substantially all of the Collateral or release the Guarantors from their guaranty obligations under the Guaranties (excluding, if the Parent or any Subsidiary of the Parent becomes a debtor under the federal Bankruptcy Code, the release of "cash collateral", as defined in Section 363(a) of the federal Bankruptcy Code pursuant to a cash collateral stipulation with the debtor approved by the Required Lenders); (b) without the written consent of all of the Lenders, (i) amend or waive this SECTION 25 or the definition of Required Lenders, (ii) amend the definitions of Eligible Real Property, Eligible Equipment, or Net Orderly Liquidation Value, in each case, in a manner which would result in more credit being made available to the Borrower hereunder; or (iii) amend or waive SECTION 12.4; (c) without the written consent of the Administrative Agent, amend or waive SECTION 14, the amount or time of payment of the Administrative Agent's Fee payable for the Administrative Agent's account or any other provision applicable to the Administrative Agent; (d) in the event of any change in the Person acting as the Administrative Agent hereunder, without the written consent of the Person formerly acting as Administrative Agent, amend or waive any provision of this Term Loan Agreement accruing to the benefit of such Person in respect of all actions taken or omitted to be taken by either of them prior to such change. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Administrative Agent or any Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Parent or the Borrower shall entitle the Parent or the Borrower to other or further notice or demand in similar or other circumstances. 26. SEVERABILITY. The provisions of this Term Loan Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Term Loan Agreement in any jurisdiction. The parties agree that they will negotiate in good faith to replace any provision hereof so held invalid or unenforceable with a valid provision which is as similar as possible to the invalid or unenforceable provision. 85 27. CONFIDENTIALITY. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates' respective partners, directors, officers, employees, agents, advisors and representatives in connection with this Term Loan Agreement and the transactions contemplated hereby (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this ARTICLE 27, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Term Loan Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Parent and its obligations or the Borrower and its obligations, (g) with the consent of the Parent or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this ARTICLE 27 or (y) becomes available to the Administrative Agent, any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower. For purposes of this Section, "Information" means all information received from the Parent or any Subsidiary of the Parent relating to the Parent or any Subsidiary of the Parent or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Parent or any Subsidiary of the Parent. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Each of the Administrative Agent and the Lenders acknowledges that (a) the Information may include material non-public information concerning the Parent or a Subsidiary of the Parent, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws. To the extent practicable and possible in compliance with applicable law, regulation, proceeding or court order, each of the Lenders and the Administrative Agent shall, prior to disclosure thereof, notify the Borrower of any request for disclosure of any such non-public information by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) or pursuant to legal process. The Parent and the Borrower hereby acknowledge that (a) the Administrative Agent may make available to the Lenders materials and/or information provided by or on behalf of the Parent and the Borrower hereunder (collectively, "BORROWER MATERIALS") by posting the Borrower Materials on IntraLinks or another similar electronic system (the "PLATFORM") and (b) certain of the Lenders may be "public-side" Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Parent, the Borrower or their securities) (each, a "PUBLIC LENDER"). The Parent and the Borrower hereby agree that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked "PUBLIC" which, at a minimum, shall mean that the word "PUBLIC" shall appear prominently on the first page thereof; (x) by marking Borrower Materials "PUBLIC," the Parent and the Borrower shall be deemed to have authorized the Administrative Agent and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Parent, the Borrower or their securities for purposes of United States Federal and state securities laws (PROVIDED, HOWEVER, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in this ARTICLE 27); (y) all Borrower Materials marked "PUBLIC" are permitted to be made available through a portion of the Platform designated "Public Investor;" and (z) the Administrative Agent shall be entitled to treat any Borrower Materials that are not marked "PUBLIC" as being suitable only for posting on a portion of the Platform not designated "Public Investor." 86 The Lenders shall have the right to refer to the transaction contemplated by this Term Loan Agreement in their marketing materials, press releases and announcements, subject to Borrower's right to review and approval of the same, following the later of the Closing Date or the Borrower's public announcement of the transaction contemplated by this Term Loan Agreement. 28. USA PATRIOT ACT. Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "ACT"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender to identify the Borrower in accordance with the Act. 29. DESIGNATION OF PERMITTED LIENS. The designation of a Lien as a Permitted Lien is not, and shall not be deemed to be, an acknowledgment by the Administrative Agent or the Lenders to any Person that the Lien shall have priority over any Lien of the Administrative Agent granted in any Loan Document. 87 IN WITNESS WHEREOF, the undersigned have duly executed this Term Loan Agreement as a sealed instrument as of the date first set forth above. QUAKER FABRIC CORPORATION OF FALL RIVER By: ---------------------------------------- Name: Title: QUAKER FABRIC CORPORATION By: ---------------------------------------- Name: Title: 88 1903 DEBT FUND, LP By: [to be provided] By: ----------------------------------------- Name: Title: GB MERCHANT PARTNERS, LLC, as Administrative Agent By: ----------------------------------------- Name: Title: 89 EX-10.40 7 a5274680ex10_40.txt SCHEDULE EXHIBIT 10.40 SCHEDULE 1 - LENDERS, COMMITMENT PERCENTAGES, LENDING OFFICES LENDER TERM LOAN TERM LOAN COMMITMENT COMMITMENT PERCENTAGE 1903 Debt Fund, LP $24,600,000.00 100% 101 Huntington Avenue Boston, Massachusetts 02109 Attn: D. Michael Murray SCHEDULE 1.1(A) MORTGAGED PROPERTIES FEE MORTGAGES: 1. 941 Grinnell Street, Fall River, MA 2. 1092 Davol Street, Fall River, MA 3. 81 Ferry Street, Fall River, MA 4. 1450 Brayton Ave, Fall River, MA 5. 387 Quarry Street, Fall River, MA 6. Godfrey Road, Verona, MS 7. 994 Jefferson Street (Bleachery Pond), Fall River, MA LEASEHOLD MORTGAGES: 1. 81 Commerce Drive, Fall River, MA EX-10.41 8 a5274680ex1041.txt EXHIBIT 10.41 EXHIBIT 10.41 SECURITY AGREEMENT SECURITY AGREEMENT, dated as of November 9, 2006, between (a) QUAKER FABRIC CORPORATION OF FALL RIVER, a Massachusetts corporation (the "Borrower"), (b) QUAKER TEXTILE CORPORATION, a Massachusetts corporation ("Quaker Textile"), QUAKER FABRIC MEXICO, S.A. DE C.V., a Mexican corporation ("Quaker Mexico"), and QUAKER FABRIC CORPORATION, a Delaware corporation (the "Parent", and together with Quaker Textile and Quaker Mexico, the "Guarantors") (the Borrower and each of the Guarantors being sometimes referred to herein as a "Company" and collectively, as the "Companies"), and (c) GB MERCHANT PARTNERS, LLC, as administrative agent (hereinafter, the "Administrative Agent") for itself and the other lending institutions (hereinafter, collectively the "Lenders") which are or may become parties to a Term Loan Agreement of even date herewith (the "Credit Agreement"), among the Borrowers, the Lenders and the Administrative Agent. WHEREAS, it is a condition precedent to the Lenders' making any loans or otherwise extending credit to the Borrower under the Credit Agreement that each Company execute and deliver to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, a security agreement in substantially the form hereof; and WHEREAS, each Company wishes to grant a security interest in favor of the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, as herein provided; and WHEREAS, pursuant to the terms of that certain Amended and Restated Revolving Credit Agreement dated as of even date herewith (as amended and in effect from time to time, the "Revolving Credit Agreement" and, together with all amendments, documents, instruments and agreements executed pursuant thereto, collectively, the "Revolving Credit Documents"), by and among the Borrower, the Parent, and Bank of America, N.A., as administrative agent (the "Revolving Credit Agent") for itself and other lending institutions which are, or may in the future become, parties thereto (collectively, the "Revolving Lenders"), the Revolving Lenders have extended loans to the Borrower, and the Borrower is obligated to the Revolving Credit Agent and the Revolving Lenders under the Revolving Credit Documents, which obligations are secured by the collateral set forth herein; and WHEREAS, the Administrative Agent, the Revolving Credit Agent, the Borrower and the Parent are parties to that certain Intercreditor Agreement of even date herewith (as amended and in effect from time to time, the "Intercreditor Agreement"), setting forth the relative priorities of liens held by the Revolving Credit Agent for the benefit of the Revolving Lenders and the Administrative Agent for the benefit of the Lenders with respect to the collateral referred to therein, including, without limitation, the collateral described herein, securing the respective obligations of the Parent and the Borrower. NOW, THEREFORE, in consideration of the promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. All capitalized terms used herein without definitions shall have the respective meanings provided therefor in the Credit Agreement. The term "State", as used herein, means the Commonwealth of Massachusetts. All terms defined in the Uniform Commercial Code of the State and used herein shall have the same definitions herein as specified therein. However, if a term is defined in Article 9 of the Uniform Commercial Code of the State differently than in another Article of the Uniform Commercial Code of the State, the term has the meaning specified in Article 9. The term "electronic document" applies in the event that the 2003 revisions to Article 7, with amendments to Article 9, of the Uniform Commercial Code, in substantially the form approved by the American Law Institute and the National Conference of Commissioners on Uniform State Laws, are now or hereafter adopted and become effective in the State or in any other relevant jurisdiction. 2. GRANT OF SECURITY INTEREST. Each Company hereby grants to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, to secure the payment and performance in full of all of the Obligations, a continuing first priority security interest in and so pledges and assigns to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, the following properties, assets and rights of such Company, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof, subject solely to the Liens of the Revolving Credit Agent under the Revolving Credit Documents (all of the same being hereinafter called the "Collateral"): all personal and fixture property of every kind and nature including without limitation all goods (including inventory, equipment (including rolling stock) and any accessions thereto), instruments (including promissory notes), documents including, if applicable, electronic documents, accounts (including health care insurance receivables), chattel paper (whether tangible or electronic), deposit accounts, letter-of-credit rights (whether or not the letter of credit is evidenced by a writing), software, intellectual property rights, commercial tort claims, securities and all other investment property, cash and cash equivalents, supporting obligations, any other contract rights or rights to the payment of money, insurance claims and proceeds, all general intangibles (including all payment intangibles), and all books and records relating to the foregoing. The Administrative Agent acknowledges that the attachment of its security interest in any commercial tort claim as original collateral is subject to each Company's compliance with Section 4.7. 3. AUTHORIZATION TO FILE FINANCING STATEMENTS. Each Company hereby irrevocably authorizes the Administrative Agent, its counsel or representative at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of the Company or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of the State or such other jurisdiction, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by part 5 of Article 9 of the Uniform Commercial Code of the State or such other jurisdiction for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether such Company is an organization, the type of organization and any organizational identification number issued to such Company and, (ii) in the case of a financing statement filed as a fixture filing or indicating Collateral as extracted collateral, a sufficient description of real property to which the Collateral relates. Each Company agrees to furnish any such information to the Administrative Agent promptly upon request. Each Company also ratifies its authorization for the Administrative Agent to have filed in any Uniform Commercial Code jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof, with all costs and expenses associated with any such filings to be at the Companies' expense. -2- 4. OTHER ACTIONS. Further to ensure the attachment, perfection and first priority of, and the ability of the Administrative Agent to enforce, the Administrative Agent's security interest in the Collateral, each Company agrees, in each case at such Company's own expense, to take the following actions with respect to the following Collateral and without limitation on such Company's other obligations contained in this Agreement: 4.1. PROMISSORY NOTES AND TANGIBLE CHATTEL PAPER. If any Company shall, now or at any time hereafter, hold or acquire any promissory notes or tangible chattel paper (excluding promissory notes in favor of employees of any Company not exceeding $300,000 individually or $500,000 in the aggregate), such Company shall forthwith endorse, assign and deliver the same to the Administrative Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Administrative Agent may from time to time specify. 4.2. DEPOSIT ACCOUNTS. For each deposit account that each Company, now or at any time hereafter, opens or maintains with any depositary bank after the obligations of the Companies to the Revolving Credit Agent and Revolving Lenders arising under the Revolving Credit Documents have been satisfied, each such Company shall deliver to the Administrative Agent an Agency Account Agreement in favor of the Administrative Agent, in form and substance satisfactory to the Administrative Agent, executed by such depositary bank; provided, that any Company may maintain such accounts that are not subject to an Agency Account Agreement in favor of the Administrative Agent so long as the aggregate balance maintained in all such accounts does not exceed $750,000. The provisions of this paragraph shall not apply to (i) a deposit account for which the Administrative Agent is the depositary bank and is in automatic control and (ii) any deposit accounts specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of a Company's salaried employees. -3- 4.3. INVESTMENT PROPERTY. If any Company shall, now or at any time hereafter, hold or acquire any certificated securities, such Company shall forthwith endorse, assign and deliver the same to the Administrative Agent, accompanied by such instruments of transfer or assignment duly executed in blank as the Administrative Agent may from time to time specify. If any securities now or hereafter acquired by any Company are uncertificated and are issued to such Company or its nominee directly by the issuer thereof, such Company shall immediately notify the Administrative Agent thereof and, at the Administrative Agent's request and option, pursuant to an agreement in form and substance satisfactory to the Administrative Agent, either (a) cause the issuer to agree to comply without further consent of such Company or such nominee, at any time with instructions from the Administrative Agent as to such securities, or (b) arrange for the Administrative Agent to become the registered owner of the securities; provided, however, that if any securities, whether certificated or uncertificated, or other investment property now or hereafter acquired by any Company are held by such Company or its nominee through a securities intermediary or commodity intermediary, such Company shall immediately notify the Administrative Agent thereof and, at the Administrative Agent's request and option, pursuant to an agreement in form and substance satisfactory to the Administrative Agent, either (i) cause such securities intermediary or (as the case may be) commodity intermediary to agree to comply, in each case without further consent of such Company or such nominee, at any time with entitlement orders or other instructions from the Administrative Agent to such securities intermediary as to such securities or other investment property, or (as the case may be) to apply any value distributed on account of any commodity contract as directed by the Administrative Agent to such commodity intermediary, or (ii) in the case of financial assets or other investment property held through a securities intermediary, arrange for the Administrative Agent to become the entitlement holder with respect to such investment property, with such Company being permitted, only with the consent of the Administrative Agent, to exercise rights to withdraw or otherwise deal with such investment property. The provisions of this paragraph shall not apply to any financial assets credited to a securities account for which the Administrative Agent is the securities intermediary. 4.4. COLLATERAL IN THE POSSESSION OF A BAILEE. If any Collateral is, now or at any time hereafter, in the possession of a bailee (excluding Collateral in the possession of dyers and contract manufacturers in the ordinary course of the Companies' business consistent with past practices that is designated as ineligible inventory on the most recent Borrowing Base Certificate and/or Collateral Update Certificate), the applicable Company or Companies shall promptly notify the Administrative Agent thereof and, at the Administrative Agent's request and option, such Company or Companies shall promptly obtain an acknowledgement from the bailee, in form and substance satisfactory to the Administrative Agent, that the bailee holds such Collateral for the benefit of the Administrative Agent and such bailee's agreement to comply, without further consent of such Company or Companies, at any time with instructions of the Administrative Agent as to such Collateral. -4- 4.5. ELECTRONIC CHATTEL PAPER AND TRANSFERABLE RECORDS. If any Company, now or at any time hereafter, holds or acquires an interest in any electronic chattel paper, any electronic document or any "transferable record," as that term is defined in Section 201 of the federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, such Company shall promptly notify the Administrative Agent thereof and, at the request and option of the Administrative Agent, shall take such action as the Administrative Agent may reasonably request to vest in the Administrative Agent control, under Section 9-105 of the Uniform Commercial Code of the State or any other relevant jurisdiction, of such electronic chattel paper, control, under Section 7-106 of the Uniform Commercial Code of the State or any other relevant jurisdiction, of such electronic document or control, under Section 201 of the federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The provisions of this Section 4.5 relating to electronic documents and "control" under UCC Section 7-106 apply in the event that the 2003 revisions to Article 7, with amendments to Article 9, of the Uniform Commercial Code, in substantially the form approved by the American Law Institute and the National Conference of Commissioners on Uniform State Laws, are now or hereafter adopted and become effective in the State or in any other relevant jurisdiction. 