EX-10.1 3 dex101.txt BRIDGE CREDIT FACILITY Exhibit 10.1 CONFORMED EXECUTION COPY BRIDGE CREDIT AGREEMENT DATED AS OF SEPTEMBER 12, 2003 AMONG PATTERSON DENTAL COMPANY, AS THE BORROWER THE LENDERS FROM TIME TO TIME PARTIES HERETO BANC ONE MEZZANINE CORPORATION, AS ADMINISTRATIVE AGENT AND BANK OF AMERICA, N.A., AS SYNDICATION AGENT ================================================================================ BANC ONE CAPITAL MARKETS, INC. AND BANC OF AMERICA SECURITIES LLC, AS CO-LEAD ARRANGERS AND JOINT BOOK RUNNERS ================================================================================ SIDLEY AUSTIN BROWN & WOOD LLP Bank One Plaza 10 South Dearborn Street Chicago, Illinois 60603 TABLE OF CONTENTS ARTICLE I DEFINITIONS.....................................................1 1.1. Certain Defined Terms...........................................1 1.2. Plural Forms...................................................17 ARTICLE II THE CREDITS....................................................17 2.1. Loans..........................................................17 2.2. Required Payments; Termination.................................18 2.3. Ratable Loans; Types of Advances...............................19 2.4. Facility Fee...................................................19 2.5. Minimum Amount of Each Advance.................................19 2.6. Optional Principal Payments....................................19 2.7. Conversion and Continuation of Outstanding Advances; No Conversion or Continuation of Eurodollar Advances After Default........................................................20 2.8. Changes in Interest Rate, etc..................................20 2.9. Rates Applicable After Default.................................21 2.10. Method of Payment..............................................21 2.11. Noteless Agreement; Evidence of Indebtedness...................21 2.12. Telephonic Notices.............................................22 2.13. Interest Payment Dates; Interest and Fee Basis.................22 2.14. Notification of Advances, Interest Rates and Prepayments; Availability of Loans..........................................23 2.15. Lending Installations..........................................23 2.16. Non-Receipt of Funds by the Agent..............................23 2.17. Replacement of Lender..........................................23 ARTICLE III YIELD PROTECTION; TAXES........................................24 3.1. Yield Protection...............................................24 3.2. Changes in Capital Adequacy Regulations........................25 3.3. Availability of Types of Advances..............................25 3.4. Funding Indemnification........................................25 3.5. Taxes..........................................................26 3.6. Lender Statements; Survival of Indemnity.......................28 3.7. Alternative Lending Installation...............................28 ARTICLE IV CONDITIONS PRECEDENT...........................................28 4.1. Effectiveness of Commitments...................................28 4.2. Initial Credit Extension.......................................31 ARTICLE V REPRESENTATIONS AND WARRANTIES.................................31 5.1. Existence and Standing.........................................31 5.2. Authorization and Validity.....................................31 5.3. No Conflict; Government Consent................................32 5.4. Financial Statements...........................................32 i 5.5. Material Adverse Change........................................32 5.6. Taxes..........................................................33 5.7. Litigation and Contingent Obligations..........................33 5.8. Subsidiaries...................................................33 5.9. ERISA..........................................................33 5.10. Accuracy of Information........................................33 5.11. Regulation U...................................................34 5.12. Material Agreements............................................34 5.13. Compliance With Laws...........................................34 5.14. Ownership of Properties........................................34 5.15. Plan Assets; Prohibited Transactions...........................34 5.16. Environmental Matters..........................................34 5.17. Investment Company Act.........................................35 5.18. Public Utility Holding Company Act.............................35 5.19. Insurance......................................................35 5.20. Solvency.......................................................35 5.21. No Default or Unmatured Default................................35 5.22. Reportable Transaction.........................................35 5.23. Post-Retirement Benefits.......................................35 5.24. AbilityOne Acquisition.........................................35 ARTICLE VI COVENANTS......................................................36 6.1. Financial Reporting............................................36 6.2. Use of Proceeds................................................38 6.3. Notice of Default..............................................38 6.4. Conduct of Business............................................38 6.5. Taxes..........................................................38 6.6. Insurance......................................................38 6.7. Compliance with Laws...........................................39 6.8. Maintenance of Properties......................................39 6.9. Inspection; Keeping of Books and Records.......................39 6.10. Dividends......................................................39 6.11. Merger.........................................................39 6.12. Sale of Assets.................................................40 6.13. Investments and Acquisitions...................................40 6.14. Indebtedness...................................................43 6.15. Liens..........................................................44 6.16. Affiliates.....................................................46 6.17. Financial Contracts............................................47 6.18. Subsidiary Covenants...........................................47 6.19. Contingent Obligations.........................................47 6.20. Leverage Ratio.................................................47 6.21. Interest Expense Coverage Ratio................................48 6.22. Minimum Consolidated Net Worth.................................48 6.23. Additional Subsidiary Guarantors...............................48 6.24. Foreign Subsidiary Investments.................................48 6.25. Subordinated Indebtedness......................................48 ii 6.26. Sale of Accounts...............................................48 ARTICLE VII DEFAULTS.......................................................49 ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES.................52 8.1. Acceleration...................................................52 8.2. Amendments.....................................................52 8.3. Preservation of Rights.........................................53 ARTICLE IX GENERAL PROVISIONS.............................................53 9.1. Survival of Representations....................................53 9.2. Governmental Regulation........................................53 9.3. Headings.......................................................53 9.4. Entire Agreement...............................................53 9.5. Several Obligations; Benefits of this Agreement................53 9.6. Expenses; Indemnification......................................54 9.7. Numbers of Documents...........................................55 9.8. Accounting.....................................................55 9.9. Severability of Provisions.....................................55 9.10. Nonliability of Lenders........................................55 9.11. Confidentiality................................................56 9.12. Lenders Not Utilizing Plan Assets..............................56 9.13. Nonreliance....................................................56 9.14. Disclosure.....................................................57 9.15. Performance of Obligations.....................................57 ARTICLE X THE AGENT......................................................57 10.1. Appointment; Nature of Relationship............................57 10.2. Powers.........................................................58 10.3. General Immunity...............................................58 10.4. No Responsibility for Loans, Recitals, etc.....................58 10.5. Action on Instructions of Lenders..............................58 10.6. Employment of Agents and Counsel...............................59 10.7. Reliance on Documents; Counsel.................................59 10.8. Agent's Reimbursement and Indemnification......................59 10.9. Notice of Default..............................................60 10.10. Rights as a Lender.............................................60 10.11. Lender Credit Decision.........................................60 10.12. Successor Agent................................................60 10.13. Agent and Arranger Fees........................................61 10.14. Delegation to Affiliates.......................................61 10.15. No Duties Imposed on Syndication Agents, Documentation Agents or Arrangers...................................................61 ARTICLE XI SETOFF; RATABLE PAYMENTS.......................................62 11.1. Setoff.........................................................62 11.2. Ratable Payments...............................................62 iii ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS..............62 12.1. Successors and Assigns; Designated Lenders.....................62 12.2. Participations.................................................64 