4.6. LETTER-OF-CREDIT RIGHTS. If any Company is, now or at any time hereafter, a beneficiary under a letter of credit (excluding trade letters of credit) with a face amount equal to or greater than $500,000 individually, or $1,500,000 in the aggregate with all other letters of credit under which such Company is beneficiary, now or hereafter, such Company shall promptly notify the Administrative Agent thereof and, at the request and option of the Administrative Agent, such Company shall, pursuant to an agreement in form and substance satisfactory to the Administrative Agent, either (a) arrange for the issuer and any confirmer or other nominated person of such letter of credit to consent to an assignment to the Administrative Agent of the proceeds of the letter of credit or (b) arrange for the Administrative Agent to become the transferee beneficiary of the letter of credit, with the Administrative Agent agreeing, in each case, that the proceeds of the letter of credit are to be applied as provided in the Credit Agreement. 4.7. COMMERCIAL TORT CLAIMS. If any Company shall, now or at any time hereafter, hold or acquire a commercial tort claim, such Company shall immediately notify the Administrative Agent in a writing signed by such Company of the particulars thereof and grant to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory to the Administrative Agent. -5- 4.8. OTHER ACTIONS AS TO ANY AND ALL COLLATERAL. Each Company further agrees, upon the request of the Administrative Agent and at the Administrative Agent's option, to take any and all other actions as the Administrative Agent may determine to be necessary or useful for the attachment, perfection and first priority of, and the ability of the Administrative Agent to enforce, the Administrative Agent's security interest in any and all of the Collateral, including, without limitation, (a) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the Uniform Commercial Code of any relevant jurisdiction, to the extent, if any, that such Company's signature thereon is required therefor, (b) causing the Administrative Agent's name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of the Administrative Agent to enforce, the Administrative Agent's security interest in such Collateral, (c) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of the Administrative Agent to enforce, the Administrative Agent's security interest in such Collateral, (d) obtaining governmental and other third party waivers, consents and approvals, in form and substance satisfactory to the Administrative Agent, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, (e) obtaining waivers from mortgagees and landlords in form and substance satisfactory to the Administrative Agent and (f) taking all actions under any earlier versions of the Uniform Commercial Code or under any other law, as reasonably determined by the Administrative Agent to be applicable in any relevant Uniform Commercial Code or other jurisdiction, including any foreign jurisdiction, in each such case, at the Companies' expense. 5. RELATION TO OTHER COLLATERAL DOCUMENTS. The provisions of this Agreement supplement the provisions of any real estate mortgage or deed of trust granted by the Companies to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, and which secures the payment or performance of any of the Obligations. Nothing contained in any such real estate mortgage or deed of trust shall derogate from any of the rights or remedies of the Administrative Agent or any of the Lenders hereunder. In addition, to the provisions of this Agreement being so read and construed with any such mortgage or deed of trust, the provisions of this Agreement shall be read and construed with the other Security Documents referred to below in the manner so indicated. -6- 5.1. STOCK PLEDGE AGREEMENT. Concurrently herewith certain of the Companies are executing and delivering to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, a stock pledge agreement pursuant to which each Company party thereto is pledging to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, all of its shares of capital stock in certain of its Subsidiaries. Such pledges shall be governed by the terms of such pledge agreement and not by the terms of this Agreement. 5.2. PATENT AND TRADEMARK ASSIGNMENTS. Concurrently herewith certain of the Companies are executing and delivering to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, a Patent Collateral Assignment and Security Agreement (the "Patent Assignment") and a Trademark Collateral Assignment and Pledge Agreement (the "Trademark Assignment") pursuant to which such Companies are assigning to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, certain Collateral consisting of patents and patent rights and trademarks, service marks and trademark and service mark rights, together with the goodwill appurtenant thereto. The provisions of the Patent Assignment and the Trademark Assignment are supplemental to the provisions of this Agreement, and nothing contained in the Patent Assignment or the Trademark Assignment shall derogate from any of the rights or remedies of the Administrative Agent or any of the Lenders hereunder. Neither the delivery of, nor anything contained in, the Patent Assignment or the Trademark Assignment shall be deemed to prevent or postpone the time of attachment or perfection of any security interest in such Collateral created hereby.5.3. COPYRIGHT MEMORANDUM. Concurrently herewith certain of the Companies are executing and delivering to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, for recording in the United States Copyright Office (the "Copyright Office"), a Memorandum of Grant of Security Interest in Copyrights. Each Company represents and warrants to the Lenders and the Administrative Agent that such Memorandum identifies all now existing material copyrights and other rights in and to all material copyrightable works of the Companies, identified, where applicable, by title, author and/or Copyright Office registration number and date. 6. REPRESENTATIONS AND WARRANTIES CONCERNING EACH COMPANY'S LEGAL STATUS. Each of the Companies has previously delivered to the Administrative Agent a certificate signed by the Company and entitled "Perfection Certificate" (the "Perfection Certificate"). Each Company represents and warrants to the Lenders and the Administrative Agent as follows: (a) each Company's exact legal name is that indicated on its Perfection Certificate and on the signature page hereof, (b) the Company is an organization of the type, and is organized in the jurisdiction, set forth in its Perfection Certificate, (c) its Perfection Certificate accurately sets forth the Company's organizational identification number or accurately states that such Company has none, (d) its Perfection Certificate accurately sets forth such Company's place of business or, if more than one, its chief executive office, as well as such Company's mailing address, if different, (e) all other information set forth on its Perfection Certificate pertaining to such Company is accurate and complete and (f) there has been no change in any of such information since the date on which its Perfection Certificate was signed by such Company. -7- 7. COVENANTS CONCERNING EACH COMPANY'S LEGAL STATUS. Each Company covenants with the Lenders and the Administrative Agent as follows: (a) without providing at least thirty (30) days prior written notice to the Administrative Agent, such Company will not change its name, its place of business or, if more than one, chief executive office, or its mailing address or organizational identification number if it has one, (b) if such Company does not have an organizational identification number and later obtains one, such Company will forthwith notify the Administrative Agent of such organizational identification number, and (c) such Company will not change its type of organization, jurisdiction of organization or other legal structure. 8. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL, ETC. Each Company further represents and warrants to the Lenders and the Administrative Agent as follows: (a) such Company is the owner of the Collateral, free from any right or claim of any person or any adverse lien, except for the security interest created by this Agreement and other Liens permitted by the Credit Agreement, (b) none of the Collateral constitutes, or is the proceeds of, "farm products" as defined in Section 9-102(a)(34) of the Uniform Commercial Code of the State, (c) except as disclosed to the Administrative Agent in writing, none of the account debtors or other persons obligated on any of the Collateral is a governmental authority covered by the Federal Assignment of Claims Act or like federal, state or local statute or rule in respect of such Collateral, (d) such Company holds no commercial tort claim except as indicated on its Perfection Certificate or claims arising after the date on which notice is given, (e) such Company has at all times operated its business in compliance with all applicable provisions of the federal Fair Labor Standards Act, as amended, and with all applicable provisions of federal, state and local statutes and ordinances dealing with the control, shipment, storage or disposal of hazardous materials or substances, (f) all other information set forth on its Perfection Certificate pertaining to the Collateral is accurate and complete, and (g) there has been no change in any of such information since the date on which its Perfection Certificate was signed by such Company. 9. COVENANTS CONCERNING COLLATERAL, ETC. Each Company further covenants with the Lenders and the Administrative Agent as follows: (a) the Collateral, to the extent not delivered to the Administrative Agent pursuant to Section 4 or the Revolving Credit Agent pursuant to the terms of the Revolving Loan Documents, will be kept at those locations listed on its Perfection Certificate and such Company will not remove the Collateral from such locations without providing at least 30 days prior written notice to the Administrative Agent, (b) except for the security interest herein granted and Liens permitted by Section 8.3 of the Credit Agreement, the Companies shall be the owners of the Collateral free from any right or claim of any other person or any lien, security interest or other encumbrance, and such Company shall defend the same against all claims and demands of all Persons at any time claiming the same or any interests therein adverse to the Administrative Agent or any of the Lenders, (c) such Company shall not pledge, mortgage or create, or suffer to exist any right of any person in or claim by any person to the Collateral, or any lien, security interest or other encumbrance in the Collateral in favor of any person, or become bound (as provided in Section 9 203(d) of the Uniform Commercial Code of the State or any other relevant jurisdiction or otherwise) by a security agreement in favor of any person as secured party, other than the Administrative Agent except for Liens permitted by the Credit Agreement, (d) such Company will keep the Collateral in good order and repair (ordinary wear and tear excepted) and will not use the same in violation of law or any policy of insurance thereon, (e) as provided in the Credit Agreement, such Company will permit the Administrative Agent, or its designee, to inspect the Collateral at any reasonable time, wherever located, (f) such Company will pay promptly when due all taxes, assessments, governmental charges and levies upon the Collateral or incurred in connection with the use or operation of the Collateral or incurred in connection with this Agreement, (g) such Company will continue to operate, its business in compliance with all applicable provisions of the federal Fair Labor Standards Act, as amended, and with all applicable provisions of federal, state and local statutes and ordinances dealing with the control, shipment, storage or disposal of hazardous materials or substances, (h) such Company will not sell or otherwise dispose, or offer to sell or otherwise dispose, of the Collateral or any interest therein except for sales or other dispositions expressly permitted under the Credit Agreement, and (i) such Company will not file any amendment to or termination of any Uniform Commercial Code financing statement naming such Company as debtor and the Administrative Agent as secured party. -8- 10. INSURANCE. 10.1. MAINTENANCE OF INSURANCE. Each Company will maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with general practices of businesses engaged in similar activities in similar geographic areas. Such insurance shall be in such minimum amounts that such Company will not be deemed a co-insurer under applicable insurance laws, regulations and policies and otherwise shall be in such amounts, contain such terms, be in such forms and be for such periods as may be reasonably satisfactory to the Administrative Agent. In addition, all such insurance shall be payable to the Administrative Agent as loss payee under a "standard" or "New York" loss payee clause for the benefit of the Lenders and the Administrative Agent. Without limiting the foregoing, the Company will (a) keep all of its physical property insured with casualty or physical hazard insurance on an "all risks" basis, with broad form flood and earthquake coverages and electronic data processing coverage, with a full replacement cost endorsement and an "agreed amount" clause in an amount equal to 100% of the full replacement cost of such property, (b) maintain all such workers' compensation or similar insurance as may be required by law and (c) maintain, in amounts and with deductibles consistent with those generally maintained by businesses engaged in similar activities in similar geographic areas and otherwise in a manner consistent with its past practices, general public liability insurance against claims of bodily injury, death or property damage occurring, on, in or about the properties of the Company; business interruption insurance; and product liability insurance. -9- 10.2. INSURANCE PROCEEDS. The proceeds of any casualty insurance in respect of any casualty loss of any of the Collateral shall, subject to the rights, if any, of other parties with an interest having priority in the property covered thereby, be applied pursuant to the terms of the Credit Agreement. 10.3. CONTINUATION OF INSURANCE. All policies of insurance shall provide for at least thirty (30) days prior written cancellation notice to the Administrative Agent. In the event of failure by any Company to provide and maintain insurance as herein provided, the Administrative Agent may, at its option, provide such insurance and charge the amount thereof to the Companies. Each Company shall furnish the Administrative Agent with certificates of insurance and policies evidencing compliance with the foregoing insurance provision. 11. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL. 11.1. EXPENSES INCURRED BY ADMINISTRATIVE AGENT. In the Administrative Agent's discretion, the Administrative Agent may discharge taxes and other encumbrances (other than Permitted Liens) at any time levied or placed on any of the Collateral, maintain any of the Collateral, make necessary repairs thereto and pay any necessary filing fees or insurance premiums, in each case if the Companies fail to do so. Each Company agrees to reimburse the Administrative Agent on demand for all expenditures so made. The Administrative Agent shall have no obligation to any Company to make any such expenditures, nor shall the making thereof be construed as a waiver or cure of any Default or Event of Default. 11.2. ADMINISTRATIVE AGENT'S OBLIGATIONS AND DUTIES. Anything herein to the contrary notwithstanding, each Company shall remain obligated and liable under each contract or agreement comprised in the Collateral to be observed or performed by such Company thereunder. Neither the Administrative Agent nor any Lender shall have any obligation or liability under any such contract or agreement by reason of or arising out of this Agreement or the receipt by the Administrative Agent or any Lender of any payment relating to any of the Collateral, nor shall the Administrative Agent or any Lender be obligated in any manner to perform any of the obligations of any Company under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Administrative Agent or any Lender in respect of the Collateral or as to the sufficiency of any performance by any party under any such contract or agreement, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to the Administrative Agent or to which the Administrative Agent or any Lender may be entitled at any time or times. The Administrative Agent's sole duty with respect to the custody, safe keeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Uniform Commercial Code of the State or otherwise, shall be to deal with such Collateral in the same manner as the Administrative Agent deals with similar property for its own account. -10- 12. SECURITIES AND DEPOSITS. The Administrative Agent may at any time following and during the continuance of an Event of Default, at its option, transfer to itself or any nominee any securities constituting Collateral, receive any income thereon and hold such income as additional Collateral or apply it to the Obligations. Whether or not any Obligations are due, the Administrative Agent may, following and during the continuance of an Event of Default, demand, sue for, collect, or make any settlement or compromise which it deems desirable with respect to the Collateral. Regardless of the adequacy of Collateral or any other security for the Obligations, any deposits or other sums at any time credited by or due from the Administrative Agent or any Lender to any Company may at any time be applied to or set off against any of the Obligations. 13. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER PERSONS OBLIGATED ON COLLATERAL. Each Company shall, following and during the continuance of an Event of Default, at the request and option of the Administrative Agent, notify account debtors and other persons obligated on any of the Collateral of the security interest of the Administrative Agent in any account, chattel paper, general intangible, instrument or other Collateral and that payment thereof is to be made directly to the Administrative Agent or to any financial institution designated by the Administrative Agent as the Administrative Agent's agent therefor, and following and during the continuance of an Event of Default, the Administrative Agent may itself, without notice to or demand upon such Company, so notify account debtors and other persons obligated on Collateral. After the making of such a request or the giving of any such notification, such Company shall hold any proceeds of collection of accounts, chattel paper, general intangibles, instruments and other Collateral received by such Company as trustee for the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, without commingling the same with other funds of such Company and shall turn the same over to the Administrative Agent in the identical form received, together with any necessary endorsements or assignments. The Administrative Agent shall apply the proceeds of collection of accounts, chattel paper, general intangibles, instruments and other Collateral received by the Administrative Agent to the Obligations in accordance with the Credit Agreement, such proceeds to be immediately credited after final payment in cash or other immediately available funds of the items giving rise to them. 14. POWER OF ATTORNEY. 14.1. APPOINTMENT AND POWERS OF ADMINISTRATIVE AGENT. Each Company hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with, subject to the provisions of applicable law, full power of substitution, as its true and lawful attorneys-in-fact with full irrevocable power and authority in the place and stead of such Company or in the Administrative Agent's own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be necessary or useful to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives said attorneys the power and right, on behalf of such Company, without notice to or assent by such Company, to do the following: -11- (a) upon the occurrence and during the continuance of an Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise dispose of or deal with any of the Collateral in such manner as is consistent with the Uniform Commercial Code of the State or any other relevant jurisdiction and as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at such Company's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary or useful to protect, preserve or realize upon the Collateral and the Administrative Agent's security interest therein, in order to effect the intent of this Agreement, all no less fully and effectively as such Company might do, including, without limitation, (i) the filing and prosecuting of registration and transfer applications with the appropriate federal, state or local agencies or authorities with respect to trademarks, copyrights and patentable inventions and processes, (ii) upon written notice to such Company, the exercise of voting rights with respect to voting securities, which rights may be exercised, if the Administrative Agent so elects, with a view to causing the liquidation of assets of the issuer of any such securities and (iii) the execution, delivery and recording, in connection with any sale or other disposition of any Collateral, of the endorsements, assignments or other instruments of conveyance or transfer with respect to such Collateral; and (b) whether or not an Event of Default shall have occurred and be continuing, to the extent that such Company's authorization given in Section 3 is not sufficient, to file such financing statements with respect hereto, with or without such Company's signature, or a photocopy of this Agreement in substitution for a financing statement, as the Administrative Agent may deem appropriate and to execute in such Company's name such financing statements and amendments thereto and continuation statements which may require such Company's signature. -12- 14.2. RATIFICATION BY THE COMPANIES. To the extent permitted by law, each Company hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and is irrevocable. 14.3. NO DUTY ON ADMINISTRATIVE AGENT. The powers conferred on the Administrative Agent hereunder are solely to protect the interests of the Administrative Agent and the Lenders in the Collateral and shall not impose any duty upon the Administrative Agent to exercise any such powers. The Administrative Agent shall be accountable only for the amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to any Company for any act or failure to act, except for the Administrative Agent's own gross negligence or willful misconduct. 15. RIGHTS AND REMEDIES. If an Event of Default shall have occurred and be continuing, the Administrative Agent, without any other notice to or demand upon the Companies, shall have in any jurisdiction in which enforcement hereof is sought, in addition to all other rights and remedies, the rights and remedies of a secured party under the Uniform Commercial Code of the State or any other relevant jurisdiction and any additional rights and remedies as may be provided to a secured party at law or in equity in any jurisdiction in which Collateral is located, including, without limitation, the right to take possession of the Collateral, and for that purpose the Administrative Agent may, so far as any Company can give authority therefor, enter upon any premises on which the Collateral may be situated and remove the same therefrom. The Administrative Agent may in its discretion require each Company to assemble all or any part of the Collateral at such location or locations within the jurisdiction(s) of such Company's principal office(s) or at such other locations as the Administrative Agent may reasonably designate. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, the Administrative Agent shall give to the Companies at least twenty (20) days prior written notice of the time and place of any public sale of Collateral or of the time after which any private sale or any other intended disposition is to be made. Each Company hereby acknowledges that twenty (20) days prior written notice of such sale or sales shall be reasonable notice. In addition, each Company waives any and all rights that it may have to a judicial hearing in advance of the enforcement of any of the Administrative Agent's rights and remedies hereunder, including, without limitation, its right following an Event of Default to take immediate possession of the Collateral and to exercise its rights and remedies with respect thereto. 16. STANDARDS FOR EXERCISING RIGHTS AND REMEDIES. To the extent that applicable law imposes duties on the Administrative Agent to exercise remedies in a commercially reasonable manner, each Company acknowledges and agrees that it is not commercially unreasonable for the Administrative Agent (a) to fail to incur expenses reasonably deemed significant by the Administrative Agent to prepare Collateral for disposition or otherwise to fail to complete raw material or work in process into finished goods or other finished products for disposition, (b) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against account debtors or other persons obligated on Collateral or to fail to remove Liens on or any adverse claims against Collateral, (d) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (e) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (f) to contact other persons, whether or not in the same business as such Company, for expressions of interest in acquiring all or any portion of the Collateral, (g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (h) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to disclaim disposition warranties, (k) to purchase insurance or credit enhancements to insure the Administrative Agent against risks of loss, collection or disposition of Collateral or to provide to the Administrative Agent a guaranteed return from the collection or disposition of Collateral, or (l) to the extent deemed appropriate by the Administrative Agent, to obtain the services of brokers, investment bankers, consultants and other professionals to assist the Administrative Agent in the collection or disposition of any of the Collateral. Each Company acknowledges that the purpose of this Section 16 is to provide non-exhaustive indications of what actions or omissions by the Administrative Agent would fulfill the Administrative Agent's duties under the Uniform Commercial Code of the State or any other relevant jurisdiction in the Administrative Agent's exercise of remedies against the Collateral and that other actions or omissions by the Administrative Agent shall not be deemed to fail to fulfill such duties solely on account of not being indicated in this Section 16. Without limitation upon the foregoing, nothing contained in this Section 16 shall be construed to grant any rights to any Company or to impose any duties on the Administrative Agent that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section 16. -13- 17. NO WAIVER BY ADMINISTRATIVE AGENT, ETC. The Administrative Agent shall not be deemed to have waived any of its rights and remedies in respect of the Obligations or the Collateral unless such waiver shall be in writing and signed by the Administrative Agent with the consent of the Required Lenders. No delay or omission on the part of the Administrative Agent in exercising any right or remedy shall operate as a waiver of such right or remedy or any other right or remedy. A waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. All rights and remedies of the Administrative Agent with respect to the Obligations or the Collateral, whether evidenced hereby or by any other instrument or papers, shall be cumulative and may be exercised singularly, alternatively, successively or concurrently at such time or at such times as the Administrative Agent deems expedient. 18. SURETYSHIP WAIVERS BY THE COMPANIES. Each Company waives demand, notice (other than notices expressly provided for herein or in any other Loan Document), protest, notice of acceptance of this Agreement, notice of loans made, credit extended, Collateral received or delivered or other action taken in reliance hereon and all other demands and notices of any description. With respect to both the Obligations and the Collateral, each Company assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of or failure to perfect any security interest in any Collateral, to the addition or release of any party or person primarily or secondarily liable, to the acceptance of partial payment thereon and the settlement, compromising or adjusting of any thereof, all in such manner and at such time or times as the Administrative Agent may deem advisable. The Administrative Agent shall have no duty as to the collection or protection of the Collateral or any income therefrom, the preservation of rights against prior parties, or the preservation of any rights pertaining thereto beyond the safe custody thereof as set forth in Section 11.2. Each Company further waives any and all other suretyship defenses. -14- 19. MARSHALLING. Neither the Administrative Agent nor any Lender shall be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of the rights and remedies of the Administrative Agent or any Lender hereunder and of the Administrative Agent or any Lender in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising. To the extent that it lawfully may, each Company hereby agrees that it will not invoke any law relating to the marshalling of collateral which might cause delay in or impede the enforcement of the Administrative Agent's rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, each Company hereby irrevocably waives the benefits of all such laws. 20. PROCEEDS OF DISPOSITIONS; EXPENSES. Each Company shall pay to the Administrative Agent on demand any and all expenses, including reasonable attorneys' fees and disbursements, incurred or paid by the Administrative Agent in protecting, preserving or, after and during the continuance of an Event of Default, enforcing the Administrative Agent's rights and remedies under or in respect of any of the Obligations or any of the Collateral. After deducting all of said expenses, the residue of any proceeds of collection or sale or other disposition of Collateral shall, to the extent actually received in cash, be applied to the payment of the Obligations in accordance with the provisions of the Credit Agreement, proper allowance and provision being made for any Obligations not then due. Upon the final payment and satisfaction in full of all of the Obligations and after making any payments required by Sections 9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial Code of the State, any excess shall be returned to the Companies. In the absence of final payment and satisfaction in full of all of the Obligations, each Company shall remain liable for any deficiency. -15- 21. OVERDUE AMOUNTS. Until paid, all amounts due and payable by the Companies hereunder shall be a debt secured by the Collateral and shall bear, whether before or after judgment, interest at the Default Rate. 22. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE. Each Company agrees that any action or claim arising out of any dispute in connection with this Agreement, any rights or obligations hereunder or the performance or enforcement of such rights or obligations may be brought in the courts of the State or any federal court sitting therein and consents to the non-exclusive jurisdiction of such court and to service of process in any such suit being made upon such Company by mail at the address specified in Section 19 of the Credit Agreement. Each Company hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit is brought in an inconvenient court. 23. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR MASSACHUSETTS STATE COURT SITTING IN MASSACHUSETTS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. NONE OF THE PARTIES HERETO SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF OR OTHERWISE RELATED TO THIS AGREEMENT AND EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY SUCH PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS Section 23. Except as prohibited by law, each Company waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. Each Company (a) certifies that none of the Administrative Agent, any Lender or any representative, agent or attorney of the Administrative Agent or any Lender has represented, expressly or otherwise, that the Administrative Agent or any Lender would not, in the event of litigation, seek to enforce the foregoing waivers or other waivers contained in this Agreement and (b) acknowledges that, in entering into the Credit Agreement and the other Loan Documents to which the Administrative Agent or any Lender is a party, the Administrative Agent and the Lenders are relying upon, among other things, the waivers and certifications contained in this Section 23. -16- 24. AMENDMENTS TO AGREEMENT AND DOCUMENTATION. This Agreement and the provisions hereof may be amended, modified or waived only by a writing signed by the Administrative Agent and each of the Companies. 25. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed an original but all of which shall constitute one agreement, and shall constitute a binding agreement when executed by each of the parties hereto. 26. NOTICES. All written communications provided for hereunder shall be sent in accordance with the provisions of Section 19 of the Credit Agreement. 27. MISCELLANEOUS. The headings of each section of this Agreement are for convenience only and shall not define or limit the provisions thereof. This Agreement and all rights and obligations hereunder shall be binding upon each Company and its successors and assigns, and shall inure to the benefit of the Administrative Agent, the Lenders and their respective successors and assigns. If any term of this Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall in no way be affected thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or unenforceable term had not been included herein. Each Company acknowledges receipt of a copy of this Agreement. 28. INTERCREDITOR MATTERS. Notwithstanding anything to the contrary contained herein, the rights and remedies of the Administrative Agent and the Lenders, and the obligations of the Companies as set forth herein are subject to the terms and conditions of the Intercreditor Agreement. Without limiting the foregoing, to the extent that any Company is required to deliver, endorse, pay over or otherwise provide possession or control over any of the collateral set forth herein to the Administrative Agent or Lenders hereunder, such obligations shall be subject to the rights of the Revolving Credit Agent and Revolving Lenders to such collateral, subject to in the Intercreditor Agreement. Further, any representation, warranty or covenant by the Companies in this Agreement that the Collateral is not and shall not be subject to any liens, encumbrances or other restrictions, shall specifically be qualified by the liens and rights of the Revolving Credit Agent for the benefit of the Revolving Lenders with respect to the collateral pursuant to the Revolving Credit Documents and as set forth in the Intercreditor Agreement. The limitations and qualifications set forth in this paragraph are effective solely to recognize the rights and remedies of the Revolving Credit Agent and Revolving Lenders and to qualify the obligations of the Companies and shall not otherwise impair the pledge and security interests granted by the Companies to the Administrative Agent pursuant to this Agreement. The parties acknowledge that to the extent that the obligations of the Companies to the Revolving Credit Agent and Revolving Lenders arising under the Revolving Credit Documents have been indefeasibly satisfied in full and such parties have no further obligations to make loans or advances to the Borrower thereunder, the limitations and qualifications set forth in this paragraph shall be of no further force or effect and the Companies covenant to take all such actions set forth herein and necessary to give effect to the provisions of this Agreement. -17- [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] (Signature Page to Security Agreement) IN WITNESS WHEREOF, intending to be legally bound, each Company has caused this Agreement to be duly executed as of the date first above written. QUAKER FABRIC CORPORATION OF FALL RIVER QUAKER FABRIC CORPORATION QUAKER TEXTILE CORPORATION QUAKER FABRIC MEXICO, S.A. DE C.V. By: /s/ Paul J. Kelly ------------------------------------------------------------- Name: Paul J. Kelly Title: Vice President Finance Accepted: GB MERCHANT PARTNERS, LLC, as Administrative Agent By: _____________________________________________ Name: Title: CERTIFICATE OF ACKNOWLEDGMENT COMMONWEALTH OR STATE OF ______________________________________________) _________ ) ss. COUNTY OF _____________________________________________________________) On this ___ day of November, 2006, before me, the undersigned notary public, personally appeared Paul J. Kelly, proved to me through satisfactory evidence of identification, which were _____________________________, to be the person whose name is signed on the preceding document, and acknowledged to me that he signed it voluntarily for its stated purpose as Vice President Finance of Quaker Fabric Corporation, Quaker Fabric Corporation of Fall River, Quaker Textile Corporation, and Quaker Fabric Mexico, S.A. de C.V. ------------------------------ (official signature and seal of notary) My commission expires: EX-10.42 9 a5274680ex1042.txt EXHIBIT 10.42 EXHIBIT 10.42 GUARANTY GUARANTY, dated as of November 9, 2006, by QUAKER TEXTILE CORPORATION, a Massachusetts corporation ("Quaker Textile"), QUAKER FABRIC MEXICO, S.A. DE C.V. ("Quaker Mexico"), a Mexican corporation, and QUAKER FABRIC CORPORATION, a Delaware corporation (the "Parent", and together with Quaker Textile and Quaker Mexico, the "Guarantors"), in favor of GB MERCHANT PARTNERS, LLC, as administrative agent (hereinafter, the "Administrative Agent") for itself and the other lending institutions (hereinafter, collectively the "Lenders") which are or may become parties to the Term Loan Agreement of even date herewith (the "Credit Agreement"), among Quaker Fabric Corporation of Fall River (the "Company"), the Parent, the Lenders, and the Administrative Agent. WHEREAS, the Company and the Guarantors are members of a group of related corporations, the success of any one of which is dependent in part on the success of the other members of such group; WHEREAS, each Guarantor expects to receive substantial direct and indirect benefits from the extensions of credit to the Company by the Lenders pursuant to the Credit Agreement (which benefits are hereby acknowledged); WHEREAS, it is a condition precedent to the Lenders' making any loans or otherwise extending credit to the Company under the Credit Agreement that the Guarantors execute and deliver to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, a guaranty substantially in the form hereof; and WHEREAS, each Guarantor wishes to guaranty the Company's obligations to the Lenders and the Administrative Agent under or in respect of the Credit Agreement as provided herein; NOW, THEREFORE, each Guarantor hereby agrees with the Lenders and the Administrative Agent as follows: 1. DEFINITIONS. The term "Obligations" and all other capitalized terms used herein without definition shall have the respective meanings provided therefor in the Credit Agreement. 2. GUARANTY OF PAYMENT AND PERFORMANCE. Each Guarantor hereby jointly and severally unconditionally guarantees to the Lenders and the Administrative Agent the full and punctual payment when due (whether at stated maturity, by required pre-payment, by acceleration or otherwise), as well as the performance, of all of the Obligations, including all such which would become due but for the operation of the automatic stay pursuant to Section 362(a) of the Federal Bankruptcy Code and the operation of Section 502(b) and 506(b) of the Federal Bankruptcy Code. This Guaranty is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance of all of the Obligations and not of their collectibility only and is in no way conditioned upon any requirement that the Administrative Agent or any Lender first attempt to collect any of the Obligations from the Company or resort to any collateral security or other means of obtaining payment. Should the Company default in the payment or performance of any of the Obligations, the obligations of the Guarantors hereunder with respect to such Obligations in default shall, upon demand by the Administrative Agent, become immediately due and payable to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, without demand or notice of any nature, all of which are expressly waived by each Guarantor. Payments by the Guarantors hereunder may be required by the Administrative Agent on any number of occasions. All payments by each Guarantor hereunder shall be made to the Administrative Agent, in the manner and at the place of payment specified therefor in the Credit Agreement, for the account of the Lenders and the Administrative Agent. 3. GUARANTOR'S AGREEMENT TO PAY ENFORCEMENT COSTS, ETC. Each Guarantor further jointly and severally agrees, as the principal obligor and not as a guarantor only, to pay to the Administrative Agent, on demand, all costs and expenses (including court costs and legal expenses) incurred or expended by the Administrative Agent or any Lender in connection with the Obligations, this Guaranty and the enforcement thereof, together with interest on amounts recoverable under this Section y3 from the time when such amounts become due until payment, whether before or after judgment, at the rate of interest for overdue principal set forth in the Credit Agreement, provided that if such interest exceeds the maximum amount permitted to be paid under applicable law, then such interest shall be reduced to such maximum permitted amount. 