12.3. Assignments....................................................65 12.4. Dissemination of Information...................................67 12.5. Tax Certifications.............................................67 ARTICLE XIII NOTICES........................................................67 13.1. Notices; Effectiveness; Electronic Communication...............67 13.2. Change of Address, Etc.........................................68 ARTICLE XIV COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION......................................................68 14.1. Counterparts; Effectiveness....................................68 14.2. Electronic Execution of Assignments............................68 ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL...69 15.1 CHOICE OF LAW..................................................69 15.2 CONSENT TO JURISDICTION........................................69 15.3 WAIVER OF JURY TRIAL...........................................69 iv SCHEDULES Commitment Schedule Pricing Schedule Schedule 5.8 - Subsidiaries Schedule 6.13 - Investments Schedule 6.14 - Indebtedness Schedule 6.15 - Liens EXHIBITS Exhibit A - Form of the Credit Parties' Counsel's Opinion Exhibit B - Form of Compliance Certificate Exhibit C - Form of Assignment and Assumption Agreement Exhibit D - Form of Loan/Credit Related Money Transfer Instruction Exhibit E - Form of Promissory Note (if requested) Exhibit F - Form of Designation Agreement Exhibit G - List of Closing Documents v BRIDGE CREDIT AGREEMENT This Bridge Credit Agreement, dated as of September 12, 2003, is entered into by and among Patterson Dental Company, a Minnesota corporation, as the Borrower, the Lenders and Banc One Mezzanine Corporation, as Administrative Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. Certain Defined Terms. As used in this Agreement: "AbilityOne" means AbilityOne Products Corp., a Delaware corporation. "AbilityOne Acquisition" means the acquisition by the Borrower or a Subsidiary or Subsidiaries of the Borrower of all of the capital stock of AbilityOne on the terms and conditions set forth in the AbilityOne Acquisition Agreement. "AbilityOne Acquisition Agreement" means that certain Agreement and Plan of Merger dated as of August 15, 2003 by and among the Borrower, RETEP, Inc., AbilityOne Products Corp., and AbilityOne II, L.L.C., as representative of the company stockholders, as in effect on the Closing Date and without giving effect to any subsequent amendment or modification thereto. "AbilityOne Corporation" means AbilityOne Corporation, a Michigan corporation. "Accounting Changes" is defined in Section 9.8 hereof. "Accounts" means the Borrower's or a Subsidiary's right to the payment of money from the sale, lease or other disposition of goods or other assets by the Borrower or a Subsidiary, a rendering of services by the Borrower or a Subsidiary, a loan by the Borrower or a Subsidiary, the overpayment of taxes or other liabilities of the Borrower, or otherwise, however such right to payment may be evidenced, together with all other rights and interests (including all liens and security interests) that the Borrower or Subsidiary may at any time have against any account debtor or other party obligated thereon or against any of the property of such account debtor or other party. "Acquisition" means any transaction, or any series of related transactions, consummated on or after the Closing Date, by which the Borrower or any of its Subsidiaries (i) acquires any going concern business or all or substantially all of the assets of any Person, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires from one or more Persons (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage of voting power) of the outstanding ownership interests of a partnership or limited liability company of any Person. "Advance" means a borrowing hereunder consisting of the aggregate amount of several Loans (i) made by some or all of the Lenders on the same date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in the case of Eurodollar Loans, for the same Interest Period. "Affiliate" of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person is the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by contract or otherwise. "Agent" means BOMC in its capacity as contractual representative of the Lenders pursuant to Article X, and not in its individual capacity as a Lender, as Administrative Agent, and any successor Agent appointed pursuant to Article X. "Aggregate Commitment" means the aggregate of the Commitments of all the Lenders. The initial Aggregate Commitment as of the Closing Date is Six Hundred Million and 00/100 Dollars ($600,000,000). After giving effect to the initial Advance hereunder on the Funding Date, any unused portion of the Aggregate Commitment shall terminate and be of no further force or effect. "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate of the Outstanding Credit Exposure of all the Lenders. "Agreement" means this Bridge Credit Agreement, as it may be amended, restated, supplemented or otherwise modified and as in effect from time to time. "Agreement Accounting Principles" means generally accepted accounting principles as in effect in the United States from time to time, applied in a manner consistent with that used in preparing the financial statements of the Borrower referred to in Section 5.4; provided, however, that except as provided in Section 9.8, with respect to the calculation of the financial covenants set forth in Sections 6.20, 6.21 and 6.22 (and the defined terms used in such Sections), "Agreement Accounting Principles" means generally accepted accounting principles as in effect in the United States as of the Closing Date, applied in a manner consistent with that used in preparing the financial statements of the Borrower referred to in Section 5.4 hereof. "Alternate Base Rate" means, for any day, a fluctuating rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of (a) the Federal Funds Effective Rate for such day and (b) one-half of one percent (0.5% ) per annum. "Applicable Fee Rate" means, with respect to the Facility Fee at any time, the percentage rate per annum which is applicable at such time with respect to such fee as set forth in the Pricing Schedule. 2 "Applicable Margin" means, with respect to Advances of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Advances of such Type as set forth in the Pricing Schedule. "Approved Fund" means any Fund that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender. "Arrangers" means, collectively, Banc One Capital Markets, Inc., a Delaware corporation, and its successors, and Banc of America Securities LLC, and its successors, in their capacities as Co-Lead Arrangers and Joint Book Runners. "Article" means an article of this Agreement unless another document is specifically referenced. "Assignment Agreement" is defined in Section 12.3.1. "Authorized Officer" means any of the chief executive officer, president, chief operating officer, chief financial officer, treasurer or assistant treasurer of the Borrower, acting singly. "BOMC" means Banc One Mezzanine Corporation, in its individual capacity, and its successors. "Borrower" means Patterson Dental Company, a Minnesota corporation, and its permitted successors and assigns (including, without limitation, a debtor in possession on its behalf). "Borrowing Notice" is defined in Section 2.1.2. "Business Day" means (i) with respect to any borrowing, payment or rate selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago, Illinois for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in Dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Chicago, Illinois for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system. "Capitalized Lease" of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Capitalized Lease Obligations" of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles. "Cash Equivalent Investments" means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or 3 better by Moody's, (iii) demand deposit accounts maintained in the ordinary course of business, (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000, and (v) money market funds investing primarily in assets of the type described in clauses (i) and (ii) of this definition; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest. "Change in Control" means (i) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934) of 30% or more of the outstanding shares of voting stock of the Borrower; (ii) other than pursuant to a transaction otherwise permitted under this Agreement, the Borrower shall cease to own, directly or indirectly and free and clear of all Liens or other encumbrances, all of the outstanding shares of voting stock of the Guarantors on a fully diluted basis; or (iii) the majority of the Board of Directors of the Borrower fails to consist of Continuing Directors. "Closing Date" means September 12, 2003 "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time, and any rule or regulation issued thereunder. "Commitment" means, for each Lender, such Lender's obligation to make Loans on the Funding Date to the Borrower in an aggregate amount not exceeding the amount set forth for such Lender on the Commitment Schedule. "Commitment Schedule" means the Schedule identifying each Lender's Commitment as of the Closing Date attached hereto and identified as such. "Consolidated Adjusted EBITDA" means, as to any Person for any period, the sum of Consolidated EBIT for such period plus consolidated depreciation and amortization for such period. For Persons acquired by the Borrower or any Subsidiary during the relevant measurement period, their EBITDA results will be included in the calculation of Consolidated Adjusted EBITDA as if those Persons were owned by the Borrower or such Subsidiary for the entire reporting period. Consolidated Adjusted EBITDA will be calculated on a rolling four-quarter basis. "Consolidated Adjusted Net Income" means, as to any Person for any period, the Consolidated Net Income of such Person, provided that, for Persons acquired by the Borrower or