4. WAIVERS BY GUARANTOR; LENDERS' FREEDOM TO ACT. Each Guarantor agrees that the Obligations will be paid and performed strictly in accordance with their respective terms, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction, and applicable to the Company, affecting any of such terms or the rights of the Administrative Agent or any Lender with respect thereto. Each Guarantor waives promptness, diligence, presentment, demand, protest, notice of acceptance, notice of any Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshalling of assets of the Company or any other entity or other person primarily or secondarily liable with respect to any of the Obligations, and all suretyship defenses generally. Without limiting the generality of the foregoing, each Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Obligation and agrees that the obligations of each Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i) the failure of the Administrative Agent or any Lender to assert any claim or demand or to enforce any right or remedy against the Company or any other entity or other person primarily or secondarily liable with respect to any of the Obligations; (ii) any extensions, compromise, refinancing, consolidation or renewals of any Obligation; (iii) any change in the time, place or manner of payment of any of the Obligations or any rescissions, waivers, compromise, refinancing, consolidation or other amendments or modifications of any of the terms or provisions of the Credit Agreement, the Notes, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any of the Obligations; (iv) the addition, substitution or release of any entity or other person primarily or secondarily liable for any Obligation; (v) the adequacy of any rights which the Administrative Agent or any Lender may have against any collateral security or other means of obtaining repayment of any of the Obligations; (vi) the impairment of any collateral securing any of the Obligations, including without limitation the failure to perfect or preserve any rights which the Administrative Agent or any Lender might have in such collateral security or the substitution, exchange, surrender, release, loss or destruction of any such collateral security; or (vii) any other act or omission which might in any manner or to any extent vary the risk of any of the Guarantors or otherwise operate as a release or discharge of any of the Guarantors, all of which may be done without notice to the Guarantors. To the fullest extent permitted by law, each Guarantor hereby expressly waives any and all rights or defenses arising by reason of (A) any "one action" or "anti-deficiency" law which would otherwise prevent the Administrative Agent or any Lender from bringing any action, including any claim for a deficiency, or exercising any other right or remedy (including any right of set-off), against any of the Guarantors before or after the Administrative Agent's or such Lender's commencement or completion of any foreclosure action, whether judicially, by exercise of power of sale or otherwise, or (B) any other law which in any other way would otherwise require any election of remedies by the Administrative Agent or any Lender. 5. UNENFORCEABILITY OF OBLIGATIONS AGAINST COMPANY. If for any reason the Company has no legal existence or is under no legal obligation to discharge any of the Obligations, or if any of the Obligations have become irrecoverable from the Company by reason of the Company's insolvency, bankruptcy or reorganization or by other operation of law or for any other reason, this Guaranty shall nevertheless be binding on each Guarantor to the same extent as if such Guarantor at all times had been the principal obligor on all such Obligations. In the event that acceleration of the time for payment of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Company, or for any other reason, all such amounts otherwise subject to acceleration under the terms of the Credit Agreement, the Notes, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any Obligation shall be immediately due and payable by each Guarantor. 6. SUBROGATION; SUBORDINATION. 6.1. WAIVER OF RIGHTS AGAINST COMPANY. Until the final payment and performance in full in cash of all of the Obligations, none of the Guarantors shall exercise and each hereby waives any rights against the Company arising as a result of payment by such Guarantor hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise, and will not prove any claim in competition with the Administrative Agent or any Lender in respect of any payment hereunder in any bankruptcy, insolvency or reorganization case or proceedings of any nature; none of the Guarantors will claim any setoff, recoupment or counterclaim against the Company in respect of any liability of such Guarantor to the Company in respect of any payment hereunder; and each Guarantor waives any benefit of and any right to participate in any collateral security which may be held by the Administrative Agent or any Lender. 6.2. SUBORDINATION. The payment of any amounts due with respect to any indebtedness of the Company for money borrowed or credit received now or hereafter owed to any of the Guarantors is hereby subordinated to the prior payment in full in cash of all of the Obligations. Each Guarantor agrees that, after the occurrence of any default in the payment or performance of any of the Obligations, such Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Company to such Guarantor until all of the Obligations shall have been paid in full in cash. If, notwithstanding the foregoing sentence, any Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any Obligations are still outstanding, such amounts shall be collected, enforced and received by such Guarantor as trustee for the Lenders and the Administrative Agent and be paid over to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, on account of the Obligations. 6.3. PROVISIONS SUPPLEMENTAL. The provisions of this Section y6 shall be supplemental to and not in derogation of any rights and remedies of the Lenders and the Administrative Agent under any separate subordination agreement which the Administrative Agent may at any time and from time to time enter into with any Guarantor for the benefit of the Lenders and the Administrative Agent. 7. SECURITY; SETOFF. Each Guarantor grants to each of the Administrative Agent and the Lenders, as security for the full and punctual payment and performance of all of such Guarantor's obligations hereunder, a continuing lien on and security interest in all securities or other property belonging to such Guarantor now or hereafter held by the Administrative Agent or such Lender and in all deposits (general or special, time or demand, provisional or final) and other sums credited by or due from the Administrative Agent or such Lender to such Guarantor or subject to withdrawal by such Guarantor. Regardless of the adequacy of any collateral security or other means of obtaining payment of any of the Obligations, if any Event of Default shall have occurred and be continuing, each of the Administrative Agent and the Lenders is hereby authorized at any time and from time to time, without notice to any Guarantor (any such notice being expressly waived by each Guarantor) and to the fullest extent permitted by law, to set off and apply such deposits and other sums against the obligations of each Guarantor under this Guaranty, whether or not the Administrative Agent or such Lender shall have made any demand under this Guaranty and although such obligations may be contingent or unmatured. 8. FURTHER ASSURANCES. Each Guarantor agrees that it will from time to time, at the request of the Administrative Agent, do all such things and execute all such documents as the Administrative Agent may consider necessary or desirable to give full effect to this Guaranty and to perfect and preserve the rights and powers of the Lenders and the Administrative Agent hereunder. Each Guarantor acknowledges and confirms that such Guarantor itself has established its own adequate means of obtaining from the Company on a continuing basis all information desired by such Guarantor concerning the financial condition of the Company and that such Guarantor will look to the Company and not to the Administrative Agent or any Lender in order for such Guarantor to keep adequately informed of changes in the Company's financial condition. 9. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force and effect until the Administrative Agent is given written notice of any Guarantor's intention to discontinue this Guaranty, notwithstanding any intermediate or temporary payment or settlement of the whole or any part of the Obligations. No such notice shall be effective unless received and acknowledged by an officer of the Administrative Agent at the address of the Administrative Agent for notices set forth in Section 19 of the Credit Agreement. No such notice shall affect any rights of the Administrative Agent or any Lender hereunder, including without limitation the rights set forth in Sections 4 and 6, with respect to any Obligations incurred or accrued prior to the receipt of such notice or any Obligations incurred or accrued pursuant to any contract or commitment in existence prior to such receipt. This Guaranty shall continue to be effective or be reinstated, notwithstanding any such notice, if at any time any payment made or value received with respect to any Obligation is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of the Company, or otherwise, all as though such payment had not been made or value received. 10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon each Guarantor, its respective successors and assigns, and shall inure to the benefit of the Administrative Agent and the Lenders and their respective successors, transferees and assigns. Without limiting the generality of the foregoing sentence, each Lender may assign or otherwise transfer the Credit Agreement, the Notes, the other Loan Documents or any other agreement or note held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein, to any other entity or other person, and such other entity or other person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to such Lender herein, all in accordance with Section 18 of the Credit Agreement. No Guarantor may assign any of its obligations hereunder. 11. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this Guaranty nor consent to any departure by any Guarantor therefrom shall be effective unless the same shall be in writing and signed by the Administrative Agent with the consent of the Required Lenders. No failure on the part of the Administrative Agent or any Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 12. NOTICES. All notices and other communications called for hereunder shall be made in writing and, unless otherwise specifically provided herein, shall be deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic or telexed notice, when transmitted, answer back received, addressed as follows: if to a Guarantor, at the address set forth beneath its signature hereto, and if to the Administrative Agent, at the address for notices to the Administrative Agent set forth in Section 19 of the Credit Agreement, or at such address as either party may designate in writing to the other. 13. GOVERNING LAW; CONSENT TO JURISDICTION. THIS GUARANTY IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. Each Guarantor agrees that any suit for the enforcement of this Guaranty may be brought in the courts of the Commonwealth of Massachusetts or any federal court sitting therein and consents to the nonexclusive jurisdiction of such court and to service of process in any such suit being made upon such Guarantor by mail at the address specified by reference in Section 12. Each Guarantor hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court. 14. WAIVER OF JURY TRIAL. EACH GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, each Guarantor hereby waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. Each Guarantor (i) certifies that neither the Administrative Agent or any Lender nor any representative, agent or attorney of the Administrative Agent or any Lender has represented, expressly or otherwise, that the Administrative Agent or any Lender would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that, in entering into the Credit Agreement and the other Loan Documents to which the Administrative Agent or any Lender is a party, the Administrative Agent and the Lenders are relying upon, among other things, the waivers and certifications contained in this Section 14. 15. MISCELLANEOUS. This Guaranty constitutes the entire agreement of each Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guaranty shall be in addition to any other guaranty of or collateral security for any of the Obligations. The invalidity or unenforceability of any one or more sections of this Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of the terms defined. 16. CONTRIBUTION. To the extent any Guarantor makes a payment hereunder in excess of the aggregate amount of the benefit received by such Guarantor in respect of the extensions of credit under the Credit Agreement (the "Benefit Amount"), then such Guarantor, after the payment in full, in cash, of all of the Obligations, shall be entitled to recover from each other Guarantor such excess payment, pro rata, in accordance with the ratio of the Benefit Amount received by each such other Guarantor to the total Benefit Amount received by all Guarantors, and the right to such recovery shall be deemed to be an asset and property of such Guarantor so funding; provided, that all such rights to recovery shall be subordinated and junior in right of payment to the final and undefeasible payment in full in cash of all of the Obligations. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] (Signature Page to Guaranty) IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. QUAKER FABRIC CORPORATION QUAKER TEXTILE CORPORATION By: /s/ Paul J. Kelly --------------------------------------------------------- Name: Paul J. Kelly Title: Vice President Finance Address: 941 Grinnell Street, Fall River, MA 02721 Telex: ____________________________________________________ QUAKER FABRIC MEXICO, S.A. DE C.V. By: /s/ Paul J. Kelly --------------------------------------------------------- Name: Paul J. Kelly Title: Vice President Finance Address: Avenida Urbina #41, Naucalpan de Juarez Estado de Mexico, 53489 Telex: ____________________________________________________ EX-10.43 10 a5274680ex1043.txt EXHIBIT 10.43 EXHIBIT 10.43 ENVIRONMENTAL INDEMNITY AGREEMENT THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "AGREEMENT"), made as of November 9, 2006, Quaker Fabric Corporation of Fall River, a Massachusetts corporation (the "BORROWER"), Quaker Textile Corporation, a Massachusetts corporation ("QUAKER TEXTILE"), Quaker Fabric Mexico, S.A. de C.V., a Mexico corporation ("QUAKER MEXICO"), and Quaker Fabric Corporation, a Delaware corporation (the "PARENT", and together with Quaker Textile and Quaker Mexico, the "GUARANTORS") (each of the Borrower and Guarantors being sometimes referred to herein as an "INDEMNITOR" and collectively, as the "INDEMNITORS"), to GB Merchant Partners, LLC, as Administrative Agent and 1903 Debt Fund, LP and the other financial institutions from time to time party thereto (collectively, the "LENDERS" and the Administrative Agent, collectively, together with their officers, directors, employees, shareholders, members, successors and assigns, the "INDEMNITEES"). RECITALS WHEREAS, Indemnitor is the owner and/or lessee of the Real Property described on Exhibit A attached hereto, together with all improvements dated thereon (the "REAL PROPERTY") and has the exclusive rights to manage, control and operate the Real Property; WHEREAS, pursuant to that certain Term Loan Agreement, dated as of the date hereof, by and among the Borrower, the Parent, the Administrative Agent, the Lenders and the Indemnitees (as amended, modified and supplemented and in effect from time to time, the "CREDIT AGREEMENT", all capitalized terms used herein without definitions shall have the respective meanings ascribed to such terms in the Credit Agreement), at the request of the Borrower, the Indemnitees agreed to make loans (the "Term Loans") to the Borrower, which Term Loans are secured, in part, by those certain mortgages, dated as of the date hereof, by the Borrower to the Indemnitees encumbering the Real Property (as the same may be amended, modified, supplemented or restated and in effect from time to time, collectively, the "SECURITY INSTRUMENTS") ; WHEREAS, the Borrower has disclosed to the Indemnitees the existence of certain Environmental Conditions at the Real Property; and WHEREAS, the Indemnitees are unwilling to make the Term Loans unless the Indemnitors indemnify the Indemnitees against liabilities arising under Environmental Laws (as herein defined), relating to those disclosed and any undisclosed Environmental Conditions at the Real Property. NOW, THEREFORE, in consideration of the making of the Term Loans by the Indemnitees and the covenants, agreements, representations and warranties set forth in this Agreement and the Term Loan Agreement, the parties hereby covenant, agree, represent and warrant as follows: 1. Defined Terms. Unless the context otherwise requires, capitalized terms used but not otherwise defined herein shall have the meanings provided therefore in the Term Loan Agreement, and the following terms shall have the following meanings: "ENVIRONMENTAL CLAIM" means any notice, notification, claim, administrative, regulatory or judicial action, suit, judgment, demand, decree or other communication by any Person or Governmental Authority requiring, alleging or asserting liability with respect to the Indemnitors or the Real Property pursuant to Environmental Laws, whether for damages, contribution, indemnification, cost recovery, compensation, injunctive relief, investigatory, assessment, monitoring, response, remedial or cleanup costs, damages to natural resources, real property damage, personal injuries, fines or penalties arising out of, based on or resulting from or related to (a) the presence or alleged presence, Use, Release or threatened Release of any Hazardous Substances originating, at or from, migrating to or from or otherwise affecting, the Real Property or any part thereof, (b) any fact, circumstance, condition or occurrence forming the basis of any violation, or alleged violation, of any Environmental Law by the Indemnitors, the Real Property or any part thereof, or (c) any alleged injury or threat of injury to health, safety or the environment by the Indemnitors or relating the Real Property or any part thereof. "ENVIRONMENTAL CONDITIONS" means any environmental condition (a) constituting or which with the passage of time or lack of Remediation would or would likely constitute a violation of Environmental Laws, including but not limited to the presence of any Hazardous Substances requiring reporting and/or the performance of response actions under Massachusetts General Laws Chapter 21E, or (b) that requires reporting, investigation, assessment, monitoring, remediation or other response actions or would allow any Governmental Authority to record a lien or encumbrance in the land records with respect to the Real Property or an Environmental Claim. Submission to the Massachusetts Department of Environmental Protection of a Class A or B Response Action Outcome Statement by a Licensed Site Professional (as defined in Mass. Gen. L. ch. 21E, ss.2) pursuant to, and in compliance with, the Massachusetts Contingency Plan (310 CMR 40.0000) shall be deemed confirmation that any Environmental Condition(s) addressed in such Response Action Outcome Statement no longer exists. "ENVIRONMENTAL LAWS" means any judgment, decree, order, law, license, rule, permit or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any other state, local, foreign or common law, statute, regulation, ordinance, order, decree or any other binding requirement of any Governmental Authority relating to health, safety or the environment. "FORECLOSURE DATE" has the meaning provided in Section 2(e) hereof. "HAZARDOUS SUBSTANCE" means any hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) and any toxic substances, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws "KNOWN ENVIRONMENTAL CONDITIONS" has the meaning provided in Section 2(d) hereof. "LOSSES" has the meaning provided in Section 2(a) hereof. "PERSON" means any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, or any other entity, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. "RELEASE" means any past or present release, spill, emission, leaking, pumping, injecting, pouring, emptying, escaping, dumping, deposit, disposal, discharge, dispersal, leaching, migration into the indoor or outdoor environment of Hazardous Substances, including, without limitation, the movement of Hazardous Substances through ambient air, soil, surface water, sediments, ground water, wetlands, land or subsurface strata. "REMEDIATION" The investigation, assessment, monitoring, removal, abatement, treatment, risk assessment, institutional controls, deed restrictions and/or activity and use limitations, containment, payment of compliance or oversight fees, and all other activities required under Environmental Laws to respond to an Environmental Condition. "USE" means, with respect to any Hazardous Substance, the generation, manufacture, processing, distribution, handling, use, treatment, recycling or storage of such Hazardous Substances or transportation to or from the Real Property by any Person of such Hazardous Substances. 2. Indemnification. (a) The Indemnitors agree to indemnify, reimburse, defend (with counsel reasonably satisfactory to Indemnitees), and hold harmless the Indemnitees from and against all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, interest, reasonable costs and expenses, including, without limitation, interest, penalties, reasonable attorneys' fees, reasonable disbursements and expenses, diminution in the value of the Real Property (subject to subsection (e) below) and reasonable consultants' and expert witness fees, disbursements, fines, penalties, fees and expenses, including costs of reporting, investigation, assessment, monitoring, remediation or other response actions (collectively, the "LOSSES"), asserted against, resulting to, imposed on, or incurred by Indemnitees directly or indirectly in connection with any of the following: (i) any events, circumstances, or conditions which relate to, form or are alleged to form the basis for an Environmental Claim; (ii) the presence, Use, Release, or threatened Release of Hazardous Substances at, on, in, under, from or otherwise affecting the Real Property; (iii) any violation or alleged violation of Environmental Laws by the Indemnitors or with respect to the Real Property, or any act or omission causing an Environmental Condition; (iv) the material breach of any representation, warranty or covenant set forth in Sections 6.19, 7.5.6, 7.15.4, 8.9, and 16 of the Term Loan Agreement relating to Environmental Claims; or (v) any reasonable costs and expenses, including reasonable attorneys' fees and disbursements incurred by any Indemnitee in (x) exercising any right, power or remedy conferred by this Agreement, or (y) enforcing the Indemnitors' obligations pursuant hereto. (b) The indemnity provided in this Agreement is not intended to be and shall not be included in any exculpation of the Indemnitors from personal liability provided in the Term Loan Agreement or in any of the other Loan Documents. Nothing in this Agreement shall be deemed to deprive the Indemnitees of any rights or remedies provided to the Indemnitees elsewhere in this Agreement or in the Loan Documents or otherwise available to them under law or at equity. (c) The Indemnitors waive and release the Indemnitees from any rights or defenses the Indemnitors may have under common law or Environmental Laws for any liability arising from or resulting from the presence, Use or Release of Hazardous Substances, except with respect to an Indemnitee to the extent directly and solely caused by that Indemnitee's gross negligence, criminal acts, fraud or willful misconduct. (d) Indemnitors acknowledge that Environmental Conditions have been identified at or with respect to certain Real Properties as set forth on the Environmental Report (collectively, the "KNOWN ENVIRONMENTAL CONDITIONS"). In addition to and without limiting any of the Indemnitors' obligations hereunder, Indemnitors shall undertake a Remediation of the Known Environmental Conditions to the extent required by Environmental Laws. Submission to the Massachusetts Department of Environmental Protection of a Class A or B Response Action Outcome Statement by a Licensed Site Professional (as defined in Mass. Gen. L. ch. 21E, ss.2) pursuant to, and in compliance with, the Massachusetts Contingency Plan (310 CMR 40.0000) shall be deemed confirmation that any Environmental Condition(s) addressed in such Response Action Outcome Statement no longer exists for the purposes of this Section 2(d). (e) With respect to any Losses which are attributable to a diminution in value of the Real Property, such Losses shall: (i) be calculated based upon the value of the Real Property determined as of the date of foreclosure of the applicable Security Instrument, exercise of power of sale under the Security Instrument, or conveyance in lieu thereof (such date, the "Foreclosure Date"), and (ii) in no event be greater than the excess, if any, of (x) the amount of the unpaid principal balance of the Term Loans, together with unpaid interest thereon (including interest accruing at the Default Rate), fees and prepayment premiums (if any), and all other costs, amounts, fees and expenses (including reasonable attorney's fees) due and owing under the Loan Documents on the Foreclosure Date, over (y) the value of the Real Property on the Foreclosure Date; provided, that if an Environmental Claim or Release is not existing or known on the Foreclosure Date (but only comes into existence and/or becomes known thereafter), then the value of the Real Property on the Foreclosure Date shall be deemed to have not been affected by such Environmental Claim or Release. 3. Payment. All payments due to the Indemnitees under this Agreement shall be payable to the Indemnitees within ten (10) days after written demand therefor, and shall bear interest at the Default Rate from the date such payment is due until the date of payment. 4. Governing Law. The parties agree that this Agreement is a contract under the laws of the Commonwealth of Massachusetts (excluding the laws applicable to conflicts of law or choice of law) and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts and any applicable law of the United States of America. 5. Court Proceeding. Any legal suit, action or proceeding against the Indemnitees or Indemnitors arising out of or relating to this Agreement shall be instituted in any federal or state court in the Commonwealth of Massachusetts, and the Indemnitors waive any objection which they may now or hereafter have to the laying of venue of any such suit, action or proceeding, and the Indemnitors hereby irrevocably submit to the jurisdiction of any such court in any suit, action or proceeding. 6. Modification, Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement or consent to any departure by the Indemnitors therefrom, shall be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to or demand on the Indemnitors shall entitle the Indenmitors to any other or future notice or demand in the same, similar or other circumstances. 7. Delay Not a Waiver. Neither any failure nor any delay on the part of the Indemnitees to enforce the demand or strict performance of any term, condition, covenant or agreement or exercise any right, power, remedy or privilege hereunder, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Indemnitees shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, or to declare a default for failure to effect prompt payment of any such other amount. 8. Notices. All notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) hand delivery, with proof of attempted delivery, (b) certified or registered United States mail, postage prepaid, (c) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or (d) by telecopier (with answerback acknowledged) provided that such telecopied notice must also be delivered by one of the means set forth in (a), (b) or (c) above, addressed If to Indemnitees: GB Merchant Partners, LLC, as Administrative Agent 101 Huntington Avenue Boston, MA 02109 Attn: D. Michael Murray Telecopy No.: (617) 210-7141 If to Indenmitors: Quaker Fabric Corporation of Fall River 941 Grinnell Street Fall River, MA 02721 Attn: Chief Financial Officer Telecopy No.: (508) 678-2656 or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section 8. A notice shall be deemed to have been given: (i) in the case of hand delivery, at the time of delivery; (ii) in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; (iii) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day; or (iv) in the case of telecopier, upon receipt of answerback confirmation, provided that such telecopied notice was also delivered as required in this Section 8. A party receiving a notice who does not comply with the technical requirements for notice under this Section 8 may elect to waive any deficiencies and treat the notice as having been properly given. 9. Trial by Jury. EACH OF THE INDEMNITORS AND THE INDEMNITEES, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED IN CONNECTION HEREWITH AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT A JURY. 10. Heading. The Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. 11. Assignment. The Indemnitees shall have the right to assign this Agreement and the obligations hereunder to any Person who is from time to time the holder of the Term Loans, but not otherwise. All references to "Indemnitees" hereunder shall be deemed to include the successors and assigns of the Indemnitees, including any trustee or servicer. 12. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 13. Heading and Recitals. The information set forth in the recitals hereof are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof. 14. Estoppel Certificates. Indemnitors and Indemnitees each hereby agree at any time, but not more than one time each calendar year (unless a Default or Event of Default exists or is continuing, in which case, as required by the Administrative Agent in its sole discretion), and upon not less than thirty (30) days prior written notice by Indemnitor or Indemnitees to execute, acknowledge and deliver to the party specified in such notice, a statement, in writing, certifying that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same, as modified, is in full force and effect and stating the modifications hereto), and stating whether or not, to the best knowledge of such certifying party, there exists any matter giving rise to a claim under Section 2, and, if so, specifying each such matter. 15. Waiver. Indemnitors hereby waive each of the following, to the fullest extent allowed by applicable law: (a) laches as a defense to any action brought by any Indemnitee against the Indemnitors; (b) any defense based upon: (i) the unenforceability or invalidity of all or any part of any security or other indemnity for the obligations of the Indemnitors hereunder or the lack of any perfection or failure of priority of any security for the obligations of the Indemnitors hereunder; or (ii) any act or omission of Indemnitor or any other Person that directly or indirectly results in the discharge or release of the Indemnitors or any other Person or any security for the obligations of the Indemnitors hereunder, other than the gross negligence, willful misconduct, criminal acts or fraud of the Indemnitees, any deed of trust trustee or any other Indemnitee; or (iii) any disability or any other defense of any Person with respect to its obligations hereunder, whether consensual or arising by operation of law or any bankruptcy, insolvency or debtor-relief proceeding, or from any similar cause; (c) any right (whether now or hereafter existing) to require any Indemnitee, as a condition to the enforcement of this Agreement, to proceed against any other indemnitor, guarantor or any other Person, or to proceed against or exhaust any security for the obligations of the Indemnitors hereunder; (d) all suretyship defenses and rights of every nature otherwise available under any requirement of law; (e) all defenses arising as a result of the exercise of nonjudicial or judicial remedies against the Indemnitors, or any other Person, or any security for the obligations of the Indemnitors hereunder, or arising out of any impairment of the Indemnitors' or any other Person's right of subrogation, reimbursement or contribution against the Indemnitors or any other Person, or any security for the obligations of the Indemnitors hereunder that may arise from the exercise of any such remedies; (f) without limiting the generality of the foregoing or any other provision hereof, any and all benefits under any requirement of Law, except any rights of subrogation which the Indemnitors may have, provided that the indemnity provided for hereunder shall neither be contingent upon the existence of any such rights of subrogation or subject to any claims or defenses whatsoever which may be asserted in connection with the enforcement or attempted enforcement of such subrogation rights including, without limitation, any claims that such subrogation rights were abrogated by any acts of any Indemnitee, provided that the Indemnitors agree to postpone any subrogation rights with respect to any Collateral securing the Term Loans until the Term Loans shall have been paid in full. 16. Survival. The indemnity provided in this Agreement shall survive the repayment in full of the Obligations, or transfer of title to any of the Real Property to the Indemnitees or other transferee (to the extent such transferee is not an Affiliate of Indemnitors), in foreclosure or otherwise. Notwithstanding anything contained herein or in any of the other Loan Documents to the contrary, the Indemnitors will not be liable under this Agreement for any Environmental Claims which give rise to liability under Section 2(a) where such event first occurs following the effective date of a transfer of title of any parcel of Real Property to the Indemnitees or other transferee (to the extent such transferee is not an Affiliate of Indemnitors), in foreclosure or otherwise. 17. Time of the Essence. Time is of the essence with respect to each and every covenant, agreement and obligation of the Indemnitors under this Agreement. 18. Liability. (a) The liability of the Indemnitors under this Agreement shall in no way be limited or impaired by (i) any amendment, modification, or restatement of or supplement to the Loan Documents, (ii) any extensions of time for or acceleration or alteration of payment or performance required by any of the Loan Documents or any waiver of such payment or performance, or (iii) the release or substitution in whole or in part, of any security for the Obligations; and in any of such cases, whether with or without notice to the Indemnitors and with or without consideration. (b) The obligations of the Indemnitors hereunder are independent of the obligations of any other Person, including any other indemnitor, and any Indemnitee may enforce any of its rights hereunder independently of any other right or remedy it or any other Indemnitee may at any time hold with respect to the obligations indemnified against hereby or any other security or other indemnity for such obligations. The obligations of the Indemnitors set forth herein constitute the full recourse obligations of the Indemnitors enforceable against the Indemnitors to the full extent of all its assets and properties, notwithstanding any provisions in the Loan Documents to the contrary. 19. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. [SIGNATURES ON THE FOLLOWING PAGE] IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written. INDEMNITORS: QUAKER FABRIC CORPORATION OF FALL RIVER QUAKER FABRIC CORPORATION QUAKER TEXTILE CORPORATION QUAKER FABRIC MEXICO, S.A. DE C.V. By: /s/ Paul J. Kelly --------------------------------------- Name: Paul J. Kelly Title: Vice President Finance ON BEHALF OF THE INDEMNITEES: GB MERCHANT PARTNERS, LLC, As Administrative Agent By: --------------------------------------- Name: Title: EXHIBIT A SCHEDULE OF REAL PROPERTIES 1. 941 Grinnell Street, Fall River, MA 2. 1092 Davol Street, Fall River, MA 3. 81 Ferry Street, Fall River, MA 4. 1450 Brayton Ave, Fall River, MA 5. 387 Quarry Street, Fall River, MA 6. Godfrey Road, Verona, MS 7. 994 Jefferson Street (Bleachery Pond), Fall River, MA 8. 81 Commerce Drive, Fall River, MA EX-10.44 11 a5274680ex1044.txt EXHIBIT 10.44 EXHIBIT 10.44 INTERCREDITOR AGREEMENT INTERCREDITOR AGREEMENT (this "INTERCREDITOR AGREEMENT"), dated as of November 9, 2006, among Bank of America, N.A., in its capacity as administrative agent (the "REVOLVING AGENT") for the Revolving Lenders (as hereinafter defined), GB Merchant Partners, LLC, in its capacity as agent (the "TERM LOAN AGENT") for the Term Loan Lenders (as hereinafter defined), Quaker Fabric Corporation of Fall River (the "BORROWER"), Quaker Fabric Corporation (the "PARENT") and the other credit parties named on the signature pages of this Intercreditor Agreement (together with the Borrower and the Parent, the "CREDIT PARTIES"). WHEREAS, pursuant to an Amended and Restated Revolving Credit Agreement dated as of the date hereof (as amended and in effect from time to time, including any replacement agreement or agreements therefor, the "REVOLVING CREDIT AGREEMENT"), among the lending institutions party thereto (the "REVOLVING LENDERS"), the Revolving Agent, the Borrower and the Parent, the Revolving Lenders have agreed, upon the terms and subject to the conditions contained therein, to make loans and otherwise to extend credit to the Borrower; and WHEREAS, pursuant to a Term Loan Agreement, dated as of the date hereof (as amended and in effect from time to time, including any replacement agreement or agreements therefor, the "TERM LOAN AGREEMENT"), among the Borrower, the Parent, the Term Loan Agent and the lending institutions party thereto (the "TERM LOAN LENDERS"), the Term Loan Lenders have agreed, upon the terms and subject to the conditions contained therein, to make term loans in the aggregate amount of $24,600,000 to the Borrower; and WHEREAS, it is a condition precedent to the Revolving Lenders' willingness to make loans and otherwise extend credit to the Borrower pursuant to the Revolving Credit Agreement and the Term Loan Lenders' willingness to make term loans to the Borrower pursuant to the Term Loan Agreement that the Credit Parties, the Revolving Agent and the Term Loan Agent enter into this Intercreditor Agreement; and WHEREAS, in order to induce the Revolving Lenders to make loans and otherwise extend credit to the Borrower pursuant to the Revolving Credit Agreement and the Term Loan Lenders to make the term loans to the Borrower pursuant to the Term Loan Agreement, the Credit Parties, the Revolving Agent and the Term Loan Agent have agreed to enter into this Intercreditor Agreement; NOW, THEREFORE, in consideration of the foregoing, the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. DEFINITIONS. Terms not otherwise defined herein have the same respective meanings given to them in the Revolving Credit Agreement. In addition, the following terms shall have the following meanings: AGREEMENTS. Collectively, the Revolving Credit Agreement and the Term Loan Agreement. BANK DEBT. At any time, as reasonably calculated by the Revolving Agent at such time, all "Obligations" under and as defined in the Revolving Credit Agreement at such time. Bank Debt shall expressly include any and all interest accruing or out of pocket costs or expenses incurred after the date of any filing by or against any Credit Party of any petition under any Insolvency Law, regardless of whether the Revolving Agent's or any Revolving Lender's claim therefor is allowed or allowable in the Insolvency Proceeding. BANK LOAN TERMINATION DATE. The first date on which (a) the Revolving Lenders have received payment in full in cash of all of the Priority Bank Debt, (b) the Revolving Agent or the Revolving Lenders shall have received cash collateral (or, in connection with Letters of Credit, "back-to-back" Letters of Credit from a financial institution acceptable to Revolving Agent) in such amounts as the Revolving Agent determines is reasonably necessary to secure the Revolving Lenders (and their affiliates) in connection with (i) any issued and outstanding Letters of Credit constituting Priority Bank Debt but not in any event in an amount greater than 103% of the aggregate undrawn face amount of such Letters of Credit (or such Letters of Credit shall have been returned to the Issuing Bank for cancellation) and (ii) Derivative Agreements but not in any event in an amount greater than 100% of the applicable Credit Party's obligations to the Revolving Agent and the Revolving Lenders (and their affiliates) under such Derivative Agreements, and (c) the commitment of the Revolving Lenders to make any loans or provide other financial accommodations to the Borrower shall have been terminated. COLLATERAL. All assets and properties of any kind whatsoever of any Credit Party that is at any time subject to a lien in favor of the Revolving Agent or the Term Loan Agent. EXCLUDED BANK DEBT. At any time, (i) the aggregate outstanding principal amount of Revolving Loans and the aggregate undrawn face amount of Letters of Credit made, issued or incurred pursuant to the Loan Documents intentionally and with actual knowledge of the account officers of Revolving Agent active on the account of the Credit Parties that such making, issuance or incurrence would cause such amount of Revolving Loans and Letters of Credit to exceed the Maximum Bank Debt at the time of such making, issuance or incurrence at such time and (ii) any prepayment or early termination fee set forth in the Revolving Credit Agreement; PROVIDED THAT, Excluded Bank Debt shall not include any interest, costs, fees, expenses, or indemnities incurred by or owed to the Revolving Agent or the Revolving Lenders pursuant to the Loan Documents which are charged