any Subsidiary during the relevant measurement period, their Consolidated Net Income will be included in the calculation of Consolidated Adjusted Net Income as if those Persons were owned by the Borrower or such Subsidiary for the entire reporting period. Consolidated Adjusted Net Income will be calculated on a rolling four-quarter basis. "Consolidated EBIT" means, as to any Person and with reference to any period, Consolidated Net Income plus, to the extent deducted from revenues in determining Consolidated Net Income, (i) Consolidated Interest Expense, and (ii) expense for federal, state, 4 local and foreign income and franchise taxes paid or accrued, all calculated for such Person and its Subsidiaries on a consolidated basis. "Consolidated Interest Expense" means, as to any Person and with reference to any period, the interest expense of such Person and its Subsidiaries calculated on a consolidated basis for such period including, without limitation, such interest expense as may be attributable to capitalized leases, receivables transaction financing costs, the discount or implied interest component of off-balance sheet liabilities, all commissions, discounts and other fees and charges owed with respect to Letters of Credit and net mark-to-market exposure. "Consolidated Net Income" means as to any Person and with reference to any period, the net income (or loss) of such Person and its Subsidiaries calculated on a consolidated basis for such period, excluding any non-cash charges or gains which are unusual, non-recurring or extraordinary. "Consolidated Net Worth" means, as of any date of determination, the consolidated total stockholders' equity (including capital stock, additional paid-in capital and retained earnings) of the Borrower and its Subsidiaries determined in accordance with Agreement Accounting Principles. "Consolidated Total Debt" means (i) all indebtedness of the Borrower and its Subsidiaries, on a consolidated basis, reflected on a balance sheet prepared in accordance with Agreement Accounting Principles, plus, without duplication (ii) the face amount of all outstanding Letters of Credit in respect of which the Borrower or any Subsidiary has any reimbursement obligation and the principal amount of all Contingent Obligations of the Borrower and its Subsidiaries, plus Capitalized Lease Obligations, plus obligations arising from the sale of accounts receivable and other forms of off-balance sheet financing, including Off-Balance Sheet Liabilities. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract, application for a Letter of Credit or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership. "Continuing Director" means, with respect to any Person as of any date of determination, any member of the board of directors of such Person who (i) was a member of such board of directors on the Closing Date, or (ii) was nominated for election or elected to such board of directors with the approval of the required majority of the Continuing Directors who were members of such board at the time of such nomination or election; provided that if any individual who is so elected or nominated in connection with a merger, consolidation, acquisition or similar transaction and who was not a Continuing Director prior thereto, together with all other individuals so elected or nominated in connection with such merger, consolidation, acquisition or similar transaction who were not Continuing Directors prior thereto, constitute a majority of the 5 members of the board of directors of such Person, such individual shall not be a Continuing Director. "Controlled Group" means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code. "Conversion/Continuation Notice" is defined in Section 2.7. "Credit Extension" means the making of an Advance hereunder. "Credit Party" means, collectively, the Borrower and each of the Guarantors. "Default" means an event described in Article VII. "Designated Lender" means, with respect to each Designating Lender, each Eligible Designee designated by such Designating Lender pursuant to Section 12.1.2. "Designating Lender" means, with respect to each Designated Lender, the Lender that designated such Designated Lender pursuant to Section 12.1.2. "Designation Agreement" is defined in Section 12.1.2. "Disqualified Stock" means any preferred or other capital stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety-one (91) days after the Facility Termination Date. "Dollar", "dollar" and "$" means the lawful currency of the United States of America. "Domestic Subsidiary" means any Subsidiary of any Person that is not a Foreign Subsidiary. "Eligible Designee" means a special purpose corporation, partnership, trust, limited partnership or limited liability company that is administered by the respective Designating Lender or an Affiliate of such Designating Lender and (i) is organized under the laws of the United States of America or any state thereof, (ii) is engaged primarily in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and (iii) issues (or the parent of which issues) commercial paper rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moody's. "Environmental Laws" means any and all applicable federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, 6 hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rules or regulations promulgated thereunder. "Eurodollar Advance" means an Advance which, except as otherwise provided in Section 2.9, bears interest at the applicable Eurodollar Rate. "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the applicable British Bankers' Association LIBOR rate for deposits in Dollars as reported by any generally recognized financial information service as of 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, if no such British Bankers' Association LIBOR rate is available to the Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Agent to be the rate at which BOMC or one of its affiliate banks offers to place deposits in Dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, in the approximate amount of BOMC's relevant Eurodollar Loan and having a maturity equal to such Interest Period. "Eurodollar Loan" means a Loan which, except as otherwise provided in Section 2.9, bears interest at the applicable Eurodollar Rate. "Eurodollar Rate" means, with respect to a Eurodollar Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the then Applicable Margin, changing as and when the Applicable Margin changes. "Excluded Taxes" means, in the case of each Lender or applicable Lending Installation and the Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or the Agent is incorporated or organized or any political combination or subdivision or taxing authority thereof or (ii) the jurisdiction in which the Agent's or such Lender's principal executive office or such Lender's applicable Lending Installation is located. "Exhibit" refers to an exhibit to this Agreement, unless another document is specifically referenced. "Existing Credit Agreements" means (i) that certain Credit Agreement, dated as of November 22, 2002, by and among the Borrower, the lenders parties thereto, Banc One Capital Markets, Inc., as lead arranger, and Bank One, NA, as agent, as the same has been amended, restated, supplemented or otherwise modified from time to time, and (ii) that certain Credit Agreement, dated as of March 27, 2002, among AbilityOne Corporation, certain of its subsidiaries party thereto, the lenders party thereto, Wachovia Bank, National Association, as administrative agent, Antares Capital Corporation, Bank of America, N.A., Madison Capital 7 Funding LLC and BNP Paribas, as the same has been amended, restated, supplemented or otherwise modified from time to time. "Facility Fee" is defined in Section 2.4. "Facility Termination Date" means the earlier of (a) March 12, 2004, (b) September 19, 2003 if the AbilityOne Acquisition has not occurred prior thereto, and (c) the date the Loans shall be required to be paid in full pursuant to Section 8.1 hereof. "Federal Funds Effective Rate" means, for any day, an interest 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 on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Agent from three (3) Federal funds brokers of recognized standing selected by the Agent in its sole discretion. "Financing" means, with respect to any Person, (i) the issuance or sale by such Person of any equity interests in such Person, or (ii) the issuance, assumption, incurrence or sale by such Person of any Indebtedness (other than Indebtedness described in Sections 6.14.1 through 6.14.10, but including any replacement, renewal, refinancing or extension of any Indebtedness permitted under Section 6.14.2); provided, however, that the foregoing shall not permit the incurrence by the Borrower or any Subsidiary of any Indebtedness if such incurrence is not otherwise permitted by this Agreement. "Floating Rate" means, for any day, a rate per annum equal to the sum of (i) the Alternate Base Rate for such day, changing when and as the Alternate Base Rate changes plus (ii) the then Applicable Margin, changing as and when the Applicable Margin changes. "Floating Rate Advance" means an Advance which, except as otherwise provided in Section 2.9, bears interest at the Floating Rate. "Floating Rate Loan" means a Loan which, except as otherwise provided in Section 2.9, bears interest at the Floating Rate. "Foreign Subsidiary" means (i) any Subsidiary of any Person that is not organized under the laws of a jurisdiction located in the United States of America and (ii) any Subsidiary of a Person described in clause (i) hereof that is organized under the laws of a jurisdiction located in the United States of America. "Foreign Subsidiary Investment" means the sum, without duplication, of (i) the aggregate outstanding principal amount of all intercompany loans made on or after the Closing Date from any Credit Party to any Foreign Subsidiary; (ii) all outstanding Investments made on or after the Closing Date by any Credit Party in any Foreign Subsidiary; and (iii) an amount equal to the net benefit