to a Credit Party's loan account through the advance of a Revolving Loan. EXCLUDED TERM LOAN DEBT. At any time, (i) the aggregate outstanding principal amount of indebtedness under the Term Loan Documents in excess of the result of $24,600,000 MINUS all repayments and prepayments of the principal thereof as of such date and (ii) any prepayment or early termination fee set forth in the Term Loan Agreement; PROVIDED THAT, Excluded Term Loan Debt shall not include (a) any interest, costs, fees, expenses, or indemnities incurred by or owed to the Term Loan Agent or the Term Loan Lenders pursuant to the Loan Documents and (b) any amounts not to exceed $2,500,000 in the aggregate at any time advanced by the Term Loan Agent, in its reasonable business judgment in the performance of its duties under the Term Loan Agreement, which the Term Loan Agent determines to be reasonably necessary to (1) preserve or protect the Term Loan Primary Collateral, or any portion thereof, or (2) enhance the likelihood of, or to maximize the amount of, repayment of the Term Loan Debt. INSOLVENCY LAWS. (i) The U.S. Bankruptcy Code, (ii) any successor to such statute, (iii) any statute dealing with the reorganization or liquidation of debtors, and (iv) any other applicable insolvency or other similar law of any jurisdiction including, without limitation, any law of any jurisdiction permitting a debtor to obtain a stay or a compromise of the claims of its creditors against it. INSOLVENCY PROCEEDING. (a) Any case or proceeding commenced by or against any Person under any provision of any Insolvency Laws, or (b) any proceeding seeking the appointment of any trustee, receiver, liquidator, custodian or other insolvency official with similar powers with respect to such Person or any of its assets, or (c) any proceeding for liquidation, dissolution or other winding up of the business of such Person, or (d) any assignment for the benefit of creditors or any marshalling of assets of such Person. -2- LIEN ENFORCEMENT ACTION. (a) Any action by Revolving Agent or any Revolving Lender or the Term Loan Agent or any Term Loan Lender to foreclose on the lien of such Person in any Collateral, (b) any action, as part of an exercise of rights or remedies, by either Revolving Agent or any Revolving Lender or the Term Loan Agent or any Term Loan Lender to take possession of, exercise exclusive or partial control over, sell or otherwise realize (judicially or non-judicially) upon any Collateral (including, without limitation, by setoff or notification of account debtors or other Persons obligated on Collateral), and/or (c) the commencement by Revolving Agent or any Revolving Lender or the Term Loan Agent or any Term Loan Lender of any legal proceedings against any Credit Party or with respect to any Collateral to facilitate the actions described in (a) and (b) above; PROVIDED that, for the avoidance of doubt but without limitation, none of the following shall constitute a Lien Enforcement Action: (i) declaring a default or event of default under the Revolving Credit Agreement or the Term Loan Agreement, or making demand for payment or accelerating the maturity of any Bank Debt or Term Loan Debt, (ii) the receipt of payments of principal of or interest on the Bank Debt or the Term Loan Debt, or payments of other obligations arising under the Loan Documents or the Term Loan Documents, except as otherwise expressly set forth in this Intercreditor Agreement, (iii) the implementation of reserves under the Revolving Credit Agreement, (iv) the reduction of advance rates under the Revolving Credit Agreement, (v) the termination of the Commitments or the cessation (whether temporary or permanent) of lending under the Revolving Credit Agreement due to the existence of a Default or Event of Default, (vi) sending by the Revolving Agent, any Revolving Lender or any of their Affiliates of any "activation" notice under a deposit control agreement to block access to any deposit account of a Credit Party, or (vii) the exercise by Revolving Agent, any Revolving Lender or any of their respective Affiliates of any right of offset with respect to Bank Debt not arising under the Revolving Credit Agreement. MAXIMUM REVOLVING CREDIT AMOUNT. On any date of determination thereof, an amount equal to the sum of (a) the lesser of (i) the Revolving Borrowing Base Amount at such time and (ii) $25,000,000 less permanent reductions in the Total Commitment under the Revolving Credit Agreement (other than in connection with a refinancing in total of the Bank Debt and other than a reduction or termination occurring after an Event of Default), PLUS (b) $2,500,000. MAXIMUM BANK DEBT. On any date of determination thereof, an amount equal to the Maximum Revolving Credit Amount on such date, regardless of whether allowed or allowable in any Insolvency Proceeding; PROVIDED, HOWEVER, that the Maximum Bank Debt shall be calculated without giving effect to any decreases in the Maximum Revolving Credit Amount occurring after the making, issuance or incurrence of any Revolving Loans or Letters of Credit, as a result of (i) Accounts Receivable or inventory that are deemed by the Revolving Agent to be eligible on any date thereafter becoming or being deemed, with the passage of time, ineligible (whether as a result of aging, obsolescence, disputes, or non-payment by account debtors or otherwise), the return of uncollected checks or other items of payment applied to the reduction of Revolving Loans, or other similar involuntary or unintentional actions; (ii) the Revolving Agents exercising discretion under the Revolving Credit Agreement to (x) declare Accounts Receivable previously deemed to be Eligible Accounts Receivable or inventory previously deemed to be Eligible Inventory as no longer constituting Eligible Accounts Receivable or Eligible Inventory, (y) reduce advance rates or (z) impose, release, increase or decrease the amount of reserves (except as otherwise expressly set forth in this Intercreditor Agreement); (iii) any failure of the Credit Parties to report accurately the amount of Eligible Accounts Receivable or Eligible Inventory on any Borrowing Base Certificate; or (iv) any revaluations or re-appraisals of Collateral. -3- OCCUPANCY COMMENCEMENT DATE. The earlier to occur of (a) the Term Loan Agent's commencement of any Lien Enforcement Action or (b) the commencement of an Insolvency Proceeding. PRIORITY BANK DEBT. All Bank Debt other than Excluded Bank Debt. PRIORITY TERM LOAN DEBT. All Term Loan Debt other than Excluded Term Loan Debt. REVOLVING BORROWING BASE AMOUNT. At any time, an amount equal to the Borrowing Base (as defined in the Revolving Credit Agreement and as determined by the Revolving Agent from time to time); PROVIDED that the Borrowing Base shall be calculated without giving effect to (a) any amendments or modifications to the definition of "Borrowing Base", or any of the component definitions thereof after the Closing Date, (b) any increase in the percentage advance rates under the Revolving Credit Agreement above the rates in effect on the Closing Date, or (c) any release in whole or in part of, or decrease in, the Availability Reserve after the Closing Date, in the case of (a), (b) and (c), in a manner which would result in a greater amount of credit being provided to the Borrower as an advance against the Borrowing Base as in effect on the Closing Date; PROVIDED, HOWEVER, the Revolving Credit Agent's discretion to reduce advance rates, establish and release reserves (other than the Availability Reserve) and to determine eligibility pursuant to the Revolving Credit Agreement shall not be limited. REVOLVING PRIMARY COLLATERAL. All the Collateral other than the Term Loan Primary Collateral. REVOLVING RELEASE EVENT. After the occurrence and during the continuance of an Event of Default, but prior to the commencement of an Insolvency Proceeding, the written request of the Revolving Agent delivered to the Term Loan Agent requesting that the Term Loan Agent release its lien on any Revolving Primary Collateral to be sold or otherwise disposed of, such written request to be delivered to the Term Loan Agent not less than five (5) days prior to the proposed sale or disposition of any Revolving Primary Collateral. TERM LOAN DEBT. At any time, as reasonably calculated by the Term Loan Agent at such time, all "Obligations" under and as defined in the Term Loan Agreement at such time. Term Loan Debt shall expressly include any and all interest accruing or out of pocket costs or expenses incurred after the date of any filing by or against any Credit Party of any petition under any Insolvency Law, regardless of whether the Term Loan Agent's or any Term Loan Lender's claim therefor is allowed or allowable in the Insolvency Proceeding. TERM LOAN DOCUMENTS. Collectively, the "Loan Documents" as such term is defined in the Term Loan Agreement. TERM LOAN EVENT OF DEFAULT. An "Event of Default" as such term is defined in the Term Loan Agreement. TERM LOAN PRIMARY COLLATERAL. All of the Real Estate, Equipment (as defined in the UCC) and Fixtures (as defined in the UCC) of the Credit Parties which is subject to a mortgage, lien or security interest pursuant to the Term Loan Documents, together with all identifiable proceeds of the foregoing. TERM LOAN RELEASE EVENT. After the occurrence and during the continuance of a Term Loan Event of Default, but prior to the commencement of an Insolvency Proceeding, the written request of the Term Loan Agent delivered to the Revolving Agent requesting that the Revolving Agent release its lien on any Term Loan Primary Collateral to be sold or otherwise disposed of, such written request to be delivered to the Revolving Agent not less than five (5) days prior to the proposed sale or disposition of any Term Loan Primary Collateral. -4- TERM LOAN TERMINATION DATE. The first date on which the erm Loan Lenders have received payment in full in cash of all of the Priority Term Loan Debt. UCC. The Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the Commonwealth of Massachusetts; PROVIDED, that to the extent that the UCC is used to define any term herein and such term is defined differently in different Articles or Divisions of the UCC, the definition of such term contained in Article or Division 9 shall govern. 2. SECURITY INTERESTS; PRIORITIES. 2.1. ACKNOWLEDGEMENT OF LIENS. Subject to the provisions of this Intercreditor Agreement, the Revolving Agent hereby acknowledges that the Term Loan Agent has been granted Liens upon all of the Collateral pursuant to the Term Loan Documents to secure the Term Loan Debt and further acknowledges and agrees that the Term Loan Debt is entitled to be secured on a first priority basis by the Term Loan Primary Collateral. Subject to the provisions of this Intercreditor Agreement, the Term Loan Agent hereby acknowledges that the Revolving Agent has been granted Liens upon all of the Collateral pursuant to the Loan Documents to secure the Bank Debt, and further acknowledges and agrees that the Bank Debt is entitled to be secured on a first priority basis in all the Revolving Primary Collateral. 2.2. PRIORITIES. (a) The parties agree that, at all times, whether before during or after any Insolvency Proceeding, liens on the Revolving Primary Collateral securing the Priority Bank Debt shall be senior to the liens on the Revolving Primary Collateral securing the Term Loan Debt irrespective of the time or manner of perfection or the execution, delivery or issuance of any thereof. (b) The parties agree that, at all times, whether before during or after any Insolvency Proceeding, liens on the Term Loan Primary Collateral securing the Priority Term Loan Debt shall be senior to the liens on the Term Loan Primary Collateral securing the Bank Debt irrespective of the time or manner of perfection or the execution, delivery or issuance of any thereof. 2.3. APPLICATION OF COLLATERAL PROCEEDS. (a) All proceeds of the Revolving Primary Collateral received or collected by any Credit Party, the Revolving Agent or the Term Loan Agent shall be applied: FIRST, to the payment of the Priority Bank Debt, including the provision of cash collateral in an amount equal to 103% of the undrawn amount of any Letters of Credit constituting Priority Bank Debt and in an amount equal to 100% of the obligations in respect of Cash Management Obligations constituting Priority Bank Debt, and to the payment of interest, costs, fees, expenses and indemnities constituting Priority Bank Debt; SECOND, after a Lien Enforcement Action, to the payment of the Priority Term Loan Debt, including the payment of interest, costs, fees, expenses and indemnities constituting Priority Term Loan Debt, in each case, to the extent due and payable; THIRD, to the payment of Excluded Bank Debt and, with respect to Excluded Bank Debt consisting of issued and outstanding Letters of Credit, the provision of cash collateral in respect of such Letters of Credit (in an amount not to exceed 103% of the aggregate undrawn face amount of such Letters of Credit); and FOURTH, after a Lien Enforcement Action, to the payment of Excluded Term Loan Debt. (b) All proceeds of the Term Loan Primary Collateral received or collected by any Credit Party, the Term Loan Agent or the Revolving Agent shall be applied: FIRST, to the payment of the Priority Term Loan Debt, and to the payment of interest, costs, fees, expenses and indemnities constituting Priority Term Loan Debt, in each case, to the extent then due and payable; SECOND, after a Lien Enforcement Action, to the payment of the Priority Bank Debt, including the payment of interest, costs, fees, expenses and indemnities constituting Priority Bank Debt, in each case, to the extent then due and payable; THIRD, to the payment of Excluded Term Loan Debt; and FOURTH, after a Lien Enforcement Action, to the payment of Excluded Bank Debt. -5- 2.4. FURTHER ASSURANCES. (a) The Term Loan Agent hereby agrees, upon request of the Revolving Agent at any time and from time to time, to execute such other documents or instruments as may be requested by the Revolving Agent further to evidence of public record or otherwise the senior priority of the liens on the Revolving Primary Collateral securing the Priority Bank Debt as contemplated hereby. (b) The Revolving Agent hereby agrees, upon request of the Term Loan Agent at any time and from time to time, to execute such other documents or instruments as may be requested by the Term Loan Agent further to evidence of public record or otherwise the senior priority of the liens on the Term Loan Primary Collateral securing the Priority Term Loan Debt as contemplated hereby. 2.5. BOOKS AND RECORDS. The Term Loan Agent and the Revolving Agent further agree to maintain on their respective books and records such notations as the Revolving Agent or the Term Loan Agent may reasonably request to reflect the lien subordination contemplated hereby and to perfect or preserve the rights of the Revolving Agent and the Term Loan Agent hereunder. 2.6. LIEN VALIDITY. The subordination provisions contained herein relate solely to the priority of liens granted to the Revolving Agent and the Term Loan Agent by the Credit Parties. It is the Revolving Agent's responsibility to ensure the validity, perfection and enforceability of the liens granted by the Credit Parties to the Revolving Agent for the benefit of itself and the Revolving Lenders. It is the Term Loan Agent's responsibility to ensure the validity, perfection and enforceability of the liens granted by the Credit Parties to the Term Loan Agent for the benefit of itself and the Term Loan Lenders. Except as expressly set forth herein, (a) neither the Revolving Agent nor any Revolving Lender shall have any duties to the Term Loan Agent or the Term Loan Lenders with respect to the Collateral and (b) neither the Term Loan Agent nor any Term Loan Lender shall have any duties to the Revolving Agent or the Revolving Lenders with respect to the Collateral. The Term Loan Agent and the Term Loan Lenders agree that they will not contest the validity, perfection, priority or enforceability of the claims of the Revolving Agent and the Revolving Lenders with respect to the Priority Bank Debt or the liens upon the Collateral in favor of the Revolving Agent. The Revolving Agent and the Revolving Lenders agree that they will not contest the validity, perfection, priority or enforceability of the claims of the Term Loan Agent and the Term Loan Lenders with respect to the Priority Term Loan Debt or the liens upon the Collateral in favor of the Term Loan Agent. 2.7. NOT DEBT SUBORDINATION. (a) Nothing in this Intercreditor Agreement shall be deemed to subordinate the right of Term Loan Lenders to receive payment from a source other than the Revolving Primary Collateral (whether before or after the occurrence of any default, event of default or Insolvency Proceeding), it being the intent of the parties hereto that, to the extent provided in this Intercreditor Agreement, the lien of the Term Loan Agent with respect to the Revolving Primary Collateral shall be junior to the lien of the Revolving Agent with respect to the Revolving Primary Collateral to the extent of the respective lien priorities provided for in this Intercreditor Agreement. -6- (b) Nothing in this Intercreditor Agreement shall be deemed to subordinate the right of Revolving Lenders to receive payment from a source other than the Term Loan Primary Collateral (whether before or after the occurrence of any default, event of default or Insolvency Proceeding), it being the intent of the parties hereto that, to the extent provided in this Intercreditor Agreement, the lien of the Revolving Agent with respect to the Term Loan Primary Collateral shall be junior to the lien of the Term Loan Agent with respect to the Term Loan Primary Collateral to the extent of the respective lien priorities provided for in this Intercreditor Agreement. 2.8. COLLATERAL RELEASE. (a) Following the occurrence of a Revolving Release Event, upon the request of the Revolving Agent with respect to the Revolving Primary Collateral identified in such request (which request shall specify the proposed terms of the proposed transfer, sale or other disposition and the type and amount of consideration to be received in connection therewith), the Term Loan Agent on behalf of the Term Loan Lenders shall: (i) release or otherwise terminate its liens on such Revolving Primary Collateral (to the same extent that the Revolving Agent shall release or terminate its liens on such Collateral), to the extent such Revolving Primary Collateral is to be sold or otherwise disposed of either by (i) the Revolving Agent or its agents, or (ii) any Credit Party with the consent of the requisite Revolving Lenders; (ii) deliver such release documents as the Revolving Agent may reasonably require in connection therewith; PROVIDED that if the closing of the sale or disposition of such Revolving Primary Collateral is not consummated within thirty (30) days of receipt by the Revolving Agent of such release documents from the Term Loan Agent, the Revolving Agent shall promptly return all release documents to the Term Loan Agent; and (iii) be deemed to have consented under the Term Loan Agreement to such sale or other disposition; PROVIDED that such deemed consent shall lapse in the event such sale or other disposition does not occur within thirty (30) days of receipt by the Revolving Agent of the relevant release documents from the Term Loan Agent. (b) The effectiveness of any such release, termination and/or consent by the Term Loan Agent under clause (a) above shall be subject to (i) the sale or other disposition of the Revolving Primary Collateral described in such request on the terms described in such request or on substantially similar terms and in a commercially reasonable manner, (ii) the application of all of the net proceeds of such sale or other disposition promptly by the Revolving Agent or the Term Loan Agent as specified in SECTION 2.3(A) hereof and Section 12.4 of the Revolving Credit Agreement (as in effect on the date hereof) to reduce the Priority Bank Debt, and (iii) the rights of the Term Loan Agent under SECTION 2.9(A). (c) Following the occurrence of a Term Loan Release Event, upon the request of the Term Loan Agent with respect to the Term Loan Primary Collateral identified in such request (which request shall specify the proposed terms of the proposed transfer, sale or other disposition and the type and amount of consideration to be received in connection therewith), the Revolving Agent on behalf of the Revolving Lenders shall: -7- (i) release or otherwise terminate its liens on such Term Loan Primary Collateral (to the same extent that the Term Loan Agent shall release or terminate its liens on such Collateral), to the extent such Term Loan Primary Collateral is to be sold or otherwise disposed of either by (i) the Term Loan Agent or its agents, or (ii) any Credit Party with the consent of the requisite Term Loan Lenders; (ii) deliver such release documents as the Term Loan Agent may reasonably require in connection therewith; PROVIDED that if the closing of the sale or disposition of such Term Loan Primary Collateral is not consummated within thirty (30) days of receipt by the Term Loan Agent of such release documents from the Revolving Agent, the Term Loan Agent shall promptly return all release documents to the Revolving Agent; and (iii) be deemed to have consented under the Revolving Credit Agreement to such sale or other disposition; PROVIDED that such deemed consent shall lapse in the event such sale or other disposition does not occur within thirty (30) days of receipt by the Term Loan Agent of the relevant release documents from the Revolving Agent. (d) The effectiveness of any such release, termination and/or consent by the Revolving Agent under clause (c) above shall be subject to (i) the sale or other disposition of the Term Loan Primary Collateral described in such request on the terms described in such request or on substantially similar terms and in a commercially reasonable manner, (ii) the application of all of the net proceeds of such sale or other disposition promptly by the Term Loan Agent or the Revolving Agent as specified in SECTION 2.3(B) hereof and Section 12.4 of the Term Loan Agreement (as in effect on the date hereof) to reduce the Priority Term Loan Debt and (iii) the rights of the Revolving Agent under SECTION 2.9(B). 