derived by the Foreign Subsidiaries resulting from any non-arm's-length transactions, or any other transfer of assets conducted, in each case entered into on or after the Closing Date, between any Credit Party, on the one hand, and such Foreign Subsidiaries, on the other hand, 8 other than (a) transactions in the ordinary course of business, (b) in respect of legal, accounting, reporting, listing and similar administrative services provided by any Credit Party to any such Foreign Subsidiary in the ordinary course of business consistent with past practice, and (c) the AbilityOne Acquisition. "Fund" means 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. "Funding Date" means a date on which the initial Advance is made hereunder. "Guarantor" means each of the Borrower's Material Domestic Subsidiaries (other than any SPV) and all other Material Domestic Subsidiaries of the Borrower which become Guarantors in satisfaction of the provisions of Section 6.23, in each case, together with their respective permitted successors and assigns. The initial Guarantors are AbilityOne Corporation, AbilityOne, PDSI and Webster. "Guaranty" means the Guaranty, dated as of September 12, 2003, made by certain Subsidiaries of the Borrower in favor of the Agent for the benefit of the Lenders, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Indebtedness" of a Person means, at any time, without duplication, such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than current accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, bonds, debentures, acceptances, or other instruments, (v) obligations to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) Contingent Obligations of such Person, (viii) reimbursement obligations under letters of credit, bankers' acceptances, surety bonds and similar instruments (ix) Off-Balance Sheet Liabilities, (x) obligations under Sale and Leaseback Transactions, (xi) Net Mark-to-Market Exposure under Rate Management Transactions, (xii) Disqualified Stock, and (xiii) any other obligation for borrowed money or other financial accommodation which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person. "Interest Expense Coverage Ratio" is defined in Section 6.21. "Interest Period" means, with respect to a Eurodollar Advance, a period of one, two, three or six months, or, to the extent available to all of the Lenders, nine or twelve months, commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such Interest Period shall end on but exclude the day which corresponds numerically to such date one, two, three or six months, or if applicable nine or twelve months, thereafter, provided, however, that if there is no such numerically corresponding day in such next, second, third, sixth, ninth or twelfth succeeding month, such Interest Period shall end on the last Business Day of such next, second, third, sixth, ninth or twelfth succeeding month. If an Interest Period would otherwise 9 end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day. "Investment" of a Person means any loan, advance (other than commission, travel, relocation and similar advances to directors, officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership interests, notes, debentures or other securities owned by such Person; any deposit accounts and certificates of deposit owned by such Person; and structured notes, derivative financial instruments and other similar instruments or contracts owned by such Person. "Lenders" means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. "Lending Installation" means, with respect to a Lender or the Agent, the office, branch, subsidiary or affiliate of such Lender or the Agent listed on the signature pages hereof or on the administrative information sheets provided to the Agent in connection herewith or on a Schedule or otherwise selected by such Lender or the Agent pursuant to Section 2.15. "Letter of Credit" of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable. "Leverage Ratio" means, as the end of any of the Borrower's fiscal quarters, the ratio of Consolidated Total Debt as of the end of such fiscal quarter to Consolidated Adjusted EBITDA for the four consecutive fiscal quarters then ended; provided, that the Leverage Ratio shall be calculated, with respect to Permitted Acquisitions, on a pro forma basis using historical financial statements and containing reasonable adjustments satisfactory to the Agent, broken down by fiscal quarter in the Borrower's reasonable judgment. "Lien" means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement, and, in the case of stock, stockholders agreements, voting trust agreements and all similar arrangements). "Loan" means, with respect to a Lender, such Lender's loan made pursuant to Article II (or any conversion or continuation thereof). "Loan Documents" means this Agreement, the Guaranty, and all other documents, instruments, notes (including any Notes issued pursuant to Section 2.11 (if requested)) and agreements executed in connection herewith or therewith or contemplated hereby or thereby, as the same may be amended, restated or otherwise modified and in effect from time to time. 10 "Material Adverse Effect" means a material adverse effect on (i) the business, Property, condition (financial or otherwise), operations or results of operations, performance or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower or any Subsidiary to perform its obligations under the Loan Documents, (iii) the validity or enforceability of any of the Loan Documents or (iv) the rights or remedies of the Agent or the Lenders under any of the Loan Documents. "Material Domestic Subsidiary" means (i) PDSI and Webster, and (ii) any other Domestic Subsidiary of the Borrower (other than an SPV) that meets one or both of the following criteria: (i) such Domestic Subsidiary's total assets, determined on a consolidated basis with its Subsidiaries is greater than or equal to fifteen percent (15%) of the consolidated total assets of the Borrower and its Subsidiaries; or (ii) such Domestic Subsidiary's Consolidated Adjusted Net Income is greater than or equal to fifteen percent (15%) of the Borrower's Consolidated Adjusted Net Income, in each case as reported in the most recent annual or quarterly financial statements of the Borrower delivered pursuant to Section 6.1.1 or 6.1.2. "Material Indebtedness" means any Indebtedness in an outstanding principal amount of $10,000,000 or more in the aggregate (or the equivalent thereof in any currency other than Dollars). "Material Indebtedness Agreement" means any agreement under which any Material Indebtedness was created or is governed or which provides for the incurrence of Indebtedness in an amount which would constitute Material Indebtedness (whether or not an amount of Indebtedness constituting Material Indebtedness is outstanding thereunder). "Moody's" means Moody's Investors Service, Inc. and any successor thereto. "Multiemployer Plan" means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, which is covered by Title IV of ERISA and to which the Borrower or any member of the Controlled Group is obligated to make contributions. "Net Cash Proceeds" means, with respect to any sale of Property or any Financing by any Person, (a) cash (freely convertible into Dollars) received by such Person or any Subsidiary of such Person from such sale of Property (including cash received as consideration for the assumption or incurrence of liabilities incurred in connection with or in anticipation of such sale of Property) or Financing, after (i) provision for all income or other taxes measured by or resulting from such sale of Property, (ii) payment of all reasonable brokerage commissions and other fees and expenses related to such sale of Property or Financing, and (iii) all amounts used to repay Indebtedness secured by a Lien on any asset disposed of in such sale of Property which is or may be required (by the express terms of the instrument governing such Indebtedness) to be repaid in connection with such sale of Property (including payments made to obtain or avoid the need for the consent of any holder of such Indebtedness) or Financing. "Net Mark-to-Market Exposure" of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions. "Unrealized losses" means the fair market value of the cost to such Person of replacing such Rate Management Transaction as of the date of determination 11 (assuming the Rate Management Transaction were to be terminated as of that date), and "unrealized profits" means the fair market value of the gain to such Person of replacing such Rate Management Transaction as of the date of determination (assuming such Rate Management Transaction were to be terminated as of that date). "Non-U.S. Lender" is defined in Section 3.5(iv). "Note" is defined in Section 2.11. "Obligations" means all Loans, advances, debts, liabilities, obligations, covenants and duties owing by the Borrower or any Subsidiary to the Agent, any Lender, the Arrangers, any affiliate of the Agent, any Lender or the Arrangers, or any indemnitee under the provisions of Section 9.6 or any other provisions of the Loan Documents, in each case of any kind or nature, present or future, arising under this Agreement or any other Loan Document, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, foreign exchange risk, guaranty, indemnification, or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all interest, charges, expenses, fees, attorneys' fees and disbursements, paralegals' fees (in each case whether or not allowed), and any other sum chargeable to the Borrower or any Subsidiary under this Agreement or any other Loan Document. "Off-Balance Sheet Liability" of a Person means the principal component of (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability under any so-called "synthetic lease" or "tax ownership operating lease" transaction entered into by such Person, (iv) any Receivables Purchase Facility or (v) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheets of such Person, but excluding from this clause (v) all Operating Leases. "Off-Balance Sheet Trigger Event" is defined in Section 7.17. "Operating Lease" of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more. "Other Taxes" is defined in Section 3.5(ii). "Outstanding Credit Exposure" means, as to any Lender at any time, the sum of the aggregate principal amount of its Loans outstanding at such time. "Participants" is defined in Section 12.2.1. "Payment Date" means the last day of each March, June, September and December and the Facility Termination Date. 12 "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "PDSI" means Patterson Dental Supply, Inc., a Minnesota corporation. "Permitted Acquisition" is defined in Section 6.13.5. "Permitted Purchase Money Debt" is defined in Section 6.14.5. "Person" means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" means an employee pension benefit plan, excluding any Multiemployer Plan, which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability. "Pricing Schedule" means the Schedule identifying the Applicable Margin and Applicable Fee Rate attached hereto and identified as such. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by BOMC or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Property" of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person. "Pro Rata Share" means, with respect to a Lender, (i) prior to the Funding Date, a portion equal to a fraction the numerator of which is such Lender's Commitment at such time (in each case, as adjusted from time to time in accordance with the provisions of this Agreement) and the denominator of which is the Aggregate Commitment at such time, and (ii) from and after the Funding Date and the funding of the Loans, a fraction the numerator of which is such Lender's Outstanding Credit Exposure at such time and the denominator of which is the sum of the Aggregate Outstanding Credit Exposure at such time. "Purchase Price" means the total consideration and other amounts payable in connection with any Acquisition, including, without limitation, any portion of the consideration payable in cash, all Indebtedness, liabilities and contingent obligations incurred or assumed in connection with such Acquisition and all transaction costs and expenses incurred in connection with such Acquisition, but exclusive of the value of any capital stock or other equity interests of the Borrower or any Subsidiary issued as consideration for such Acquisition. "Purchasers" is defined in Section 12.3.1. "Rate Management Obligations" of a Person means any and all obligations of such Person, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Rate Management Transactions, and (ii) any and all 13 cancellations, buy backs, reversals, terminations or assignments of any Rate Management Transactions. "Rate Management Transaction" means any transaction (including an agreement with respect thereto) now existing or hereafter entered into by the Borrower or a Subsidiary which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures. "Receivables Purchase Documents" means each of (i) that certain Receivables Sale Agreement dated as of May 10, 2002, among the originators named therein and PDC Funding Company, LLC, as buyer and that certain Receivables Purchase Agreement dated as of May 10, 2002, among PDC Funding Company, LLC, the Borrower, Preferred Receivables Funding Corporation, the financial institutions party thereto and Bank One, as agent, as such agreements may be amended, restated, extended or otherwise modified from time to time and (ii) that certain Third Amended and Restated Contract Purchase Agreement, dated as of June 19, 2002, among the Borrower, PDSI, Webster, U.S. Bank National Association, individually and as agent, and certain buyers identified therein, as such Third Amended and Restated Contract Purchase Agreement may be amended, restated, extended or otherwise modified from time to time. "Receivables Purchase Facility" means (i) the transactions contemplated by the Receivables Purchase Documents and (ii) other sales (including licenses), with limited recourse, or no recourse, by PDSI or Webster of Accounts derived from sales on contract of furnishings and equipment (but not, however, (a) open account sales of supplies or (b) Accounts derived from provisions of services). "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks, non-banks and non-broker lenders for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System. "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by foreign lenders for the purpose of purchasing or carrying margin stock (as defined therein). 14 "Reportable Event" means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan subject to Title IV of ERISA, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) or (b) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) or (b) of ERISA or Section 412(d) of the Code. "Required Lenders" means (i) prior to the Funding Date, Lenders in the aggregate having more than 50% of the Aggregate Commitment at such time, and (ii) from and after the Funding Date, Lenders in the aggregate having more than 50% of the Aggregate Outstanding Credit Exposure at such time. "Reserve Requirement" means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on "Eurocurrency liabilities" (as defined in Regulation D). "S&P" means Standard and Poor's Ratings Group, a division of The McGraw-Hill Companies, Inc., and any successor thereto. "Sale and Leaseback Transaction" means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee. "Schedule" refers to a specific schedule to this Agreement, unless another document is specifically referenced. "SEC" means the United States Securities and Exchange Commission, and any successor thereto. "Section" means a numbered section of this Agreement, unless another document is specifically referenced. "Single Employer Plan" means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group. "Solvent" means, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and at present fair saleable value) is equal to or in excess of the total amount of its liabilities, including, without limitation, contingent liabilities; and (ii) it is then able and expects to be able to pay its debts as they mature; and (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted. 15 With respect to contingent liabilities (such as litigation, guarantees and pension plan liabilities), such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can be reasonably be expected to become an actual or matured liability. "SPV" means any special purpose entity established for the purpose of purchasing receivables in connection with a receivables securitization transaction permitted under the terms of this Agreement. "Subordinated Indebtedness" of a Person means any Indebtedness of such Person the payment of which is subordinated to payment of the Obligations to the written satisfaction of the Required Lenders. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower. "Substantial Portion" means, with respect to the Property of the Borrower and its Subsidiaries, Property which represents more than 10% of the consolidated assets of the Borrower and its Subsidiaries or property which is responsible for more than 10% of the consolidated net sales or of the Consolidated Net Income of the Borrower and its Subsidiaries, in each case, as would be shown in the consolidated financial statements of the Borrower and its Subsidiaries as at the end of the four fiscal quarter period ending with the fiscal quarter immediately prior to the fiscal quarter in which such determination is made (or if financial statements have not been delivered hereunder for that fiscal quarter which ends the four fiscal quarter period, then the financial statements delivered hereunder for the quarter ending immediately prior to that quarter). "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes. "Transaction Documents" means the Loan Documents and the documents executed and delivered by the Borrower or any of its Subsidiaries in connection with the AbilityOne Acquisition including, without limitation, the AbilityOne Acquisition Agreement. "Transferee" is defined in Section 12.4. "Type" means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurodollar Advance and with respect to any Loan, its nature as a Floating Rate Loan or a Eurodollar Loan. 16 "Unfunded Liabilities" means the amount (if any) by which the present value of all vested and unvested accrued benefits under each Single Employer Plan subject to Title IV of ERISA exceeds the fair market value of all such Plan's assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan for which a valuation report is available, using PBGC actuarial assumptions for single employer plan terminations. "Unmatured Default" means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default. "Webster" means Webster Veterinary Supply, Inc., a Minnesota corporation. "Weighted Average Life to Maturity" means when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required scheduled payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the outstanding voting securities (other than directors' qualifying shares) of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. 1.2. Plural Forms. The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms. ARTICLE II THE CREDITS 2.1. Loans. 2.1.1 Amounts of Loans. Subject to the terms and conditions set forth in this Agreement, each Lender severally and not jointly agrees to make on the Funding Date, a term loan, in Dollars, to the Borrower in an aggregate amount up to such Lender's Commitment. All Loans shall be made by the Lenders on the Funding Date simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Loan hereunder nor shall the Commitment of any Lender be increased or decreased as a result of any such failure. 2.1.2 Borrowing Notice. The Borrower shall deliver to the Agent an irrevocable notice (a "Borrowing Notice") signed by it on the Funding Date. Such Borrowing Notice shall specify (i) the aggregate amount of the Loans being requested and (ii) instructions 17 for the disbursement of proceeds of such Loans. The Loans shall initially be Floating Rate Loans and thereafter may be continued as Floating Rate Loans or converted into Eurodollar Rate Loans in the manner provided in Section 2.7 and subject to the other conditions and limitations therein set forth and set forth in this Article II. Any Borrowing Notice given pursuant to this Section 2.1.2 shall be irrevocable. 2.1.3 Making of Loans. Promptly after receipt of the Borrowing Notice under Section 2.1.2 in respect of the Loans, the Agent shall notify each Lender by telecopy, or other similar form of transmission, of the proposed Advance. Each Lender shall deposit an amount equal to its Pro Rata Share of the Loans with the Agent at its office in Chicago, Illinois, in immediately available funds, on the Funding Date, as specified in the Borrowing Notice. Subject to the fulfillment of the conditions precedent set forth in Article IV, the Agent shall make the proceeds of such amounts received by it available to the Borrower at the Agent's office in Chicago, Illinois on such date and shall disburse such proceeds in accordance with the Borrower's disbursement instructions set forth in such Borrowing Notice. The failure of any Lender to deposit the amount described above with the Agent on such date shall not relieve any other Lender of its obligations hereunder to make its Loan on such date. 2.1.4 Repayment of the Loans. The Loans shall be repaid in a single installment payable on the Facility Termination Date. No installment of any Loan may be reborrowed once repaid. In addition to the scheduled payments on the Loans, the Borrower (i) may make the voluntary prepayments described in Section 2.6 for credit against the scheduled payments on the Loans pursuant to Section 2.6 and (ii) shall make the mandatory prepayments prescribed in Section 2.2 for credit against the scheduled payments on the Loans pursuant to Section 2.2. 2.2. Required Payments; Termination. (a) Any outstanding Advances and all other unpaid Obligations shall be paid in full by the Borrower on the Facility Termination Date. Until all of the Obligations (other than contingent indemnity obligations) shall have been fully paid and satisfied and all financing arrangements among the Borrower and the Lenders hereunder and under the other Loan Documents shall have been terminated, all of the rights and remedies under this Agreement and the other Loan Documents shall survive. (b) Asset Sales and Insurance Proceeds. Upon (1) the consummation of any sale, lease, conveyance, transfer, casualty or other disposition ("Asset Sale") of Property (other than sales permitted under Sections 6.12.1 through 6.12.6) by the Borrower or any Subsidiary of the Borrower or (2) the receipt by the Borrower or any of its Subsidiaries of proceeds from insurance in connection with any property loss or casualty ("Loss Proceeds"), and in each case, except as provided in the second sentence of this clause (b), within five (5) Business Days after the Borrower's or any of its Subsidiaries' (x) receipt of any Net Cash Proceeds from any such Asset Sale or any such Loss Proceeds, or (y) conversion to cash or Cash Equivalent Investments of non-cash proceeds (whether principal or interest and including securities, release of escrow arrangements or lease payments) received from any Asset Sale, the Borrower shall make a mandatory prepayment of the Obligations, subject to the provisions governing the application of payments set forth in Section 2.2(d), in an amount equal to one hundred percent (100%) of such Net Cash Proceeds or Loss Proceeds or such proceeds converted from non-cash to cash or Cash 18 Equivalent Investments. Unless a Default or Unmatured Default shall have occurred and is continuing, in the event that the Borrower shall have given the Agent written notice within thirty (30) days after an Asset Sale or event giving rise to such Loss Proceeds of its intention to replace the assets or use such Net Cash Proceeds or Loss Proceeds, as applicable, to acquire other like-kind assets (which shall include, without limitation, assets acquired pursuant to a Permitted Acquisition) within twelve (12) months following such Asset Sale or the receipt of such Loss Proceeds, as applicable, then such Net Cash Proceeds or Loss Proceeds shall not be subject to the provisions of the first sentence of this clause (b) unless and to the extent that such applicable period shall have expired without such replacement having been made. (c) Financings. Upon the consummation of any Financing by the Borrower or any Subsidiary of the Borrower, within three (3) Business Days after the Borrower's or any of its Subsidiaries' receipt of any Net Cash Proceeds from such Financing, the Borrower shall make a mandatory prepayment of the Obligations, subject to the provisions governing the application of payments set forth in Section 2.2(d), in an amount equal to one hundred percent (100%) of such Net Cash Proceeds. (d) Application of Designated Prepayments. Each mandatory prepayment required by clauses (b) and (c) of this Section 2.2 shall be referred to herein as a "Designated Prepayment." Designated Prepayments shall be applied to repay Loans ratably in an amount equal to such Designated Prepayment. (e) Application and Priority of Prepayments. With respect to the reduction of the Loans on any date, Designated Prepayments shall first be applied to Floating Rate Loans and to any Eurodollar Rate Loans maturing on such date and then to subsequently maturing Eurodollar Rate Loans in order of maturity. 2.3. Ratable Loans; Types of Advances. Each Advance hereunder shall consist of Loans made from the several Lenders ratably in proportion to their respective Pro Rata Shares. The Advances may be Floating Rate Advances or Eurodollar Advances, or a combination thereof, selected by the Borrower in accordance with Section 2.7. 2.4. Facility Fee. The Borrower shall pay to the Agent, for the account of the Lenders a facility fee (the "Facility Fee") at a per annum rate equal to the Applicable Fee Rate multiplied by (i) prior to the Funding Date, each Lender's Commitment, and (ii) on and after the Funding Date, each Lender's Outstanding Credit Exposure, from the Closing Date to and including the date on which all of the Loans shall be repaid in full. All such Facility Fees payable hereunder shall be payable quarterly in arrears on each Payment Date. 2.5. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in the minimum amount of $1,000,000 (and in multiples of $100,000 if in excess thereof), and each Floating Rate Advance shall be in the minimum amount of $1,000,000 (and in multiples of $100,000 if in excess thereof). 2.6. Optional Principal Payments. The Borrower may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances, or any portion of the outstanding Floating Rate Advances, in a minimum aggregate amount of $1,000,000 or any integral multiple 19 of $1,000,000 in excess thereof, upon one (1) Business Day's prior notice to the Agent. The Borrower may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances, or, in a minimum aggregate amount of $1,000,000 or any integral multiple of $1,000,000 in excess thereof, any portion of the outstanding Eurodollar Advances upon three (3) Business Days' prior notice to the Agent. 2.7. Conversion and Continuation of Outstanding Advances; No Conversion or Continuation of Eurodollar Advances After Default. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurodollar Advances pursuant to this Section 2.7 or are repaid in accordance with Section 2.6. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or was repaid in accordance with Section 2.6 or (y) the Borrower shall have given the Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest Period. Subject to the terms of Section 2.6 and the payment of any funding indemnification amounts required by Section 3.4, the Borrower may elect from time to time to convert all or any part of an Advance of any Type into any other Type or Types of Advances. Notwithstanding anything to the contrary contained in this Section 2.7, during the continuance of a Default or an Unmatured Default, the Agent may (or shall at the direction of the Required Lenders), by notice to the Borrower, declare that no Advance may be made as, converted to or, following the expiration of any Interest Periods then in effect, continued as a Eurodollar Advance. The Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each conversion of an Advance or continuation of a Eurodollar Advance not later than 12:00 noon (Chicago time) on the same Business Day, in the case of a conversion into a Floating Rate Advance, or three (3) Business Days, in the case of a conversion into or continuation of a Eurodollar Advance, prior to the date of the requested conversion or continuation, specifying: (i) the requested date, which shall be a Business Day, of such conversion or continuation, (ii) the aggregate amount and Type of the Advance which is to be converted or continued, and (iii) the amount of such Advance which is to be converted into or continued as a Eurodollar Advance and the duration of the Interest Period applicable thereto. 2.8. Changes in Interest Rate, etc. Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.7, to but excluding the date it is paid or is converted into a Eurodollar Advance pursuant to Section 2.7 hereof, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each 20 Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined by the Agent as applicable to such Eurodollar Advance based upon the Borrower's selections under Section 2.7 and otherwise in accordance with the terms hereof. No Interest Period may end after the Facility Termination Date. 2.9. Rates Applicable After Default. During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each Eurodollar Advance shall bear interest for the remainder of the applicable Interest Period at a rate per annum equal to the Floating Rate in effect from time to time plus 2% per annum, (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate in effect from time to time plus 2% per annum; provided that, during the continuance of a Default under Section 7.2, 7.3 (solely arising as a result of a breach of any of Sections 6.20 through 6.22), 7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above shall be applicable to all Credit Extensions, Advances, fees and other Obligations hereunder without any election or action on the part of the Agent or any Lender. 