2.9. CONSENT TO USE OF INTELLECTUAL PROPERTY; ACCESS TO AND USE OF TERM LOAN PRIMARY COLLATERAL. (a) If so requested at any time by the Term Loan Agent, the Revolving Agent shall deliver its written consent (given without any representation, warranty or obligations whatsoever) to any grant by any Credit Party to the Term Loan Agent of a non-exclusive royalty-free license to use any patent, trademark, copyright, proprietary information or other intellectual property (including, without limitation, proprietary and non-proprietary software included in, or used or useful in connection with, any equipment constituting Term Loan Collateral) of such Credit Party that constitutes Revolving Primary Collateral, in connection with the enforcement of any lien held by the Term Loan Agent on any equipment constituting Term Loan Primary Collateral and to the extent that the use of such patent, trademark, copyright or proprietary information is necessary or reasonably appropriate, in the good faith opinion of the Term Loan Agent, to operate, repair remove or sell any such equipment in a lawful manner. In the event that the Revolving Agent sells or otherwise disposes of any software that is necessary for the operation of any Term Loan Primary Collateral, absent the consent of the Term Loan Agent, the purchaser of such software shall expressly acknowledge in writing that its purchase is subject to the Term Loan Agent's rights (to the extent such rights remain in effect) and obligations under this SECTION 2.9(A). (b) The Term Loan Agent and the Credit Parties covenant, agree and confirm that the Revolving Agent and its representatives, designees and agents shall have full and complete access to, and a license to occupy and use, the Term Loan Primary Collateral, until that date which is 90 calendar days following the Occupancy Commencement Date, as necessary or reasonably appropriate (i) in connection with any Lien Enforcement Action and (ii) to protect, secure, store, maintain, assemble, manufacture and otherwise enforce the rights of the Credit Parties or the Revolving Agent in and to the Revolving Primary Collateral, in each case, subject to following terms and conditions: -8- (i) All physical damage (other than reasonable ordinary wear and tear) to the Term Loan Primary Collateral caused by the Revolving Agent or its representatives, designees or agents shall be promptly repaired to the condition comparable to that immediately prior to such damage being caused by the Revolving Agent or such representative, designee or agent by the Revolving Agent at its sole expense. To the extent that the Revolving Agent has not repaired such Term Loan Primary Collateral as provided in this CLAUSE (I), the Term Loan Agent may repair such damage to the condition comparable to that immediately prior to such damage being caused by the Revolving Agent or such representative, designee or agent, and Revolving Agent shall promptly reimburse the Term Loan Agent for the reasonable cost of the same upon delivery of documentation evidencing such expenses, such documentation to be in form, scope and substance reasonably satisfactory to the Revolving Agent and the Term Loan Agent. The Revolving Agent shall not have any liability to the Term Loan Agent or Term Loan Lenders as a result of any condition (including environmental condition, claim or liability) on or with respect to the Term Loan Primary Collateral or damage to any Term Loan Primary Collateral which existed prior to the Revolving Agent or its agents use of the Term Loan Primary Collateral and the Revolving Agent shall have no duty or liability to maintain the Term Loan Primary Collateral in a condition or manner better than that in which it was maintained prior to the use thereof by the Revolving Agent. (ii) In the event that the Term Loan Agent sells or otherwise disposes of all or any portion of the Term Loan Primary Collateral prior to the expiration of the 90 calendar day period described above, absent the consent of the Revolving Agent, any purchaser of such Term Loan Primary Collateral shall expressly acknowledge in writing that its purchase is subject to the Revolving Agent's rights (to the extent such rights remain in effect) and obligations under this SECTION 2.9(B). (c) The Term Loan Agent hereby agrees not to interfere with the right of the Revolving Agent under Section 7.15 of the Credit Agreement to visit and inspect the properties of the Credit Parties and to conduct examinations and verifications of all the Collateral. (d) The Revolving Agent hereby agrees not to interfere with the right of the Term Loan Agent under Section 7.15 of the Term Loan Agreement to visit and inspect the properties of the Credit Parties and to conduct examinations and verifications of all the Collateral. (e) Notwithstanding the inclusion of software and intellectual property assets in the Revolving Primary Collateral, in the event that the Term Loan Agent sells any Term Loan Primary Collateral containing any embedded software constituting Revolving Primary Collateral, (i) the Term Loan Agent may, notwithstanding anything contained herein to the contrary, sell such software and intellectual property assets and the Revolving Agent shall release its liens on such Collateral pursuant to the provisions of SECTION 2.8(C) and (ii) the proceeds thereof shall be applied pursuant to SECTION 2.3(B). (f) Each of the Credit Parties hereby agrees and acknowledges the terms of this SECTION 2.9. -9- 3. OBLIGATIONS OF THE CREDIT PARTIES; REMEDY STANDSTILL. 3.1. OBLIGATIONS. (a) Nothing contained herein shall impair as between the Credit Parties and the Term Loan Lenders, the obligation of the Credit Parties to pay to the Term Loan Lenders all amounts payable in respect of the Term Loan Debt as and when the same shall become due and payable in accordance with the terms of the Term Loan Agreement, subject to the rights of the Revolving Agent and the Revolving Lenders hereunder. Nothing in this Intercreditor Agreement shall have any effect on the right of the Term Loan Agent, for the benefit of the Term Loan Lenders, to accelerate the maturity date of the Term Loan Debt pursuant to the terms of the Term Loan Agreement or, except as expressly set forth in SECTION 3.2, to exercise all other rights, powers and remedies otherwise permitted by applicable law or under the Term Loan Documents or this Intercreditor Agreement. Any Lien Enforcement Action taken by the Term Loan Lenders will be done in accordance with the provisions of this Intercreditor Agreement. (b) Nothing contained herein shall impair as between the Credit Parties and the Revolving Lenders, the obligation of the Credit Parties to pay to the Revolving Lenders all amounts payable in respect of the Bank Debt as and when the same shall become due and payable in accordance with the terms of the Revolving Credit Agreement, subject to the rights of the Term Loan Agent and the Term Loan Lenders hereunder. Nothing in this Intercreditor Agreement shall have any effect on the right of the Revolving Agent, for the benefit of the Revolving Lenders, to accelerate the maturity date of the Bank Debt pursuant to the terms of the Revolving Credit Agreement or, except as expressly set forth in SECTION 3.2, to exercise all other rights, powers and remedies otherwise permitted by applicable law or under the Loan Documents or this Intercreditor Agreement. Any Lien Enforcement Action taken by the Revolving Lenders will be done in accordance with the provisions of this Intercreditor Agreement. 3.2. REMEDY STANDSTILL. (a) Until the Bank Loan Termination Date, the Term Loan Agent may not exercise any remedy (including any Lien Enforcement Action) against Revolving Primary Collateral in respect of the Term Loan Debt or notify account debtors or other Persons obligated on Revolving Primary Collateral of the assignment of any Credit Party's Accounts Receivable to the Revolving Agent and the Term Loan Agent. After the Bank Loan Termination Date, the Term Loan Agent may exercise any remedy against Revolving Primary Collateral in respect of the Term Loan Debt. (b) Until the Term Loan Termination Date, the Revolving Agent may not exercise any remedy (including any Lien Enforcement Action) against Term Loan Primary Collateral in respect of the Bank Debt. After the Term Loan Termination Date, the Revolving Agent may exercise any remedy against Term Loan Primary Collateral in respect of the Bank Debt. 4. COLLATERAL. 4.1. PAYMENTS HELD IN TRUST. (a) Until the Bank Loan Termination Date, the Term Loan Agent will hold in trust and immediately pay over to the Revolving Agent for the account of the Revolving Lenders and the Revolving Agent and for application in accordance with SECTION 2.3(A) hereof, in the same form of payment received, with appropriate endorsements, any amounts that the Term Loan Agent or the Term Loan Lenders receive constituting proceeds of Revolving Primary Collateral that the Term Loan Lenders are not then entitled to apply to the Term Loan Debt pursuant to the provisions hereof; PROVIDED that the Revolving Agent will hold in trust and immediately pay over to the Term Loan Agent, for the account of the Term Loan Lenders and the Term Loan Agent, any proceeds in excess of the Priority Bank Debt to be applied to the Priority Term Loan Debt. No payments or distributions to the Revolving Agent or the Revolving Lenders of any cash, property or securities to which the Term Loan Lenders would be entitled except for the provisions of this Intercreditor Agreement, and no payment over to the Revolving Agent or the Revolving Lenders pursuant to this Intercreditor Agreement by the Term Loan Agent as between any Credit Party, its creditors (other than the Revolving Agent and the Revolving Lenders) and the Term Loan Agent, shall be deemed to be a payment by the Credit Parties to or on account of the Term Loan Debt. -10- (b) Until the Term Loan Termination Date, the Revolving Agent will hold in trust and immediately pay over to the Term Loan Agent for the account of the Term Loan Lenders and the Term Loan Agent and for application in accordance with SECTION 2.3(B) hereof, in the same form of payment received, with appropriate endorsements, any amounts that the Revolving Agent or the Revolving Lenders receive constituting proceeds of Term Loan Primary Collateral that the Revolving Lenders are not then entitled to apply to the Bank Debt pursuant to the provisions hereof; PROVIDED that the Term Loan Agent will hold in trust and immediately pay over to the Revolving Agent, for the account of the Revolving Lenders and the Revolving Agent, any proceeds in excess of the Priority Term Loan Debt to be applied to the Priority Bank Debt. No payments or distributions to the Term Loan Agent or the Term Loan Lenders of any cash, property or securities to which the Revolving Lenders would be entitled except for the provisions of this Intercreditor Agreement, and no payment over to the Term Loan Agent or the Term Loan Lenders pursuant to this Intercreditor Agreement by the Revolving Agent as between any Credit Party, its creditors (other than the Term Loan Agent and the Term Loan Lenders) and the Revolving Agent, shall be deemed to be a payment by the Credit Parties to or on account of the Bank Debt. 4.2. APPOINTMENT OF REVOLVING AGENT AS AGENT. The Term Loan Agent hereby appoints the Revolving Agent as its agent to perfect by possession or control its lien in any of the Collateral (a) which lien is capable of being perfected by possession or control and (b) that is, at any time, delivered to and in the possession, or is under the control of the Revolving Agent, subject always to the rights of the Revolving Agent as prior lien holder. The Revolving Agent acknowledges that it holds such Collateral for the benefit of the Term Loan Agent upon and subject to the terms contained in this Intercreditor Agreement. The Revolving Agent agrees to turn over to the Term Loan Agent with appropriate endorsements any Revolving Primary Collateral in its possession upon payment in full of the Priority Bank Debt in cash. The Revolving Agent shall provide a written notice to the Term Loan Agent promptly following the Revolving Agent's receipt of a notice delivered pursuant to a landlord agreement of a default by a Credit Party under the applicable lease, but failure to give such notice shall not alter the rights or obligations of the parties hereto or result in any liability of the Revolving Agent. 4.3. APPOINTMENT OF TERM LOAN AGENT AS AGENT. The Revolving Agent hereby appoints the Term Loan Agent as its agent to perfect by possession or control its lien in any of the Collateral which lien is capable of being perfected by possession or control and, notwithstanding the intention of the parties that the Revolving Agent hold such item for perfection, is delivered to and in the possession, or is under the control of the Term Loan Agent. The Term Loan Agent acknowledges that it holds such Collateral for the benefit of the Revolving Agent upon and subject to the terms contained in this Intercreditor Agreement. The Term Loan Agent agrees to turn over to the Revolving Agent with appropriate endorsements any Term Loan Primary Collateral in its possession upon payment in full of the Priority Term Loan Debt in cash. 4.4. NO MARSHALING. (a) The Term Loan Agent agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim against the Revolving Agent or the Revolving Lenders the benefit of any marshaling right that a junior secured creditor might have under applicable law with respect to the Revolving Primary Collateral. -11- (b) The Revolving Agent agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim against the Term Loan Agent or the Term Loan Lenders the benefit of any marshaling right that a junior secured creditor might have under applicable law with respect to the Term Loan Primary Collateral. 5. DEFENSE TO ENFORCEMENT. (a) If the Term Loan Agent, in contravention of the terms of this Intercreditor Agreement, shall commence, prosecute or participate in any suit, action or proceeding against any Revolving Primary Collateral, then the Credit Parties may interpose as a defense or plea the making of this Intercreditor Agreement, and the Revolving Agent or any Revolving Lender may intervene and interpose such defense or plea in its name or in the name of such Credit Party. (b) If the Revolving Agent, in contravention of the terms of this Intercreditor Agreement, shall commence, prosecute or participate in any suit, action or proceeding against any Term Loan Primary Collateral, then the Credit Parties may interpose as a defense or plea the making of this Intercreditor Agreement, and the Term Loan Agent or any Term Loan Lender may intervene and interpose such defense or plea in its name or in the name of such Credit Party. 6. RESTRICTIONS ON ADVANCES; ADDITIONAL AGREEMENTS. 6.1. ADVANCES RESULTING IN TERM LOAN AGREEMENT BREACHES. If the Revolving Agent or any Revolving Lender should honor a request by the Borrower for a loan, advance or other financial accommodation under the Revolving Credit Agreement or otherwise, whether or not the Revolving Agent or any Revolving Lender has knowledge that the honoring of such request would result in a Term Loan Event of Default, or act, condition or event which with notice or passage of time or both would constitute a Term Loan Event of Default, in no event shall the Revolving Agent or any Revolving Lender have any liability to the Term Loan Agent or any Term Loan Lender as a result of such breach, and, without limiting the generality of the foregoing, the Term Loan Agent and the Term Loan Lenders agree that the Revolving Lenders shall not have any liability for tortious interference with contractual relations or for inducement by the Revolving Lenders of any Credit Party to breach of contract or otherwise. Nothing contained in this SECTION 6.1 shall limit, impair or waive (i) the provisions of SECTION 2.3 hereof and the limitations on Priority Bank Debt contained herein or (ii) any right that the Term Loan Agent and the Term Loan Lenders have to enforce any of the provisions of the Term Loan Documents against any Credit Party. 6.2. MODIFICATIONS TO REVOLVING CREDIT AGREEMENT RELATING TO AVAILABILITY. Without the prior written consent of the Term Loan Agent, the Revolving Agent and the Revolving Lenders shall not make amendments or modifications to the definition of "Borrowing Base", or any of the component definitions thereof, or increase the percentage advance rates thereunder above the rates in effect on the Closing Date, or release or decrease the Availability Reserve, in each case, in a manner which would result in a greater amount of credit being provided to the Borrower as an advance against the Borrowing Base; PROVIDED, however, the Revolving Agent's discretion to establish and release reserves (other than the Availability Reserve), decrease advances rates and to determine eligibility shall not be limited. -12- 7. LENDERS' FREEDOM OF DEALING. 7.1. MODIFICATIONS TO REVOLVING CREDIT AGREEMENT. The Term Loan Agent agrees, with respect to the Bank Debt, the Revolving Credit Agreement and the other Loan Documents and any and all collateral therefor or guaranties thereof, that the Credit Parties and the Revolving Lenders may, subject to the provisions of SECTION 6.2, agree to modify the terms of any of the Bank Debt, and the Revolving Lenders may, subject to the provisions of SECTION 6.2, grant extensions of the time of payment or performance to and make compromises, including releases of Collateral or guaranties, and settlements with the Credit Parties and all other persons, in each case without the consent of the Term Loan Agent or the Credit Parties and without affecting the agreements of the Term Loan Agent contained in this Intercreditor Agreement. If the Revolving Lenders should amend or waive any provision of the Loan Documents, whether or not any Revolving Lender has knowledge that such amendment or waiver would result in a breach of any Term Loan Documents or a Term Loan Event of Default, or act, condition or event which with notice or passage of time or both would constitute a Term Loan Event of Default, in no event shall any Revolving Lender have any liability to the Term Loan Agent or any Term Loan Lender as a result of such breach. 7.2. MODIFICATIONS TO TERM LOAN AGREEMENT. The Revolving Agent agrees, with respect to the Term Loan Debt, the Term Loan Agreement and the other Term Loan Documents and any and all collateral therefor or guaranties thereof, that the Credit Parties and the Term Loan Lenders may agree to modify the terms of any of the Term Loan Debt, and the Term Loan Lenders may grant extensions of the time of payment or performance to and make compromises, including releases of Collateral or guaranties, and settlements with the Credit Parties and all other persons, in each case without the consent of the Revolving Agent or the Credit Parties and without affecting the agreements of the Revolving Agent contained in this Intercreditor Agreement. If the Term Loan Lenders should amend or waive any provision of the Term Loan Agreement, whether or not the Term Loan Agent or any Term Loan Lender has knowledge that such amendment or waiver would result in a breach of any Loan Documents or an Event of Default, or act, condition or event which with notice or passage of time or both would constitute an Event of Default, in no event shall the Term Loan Agent or any Term Loan Lender have any liability to the Revolving Agent or any Revolving Lender as a result of such breach. 7.3. NOTIFICATIONS OF MODIFICATIONS TO AGREEMENTS. (a) The Revolving Agent shall provide prompt written notice to the Term Loan Agent of any amendment or modification to the Loan Documents, but failure to give such notice shall not alter the rights or obligations of the parties hereto. (b) The Term Loan Agent shall provide prompt written notice to the Revolving Agent of any amendment or modification to the Term Loan Documents, but failure to give such notice shall not alter the rights or obligations of the parties hereto. 