2.10. Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the Agent's address specified pursuant to Article XIII, or at any other Lending Installation of the Agent specified in writing by the Agent to the Borrower, by 12:00 noon (Chicago time) on the date when due and shall (except as otherwise specifically required hereunder) be applied ratably by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Agent from such Lender. The Agent is hereby authorized to charge the account of the Borrower maintained with BOMC for each payment of the Obligations as it becomes due hereunder. 2.11. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (ii) The Agent shall also maintain accounts in which it will record (a) the date and the amount of each Loan made hereunder, the Type thereof and the Interest Period (in the case of a Eurodollar Advance) with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, (c) the effective date and amount of each Assignment Agreement delivered to and accepted by it and the parties thereto pursuant to Section 12.3, (d) the amount of any sum received by the Agent 21 hereunder from the Borrower and each Lender's share thereof, and (e) all other appropriate debits and credits as provided in this Agreement, including, without limitation, all fees, charges, expenses and interest. (iii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided, however, that the failure of the Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms. (iv) Any Lender may request that its Loans be evidenced by a promissory note in substantially the form of Exhibit E (a "Note"). In such event, the Borrower shall prepare, execute and deliver to such Lender such Note payable to the order of such Lender or its registered assigns. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (prior to any assignment pursuant to Section 12.3) be represented by one or more Notes payable to the order of the payee named therein, except to the extent that any such Lender subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs (i) and (ii) above. 2.12. Telephonic Notices. The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any person or persons the Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The Borrower agrees to deliver promptly to the Agent a written confirmation, signed by an Authorized Officer, if such confirmation is requested by the Agent or any Lender, of each telephonic notice. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error. 2.13. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance shall be payable in arrears on each Payment Date, commencing with the first such date to occur after the Closing Date, on any date on which the Floating Rate Advance is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on that portion of the outstanding principal amount of any Floating Rate Advance converted into a Eurodollar Advance on a day other than a Payment Date shall be payable on the date of conversion. Interest accrued on each Eurodollar Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurodollar Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar Advance having an Interest Period longer than three (3) months shall also be payable on the last day of each three-month interval during such Interest Period. Interest on Eurodollar Advances and all fees hereunder shall be calculated for actual days elapsed on the basis of a 360-day year. Interest on Floating Rate Advances shall be calculated for actual days elapsed on the basis of a 365/366-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to 12:00 noon (Chicago time) at the place of payment. If any payment 22 of principal of or interest on an Advance, any fees or any other amounts payable to the Agent or any Lender hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest, fees and commissions in connection with such payment. 2.14. Notification of Advances, Interest Rates and Prepayments; Availability of Loans. Promptly after receipt thereof, the Agent will notify each Lender of the contents of each Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. The Agent will notify the Borrower and each Lender of the interest rate applicable to each Eurodollar Advance promptly upon determination of such interest rate and will give the Borrower and each Lender prompt notice of each change in the Alternate Base Rate. Not later than 12:00 noon (Chicago time) on the Funding Date, each Lender shall make available its Loan or Loans in funds immediately available in Chicago to the Agent at its address specified pursuant to Article XIII. The Agent will promptly make the funds so received from the Lenders available to the Borrower at the Agent's aforesaid address. 2.15. Lending Installations. Each Lender may book its Loans at any Lending Installation selected by such Lender, and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans and any Notes issued hereunder shall be deemed held by each Lender for the benefit of any such Lending Installation. Each Lender may, by written notice to the Agent and the Borrower in accordance with Article XIII, designate replacement or additional Lending Installations through which Loans will be made by it and for whose account Loan payments are to be made. 2.16. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Agent for the account of the Lenders, that it does not intend to make such payment, the Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by the Agent, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan. 2.17. Replacement of Lender. If the Borrower is required pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any Lender's obligation to make or continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender so affected an "Affected Lender"), the Borrower may elect, if such amounts continue to be charged or such suspension is still effective, to terminate or replace the Loans of such Affected Lender, provided that no Default or Unmatured Default shall have occurred and be continuing at the time of such termination or replacement, and provided 23 further that, concurrently with such termination or replacement, (i) if the Affected Lender is being replaced, another bank or other entity which is reasonably satisfactory to the Borrower and the Agent shall agree, as of such date, to purchase for cash the Outstanding Credit Exposure of the Affected Lender pursuant to an Assignment Agreement substantially in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such Affected Lender in immediately available funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected Lender been prepaid on such date rather than sold to the replacement Lender, in each case to the extent not paid by the purchasing Lender and (iii) if the Affected Lender is being terminated, the Borrower shall pay to such Affected Lender all Obligations due to such Affected Lender (including the amounts described in the immediately preceding clauses (i) and (ii) plus the outstanding principal balance of such Affected Lender's Credit Extensions). ARTICLE III YIELD PROTECTION; TAXES 3.1. Yield Protection. If, on or after the Closing Date, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in any such law, rule, regulation, policy, guideline or directive or in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) subjects any Lender or any applicable Lending Installation to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender in respect of its Eurodollar Loans, or (ii) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to Eurodollar Advances), or (iii) imposes any other condition the result of which is to increase the cost to any Lender, any applicable Lending Installation of making, funding or maintaining its Commitment or Eurodollar Loans, or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with its Commitment or Eurodollar Loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of 24 Commitment or Eurodollar Loans held or interest received by it, by an amount deemed material by such Lender, and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation of making or maintaining its Eurodollar Loans or Commitment, as applicable, or to reduce the return received by such Lender or applicable Lending Installation in connection with such Eurodollar Loans or Commitment, then, within 15 days of demand, accompanied by the written statement required by Section 3.6, by such Lender, the Borrower shall pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction in amount received. 3.2. Changes in Capital Adequacy Regulations. If a Lender determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender is increased as a result of a Change, then, within 15 days of demand, accompanied by the written statement required by Section 3.6, by such Lender, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender determines is attributable to this Agreement, its Outstanding Credit Exposure or its Commitment to make Loans, as applicable, hereunder (after taking into account such Lender's policies as to capital adequacy). "Change" means (i) any change after the Closing Date in the Risk-Based Capital Guidelines or (ii) any adoption of, or change in, or change in the interpretation or administration of any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the Closing Date which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in effect in the United States on the Closing Date, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled "International Convergence of Capital Measurements and Capital Standards," including transition rules, and any amendments to such regulations adopted prior to the Closing Date. 3.3. Availability of Types of Advances. If (x) any Lender determines that maintenance of its Eurodollar Loans at a suitable Lending Installation would violate any applicable law, rule, regulation, or directive, whether or not having the force of law, or (y) the Required Lenders determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately reflect the cost of making or maintaining Eurodollar Advances, or (iii) no reasonable basis exists for determining the Eurodollar Base Rate, then the Agent shall suspend the availability of Eurodollar Advances and require any affected Eurodollar Advances to be repaid or converted to Floating Rate Advances on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law, subject to the payment of any funding indemnification amounts required by Section 3.4. 