7.4. NOTIFICATIONS OF DEFAULTS. (a) The Term Loan Agent shall provide a written notice to the Revolving Agent promptly following the occurrence of a Term Loan Event of Default of which the Term Loan Agent is aware, but failure to give such notice shall not alter the rights or obligations of the parties hereto. (b) The Revolving Agent shall provide a written notice to the Term Loan Agent promptly following the occurrence of an Event of Default of which the Revolving Agent is aware, but failure to give such notice shall not alter the rights or obligations of the parties hereto. -13- 7.5. APPRAISALS, ETC. (a) The Revolving Agent shall provide the Term Loan Agent with copies of all appraisals, environmental exams or similar reports and bank statements and other account information received by the Revolving Agent in connection with the Revolving Credit Agreement and the other Loan Documents (collectively, the "REVOLVING CREDIT MATERIALS") and the Credit Parties irrevocably, by their execution hereof, direct and authorize the Revolving Agent to do so. The Term Loan Agent agrees that such Revolving Credit Materials are delivered without representation or warranty by, and without recourse to, the Revolving Agent and the Revolving Lenders. (b) The Term Loan Agent shall provide the Revolving Agent with copies of all appraisals, environmental exams or similar reports and bank statements and other account information received by the Term Loan Agent in connection with the Term Loan Agreement and the other Term Loan Documents (collectively, the "TERM LOAN MATERIALS") and the Credit Parties irrevocably, by their execution hereof, direct and authorize the Term Loan Agent to do so. The Revolving Agent agrees that such Term Loan Materials are delivered without representation or warranty by, and without recourse to, the Term Loan Agent and the Term Loan Lenders. 8. SALE OF THE DEBT. (a) No Term Loan Lender will sell, transfer, pledge, assign, hypothecate or otherwise dispose of any or all of the Term Loan Debt to any person other than a person who agrees in writing to become a party hereto and to succeed to the rights and to be bound by all of the obligations of such Term Loan Lender hereunder. (b) No Revolving Lender will sell, transfer, pledge, assign, hypothecate or otherwise dispose of any or all of the Bank Debt to any person other than a person who agrees in writing to become a party hereto and to succeed to the rights and to be bound by all of the obligations of such Revolving Lender hereunder. 9. BANKRUPTCY MATTERS. 9.1. INSOLVENCY. This Intercreditor Agreement and the priorities provided for herein shall be applicable with respect to all liens obtained by the Revolving Agent, any Revolving Lender, the Term Loan Agent or any Term Loan Lender (whether obtained before or after the filing of any petition by or against any Credit Party under applicable Insolvency Laws and all converted or succeeding cases in respect thereof). The relative rights of the Revolving Agent and any Revolving Lenders and the Term Loan Agent and the Term Loan Lenders in or to any distributions from or in respect of any Collateral or proceeds of Collateral shall continue after the filing of any such Insolvency Proceeding on the same basis as prior to the commencement of any such Insolvency Proceeding, subject to any Court order approving Post-Petition Financing by Post-Petition Lenders in favor of, or use of cash collateral by, any Credit Party as debtor-in-possession. 9.2. POST-PETITION FINANCING. (a) Subject to SECTION 9.5(B), if any Credit Party shall become subject to an Insolvency Proceeding and any of the Credit Parties or any trustee therefore moves for approval of financing to be provided in good faith by the Revolving Agent or the Revolving Lenders (in such capacity, the "REVOLVING POST-PETITION LENDERS") under applicable Insolvency Laws or the use of cash collateral with the consent of the Revolving Agent under applicable Insolvency Laws (such use of cash collateral and any such financing provided by the Revolving Post-Petition Lenders, the "REVOLVING POST-PETITION FINANCING"), the Term Loan Agent and the Term Loan Lenders agree that no objection will be raised by them to any such financing so long as: (i) the interest rate, fees, advance rates, lending sublimits and limits and other terms are commercially reasonable under the circumstances, (ii) the Term Loan Agent and the Term Loan Lenders retain a lien on the pre-petition Collateral (including proceeds thereof arising after the commencement of such proceeding) with the same priority as existed prior to the commencement of the case under applicable Insolvency Laws, (iii) the Term Loan Agent and the Term Loan Lenders receive, as adequate protection, a replacement lien on post-petition assets to the same extent granted to the Revolving Post-Petition Lenders, such replacement lien to be subordinate only to (A) the lien of such Revolving Post-Petition Lenders, (B) the lien of the Revolving Agent and the Revolving Lenders with respect to the pre-petition obligations and (C) any adequate protection lien provided to the Revolving Agent and the Revolving Lenders, (iv) without limiting the provisions of SECTION 9.5(B), any lien on the Term Loan Primary Collateral granted to the Revolving Post-Petition Lenders to secure the Revolving Post-Petition Financing or to the Revolving Agent or Revolving Lenders as adequate protection for the pre-petition Bank Debt, shall be subject and subordinate to the adequate protection replacement lien of the Term Loan Agent and Term Loan Lenders on the Term Loan Primary Collateral, (v) the Revolving Post-Petition Lenders agree that they will not make, issue or incur loans or letter of credit accommodations pursuant to such post-petition financing that would intentionally and with actual knowledge cause the sum of (x) the aggregate outstanding principal amount of such loans and letter of credit accommodations made pursuant to such post-petition financing PLUS (y) the outstanding principal amount of pre-petition Revolving Loans and Letters of Credit to exceed the sum of (i) the Maximum Bank Debt plus (ii) $750,000, and (vi) such financing or use of cash collateral is subject to the terms of this Intercreditor Agreement. The Term Loan Agent and the Term Loan Lenders agree that any objection will be limited to the extent of any non-compliance with the provisions of clauses (i) through (vi) in the preceding sentence. -14- (b) Subject to SECTION 9.5(A), if any Credit Party shall become subject to an Insolvency Proceeding and any of the Credit Parties or any trustee therefore moves for approval of financing to be provided in good faith by the Term Loan Agent or the Term Loan Lenders (in such capacity, the "TERM LOAN POST-PETITION LENDERS" and together with the Revolving Post-Petition Lenders, the " POST-PETITION LENDERS") under applicable Insolvency Laws (such financing provided by the Term Loan Post-Petition Lenders, the "TERM LOAN POST-PETITION FINANCING" and together with the Revolving Post-Petition Financing, the "POST-PETITION FINANCING"), the Revolving Agent and the Revolving Lenders agree that no objection will be raised by them to any such financing so long as: (i) the interest rate, fees, advance rates, lending sublimits and limits and other terms are commercially reasonable under the circumstances, (ii) the Revolving Agent and the Revolving Lenders retain a lien on the pre-petition Collateral (including proceeds thereof arising after the commencement of such proceeding) with the same priority as existed prior to the commencement of the case under applicable Insolvency Laws, (iii) the Revolving Agent and the Revolving Lenders receive, as adequate protection, a replacement lien on post-petition assets to the same extent granted to the Term Loan Post-Petition Lenders, such replacement lien to be subordinate only to (A) the lien of such Term Loan Post-Petition Lenders, (B) the lien of the Term Loan Agent and the Term Loan Lenders with respect to the pre-petition obligations and (C) any adequate protection lien provided to the Term Loan Agent and the Term Loan Lenders, (iv) without limiting the provisions of SECTION 9.5(A), any lien on the Revolving Primary Collateral granted to the Term Loan Post-Petition Lenders to secure the Term Loan Post-Petition Financing or to the Term Loan Agent or Term Loan Lenders as adequate protection for the pre-petition Bank Debt, shall be subject and subordinate to the adequate protection replacement lien of the Revolving Agent and Revolving Lenders on the Revolving Primary Collateral, (v) the Term Loan Post-Petition Lenders agree that they will not make, issue or incur loans or letter of credit accommodations pursuant to such post-petition financing that would intentionally and with actual knowledge cause the aggregate outstanding principal amount of such loans and letter of credit accommodations made pursuant to such post-petition financing to exceed the sum of (x) the outstanding amount of pre-petition Priority Term Loan Debt PLUS (y) $750,000 PLUS (z) the amount not already advanced, if any, of the $2,500,000 of additional permitted Priority Term Loan Debt referred to in clause (b) of the proviso in the definition of "Excluded Term Loan Debt", and (vi) such financing is subject to the terms of this Intercreditor Agreement. The Revolving Agent and the Revolving Lenders agree that any objection will be limited to the extent of any non-compliance with the provisions of clauses (i) through (vi) in the preceding sentence. 9.3. VOTING. (a) In any such Insolvency Proceeding, the Term Loan Agent and the Term Loan Lenders shall not vote with respect to any plan or take any other action in any way so as to contest (a) the validity of any Priority Bank Debt (including any claim for post-petition interest thereon) or any collateral or guaranties thereof, (b) the relative rights and duties of any holders of any Priority Bank Debt established in any instruments or agreements creating or evidencing any of the Bank Debt with respect to any of such collateral or guaranties or (c) the Term Loan Agent's and the Term Loan Lenders' obligations and agreements set forth in this Intercreditor Agreement. -15- (b) In any such Insolvency Proceeding, the Revolving Agent and the Revolving Lenders shall not vote with respect to any plan or take any other action in any way so as to contest (a) the validity of any Priority Term Loan Debt (including any claim for post-petition interest thereon) or any collateral or guaranties thereof, (b) the relative rights and duties of any holders of any Priority Term Loan Debt established in any instruments or agreements creating or evidencing any of the Term Loan Debt with respect to any of such collateral or guaranties or (c) the Revolving Agent's and the Revolving Lenders' obligations and agreements set forth in this Intercreditor Agreement. 9.4. ALTERNATIVE FINANCINGS. (a) Subject to SECTION 9.5(B), the provisions hereof shall not impair (i) the right of the Revolving Agent and the Revolving Lenders in any such Insolvency Proceeding to provide Revolving Post-Petition Financing or consent to the use of cash collateral on terms other than as set forth herein or (ii) with respect to any Revolving Post-Petition Financing which is provided on terms other than those set forth in SECTION 9.2(A), the rights of the Term Loan Agent and the Term Loan Lenders to object to any such Revolving Post-Petition Financing on any basis, including failure to provide "adequate protection". (b) Subject to SECTION 9.5(A), the provisions hereof shall not impair (i) the right of the Term Loan Agent and the Term Loan Lenders in any such Insolvency Proceeding to provide Term Loan Post-Petition Financing on terms other than as set forth herein or (ii) with respect to any Term Loan Post-Petition Financing which is provided on terms other than those set forth in SECTION 9.2(B), the rights of the Revolving Agent and the Revolving Lenders to object to any such Term Loan Post-Petition Financing on any basis, including failure to provide "adequate protection". 9.5. CERTAIN AGREEMENTS. (a) In any such Insolvency Proceeding, the Term Loan Agent agrees, for itself and the other Term Loan Lenders, that it shall not: (i) directly or indirectly, provide or offer to provide any Term Loan Post-Petition Financing secured by a lien senior to or pari passu with the liens of the Revolving Agent and the Revolving Lenders on the Revolving Primary Collateral, (ii) seek or request any adequate protection with respect to the Revolving Primary Collateral (other than replacement liens pursuant to SECTION 9.2(A)) or object to any adequate protection with respect to the Revolving Primary Collateral awarded to the Revolving Agent and the Revolving Lenders, or (iii) object to any sale or other disposition of Revolving Primary Collateral in accordance with Sections 363 or 365 of the U.S. Bankruptcy Code (or any similar provision of any other Insolvency Laws) approved by the Revolving Agent. (b) In any such Insolvency Proceeding, the Revolving Agent agrees, for itself and the other Revolving Lenders, that it shall not: (i) directly or indirectly, provide or offer to provide any Revolving Post-Petition Financing secured by a lien senior to or pari passu with the liens of the Term Loan Agent and the Term Loan Lenders on the Term Loan Primary Collateral, (ii) seek or request any adequate protection with respect to the Term Loan Primary Collateral (other than replacement liens pursuant to SECTION 9.2(B)) or object to any adequate protection with respect to the Term Loan Primary Collateral awarded to the Term Loan Agent and the Term Loan Lenders, or (iii) object to any sale or other disposition of Term Loan Primary Collateral in accordance with Sections 363 or 365 of the U.S. Bankruptcy Code (or any similar provision of any other Insolvency Laws) approved by the Term Loan Agent. -16- 10. CREDIT PARTIES' OBLIGATIONS ABSOLUTE. (a) Nothing contained in this Intercreditor Agreement shall impair, as between the Credit Parties and the Term Loan Lenders, the obligation of the Credit Parties to pay to the Term Loan Lenders all amounts payable in respect of the Term Loan Debt as and when the same shall become due and payable in accordance with the terms thereof, or prevent the Term Loan Agent (except as expressly otherwise provided in SECTIONS 2, 3 or 5 hereof) from exercising all rights, powers and remedies otherwise permitted by the Term Loan Documents and by applicable law upon a default in the payment or performance of its obligations in relation to the Term Loan Debt or under any of the Term Loan Documents, all, however, subject to the rights of the Revolving Agent and the Revolving Lenders as set forth in this Intercreditor Agreement. The failure of the Credit Parties to make any payment with respect to the Term Loan Debt in accordance with its terms by reason of the operation of this Intercreditor Agreement shall not be construed as preventing the occurrence of a default under the Term Loan Documents. (b) Nothing contained in this Intercreditor Agreement shall impair, as between the Credit Parties and the Revolving Lenders, the obligation of the Credit Parties to pay to the Revolving Lenders all amounts payable in respect of the Bank Debt as and when the same shall become due and payable in accordance with the terms thereof, or prevent the Revolving Agent (except as expressly otherwise provided in SECTIONS 2, 3 or 5 hereof) from exercising all rights, powers and remedies otherwise permitted by the Loan Documents and by applicable law upon a default in the payment or performance of its obligations in relation to the Bank Debt or under any of the Loan Documents, all, however, subject to the rights of the Term Loan Agent and the Term Loan Lenders as set forth in this Intercreditor Agreement. The failure of the Credit Parties to make any payment with respect to the Bank Debt in accordance with its terms by reason of the operation of this Intercreditor Agreement shall not be construed as preventing the occurrence of a default under the Loan Documents. 11. BANK LOAN TERMINATION DATE. (a) Upon the Bank Loan Termination Date, the Revolving Agent shall deliver all notices and/or certificates evidencing the transfer of Revolving Primary Collateral under the control of the Revolving Agent from the Revolving Agent to the Term Loan Agent. (b) Upon the Term Loan Termination Date, the Term Loan Agent shall deliver all notices and/or certificates evidencing the transfer of Term Loan Primary Collateral under the control of the Term Loan Agent from the Term Loan Agent to the Revolving Agent. -17- 12. NOTICES. All notices and other communications which are required and may be given pursuant to the terms of this Intercreditor Agreement shall be in writing and shall be sufficient and effective in all respects if given in writing or telecopied, delivered or mailed by registered or certified mail, postage prepaid, as follows: If to the Revolving Agent: Bank of America, N.A. One Federal Street MA5-503-07-19 Boston, MA 02110 Attention: Matthew O'Keefe Fax: (617) 654-1167 If to the Term Loan Agent: GB Merchant Partners, LLC 101 Huntington Avenue, 10th Floor Boston, MA 02199 Attention: D. Michael Murray Fax: (617) 210-7141 If to the Credit Parties: c/o Quaker Fabric Corporation 941 Grinnell Street Fall River, MA 84321 Attention: Paul J. Kelly Fax: (508) 678-2656 or such other address or addresses as any party hereto shall have designated by written notice to the other parties hereto. Notices shall be deemed given and effective upon the earlier to occur of (i) the third day following deposit thereof in the U.S. mail or (ii) receipt by the party to whom such notice is directed. 13. GOVERNING LAW. THIS INTERCREDITOR AGREEMENT SHALL BE GOVERNED BY THE COMMONWEALTH OF MASSACHUSETTS AND SHALL BE A SEALED INSTRUMENT UNDER SUCH LAWS. 14. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS INTERCREDITOR AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE PARTIES HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH OF THE PARTIES (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAS BEEN INDUCED TO ENTER INTO THIS INTERCREDITOR AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN. -18- 15. MISCELLANEOUS. This Intercreditor Agreement may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Intercreditor Agreement, it shall not be necessary to produce or account for more than one such counterpart signed by the party against which enforcement is sought. The Revolving Agent may, in its sole and absolute discretion, waive any provisions of this Intercreditor Agreement benefiting the Revolving Agent and the Revolving Lenders; PROVIDED, HOWEVER, that such waiver shall be effective only if in writing and signed by the Revolving Agent and shall be limited to the specific provision or provisions expressly so waived. The Term Loan Agent may, in its sole and absolute discretion, waive any provisions of this Intercreditor Agreement benefiting the Term Loan Agent and the Term Loan Lenders; PROVIDED, HOWEVER, that such waiver shall be effective only if in writing and signed by the Term Loan Agent and shall be limited to the specific provision or provisions expressly so waived. This Intercreditor Agreement shall be binding upon the successors and assigns of the Term Loan Agent, the Term Loan Lenders, the Revolving Agent, the Revolving Lenders and the Credit Parties and shall inure to the benefit of the Revolving Agent, the Revolving Lenders, the Term Loan Agent and the Term Loan Lenders, their respective successors and assigns, any lender or lenders refunding or refinancing any of the Bank Debt or the Term Loan Debt and their respective successors and assigns, but shall not otherwise create any rights or benefits for any third party. In the event of any inconsistency or conflict between the Loan Documents or the Term Loan Documents and this Intercreditor Agreement, such inconsistency or conflict will be governed by the terms of this Intercreditor Agreement and not the Loan Documents or the Term Loan Documents, as the case may be. This Intercreditor Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations and understandings of the parties with respect to the same. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -19- IN WITNESS WHEREOF, the parties hereto have executed this Intercreditor Agreement under seal as of the date first above written. REVOLVING AGENT: BANK OF AMERICA, N.A., as Revolving Agent By: /s/ Matthew O'Keefe ------------------------------------------------- Name: Matthew O'Keefe Title: Senior Vice President TERM LOAN AGENT: GB MERCHANT PARTNERS, LLC, as Term Loan Agent By:________________________________________________ Name: Title: CREDIT PARTIES: QUAKER FABRIC CORPORATION OF FALL RIVER QUAKER FABRIC CORPORATION QUAKER TEXTILE CORPORATION QUAKER FABRIC MEXICO, S.A. DE C.V. By:________________________________________________ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----