3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not made or continued, or a Floating Rate 25 Advance is not converted into a Eurodollar Advance, on the date specified by the Borrower for any reason other than default by the Lenders, or a Eurodollar Advance is not prepaid on the date specified by the Borrower for any reason, the Borrower will indemnify each Lender for any reasonable loss or cost incurred by it resulting therefrom, including, without limitation, any reasonable loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance. 3.5. Taxes. (i) All payments by the Borrower to or for the account of any Lender or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all Taxes. If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) the Borrower shall make such deductions, (c) the Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) the Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof or, if a receipt cannot be obtained with reasonable efforts, such other evidence of payment as is reasonably acceptable to the Agent, in each case within 30 days after such payment is made. (ii) In addition, the Borrower shall pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note or any other Loan Document ("Other Taxes"). (iii) The Borrower shall indemnify the Agent and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Agent or such Lender as a result of its Commitment, any Credit Extensions made by it hereunder, or otherwise in connection with its participation in this Agreement and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within 30 days of the date the Agent or such Lender makes demand therefor pursuant to Section 3.6. (iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a "Non-U.S. Lender") agrees that it will, not more than ten Business Days after the date on which it becomes a party to this Agreement (but in any event before a payment is due to it hereunder), (i) deliver to each of the Borrower and the Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI or successor forms, certifying in either case that such Non-U.S. Lender is entitled to receive payments under this Agreement or under any Note without deduction or withholding of any United States federal income taxes, or (ii) in the case of a Non-U.S. Lender that is fiscally transparent, deliver to the Agent a United States Internal Revenue Service Form W-8IMY or successor form together with the applicable accompanying duly 26 completed copies of United States Internal Revenue Service applicable Forms W-8 or W-9 or successor forms, as the case may be, and certify that it is entitled to an exemption from United States withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the Borrower and the Agent renewals or additional copies of such form (or any successor form) (x) on or before the date that such form expires or becomes obsolete, (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, and (z) from time to time upon reasonable request by the Borrower or the Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. (v) For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to clause (iv) above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv) above, the Borrower shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes. (vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. (vii) If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by the Agent as tax, withholding therefor, or 27 otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees of attorneys for the Agent). The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement. 3.6. Lender Statements; Survival of Indemnity. Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar Loan through the purchase of a deposit of the type, currency and maturity corresponding to the deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement. 3.7. Alternative Lending Installation. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances under Section 3.3, so long as such designation is not, in the judgment of such Lender, reasonably disadvantageous to such Lender. A Lender's designation of an alternative Lending Installation shall not affect the Borrower's rights under Section 2.17 to replace a Lender. ARTICLE IV CONDITIONS PRECEDENT 4.1. Effectiveness of Commitments. This Agreement shall not become effective, nor shall any Lender be required to make any Credit Extension hereunder, unless on or before September 19, 2003 the following conditions precedent have been satisfied and the Borrower has furnished to the Agent with sufficient copies for the Lenders: 4.1.1 Copies of the articles or certificate of incorporation (or the equivalent thereof) of each Credit Party, in each case, together with all amendments thereto, and a certificate of good standing, each certified by the appropriate governmental officer in its jurisdiction of organization and accompanied by a certification by the Secretary or Assistant Secretary of such Credit Party that there have been no changes in the matters certified by such governmental officer since the date of such governmental officer's certification. 4.1.2 Copies, certified by the Secretary or Assistant Secretary (or the equivalent thereof) of each Credit Party, in each case, of its by-laws and of its Board of Directors' 28 resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which such Credit Party is a party. 4.1.3 An incumbency certificate, executed by the Secretary or Assistant Secretary (or the equivalent thereof) of each Credit Party which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of each such Credit Party authorized to sign the Loan Documents to which it is a party, upon which certificate the Agent and the Lenders shall be entitled to rely until informed of any change in writing by the applicable Credit Party. 4.1.4 A certificate reasonably acceptable to the Agent signed by the chief financial officer of the Borrower, stating that on the Funding Date (a) no Default or Unmatured Default has occurred and is continuing, (b) all of the representations and warranties in Article V shall be true and correct (or, in the case of representations and warranties applicable to AbilityOne, true and correct to the best of such officer's knowledge) as of such date and (c) no material adverse change in the business, Property, condition (financial or otherwise), operations or results of operations, performance or prospects of the Borrower and its Subsidiaries taken as a whole has occurred since April 26, 2003 and, to the best of such officer's knowledge, of AbilityOne and its Subsidiaries taken as a whole has occurred since December 31, 2002. 4.1.5 An initial compliance certificate, dated as of the Closing Date and reflecting calculations as of July 26, 2003, in substantially the form of Exhibit B hereto. 4.1.6 Pro forma opening financial statements for the Borrower giving effect to the AbilityOne Acquisition as of the last day of the twelve-month period ending on July 26, 2003, and (ii) projections updating the projections previously provided to the Agents on or about August 15, 2003. 4.1.7 A written opinion of Matthew Levitt, counsel to the Credit Parties, in form and substance reasonably satisfactory to the Agent and addressed to the Lenders in substantially the form of Exhibit A hereto. 4.1.8 Duly executed originals of this Agreement and the Guaranty from each of the Credit Parties parties thereto and duly executed originals of any Notes requested by a Lender pursuant to Section 2.11 payable to the order of each such requesting Lender, and copies of the AbilityOne Acquisition Agreement that will be in effect on and after the date of this Agreement in form and substance satisfactory to the Agent and its counsel. 4.1.9 Evidence satisfactory to the Agent that (i) all conditions precedent to the consummation of the AbilityOne Acquisition have been satisfied or waived by the Borrower and all of the representations and warranties in the AbilityOne Acquisition Agreement are accurate in all material respects as of the date on which the AbilityOne Acquisition is consummated; (ii) the AbilityOne Acquisition has been approved by all necessary corporate action of the Borrower's and AbilityOne's respective directors and shareholders; (iii) the AbilityOne Acquisition Agreement includes a condition precedent to the consummation of the AbilityOne Acquisition providing that no material adverse 29 change shall have occurred with respect to AbilityOne and its Subsidiaries taken as a whole since December 31, 2002; (iv) all required U.S. governmental approvals related to the AbilityOne Acquisition have been obtained and all related filings made and any applicable waiting periods shall have expired or been terminated, including those prescribed by the Hart-Scott-Rodino Antitrust Improvements Act, as amended; (v) the AbilityOne Acquisition shall close contemporaneously with the funding under this Agreement; (vi) no material breach, default or waiver of any term or provision of the AbilityOne Acquisition Agreement by the Borrower or any of its Subsidiaries, which are parties thereto, or, to the best of the Borrower's knowledge, the other parties thereto, has occurred (except for such breaches, defaults and waivers, if any, consented to in writing by the Agent) and no action has been taken by any competent authority which, in the reasonable judgment of the Agent and the Arrangers restrains, prevents or imposes any material adverse condition upon, or seeks to restrain, prevent or impose any material adverse condition upon, the AbilityOne Acquisition; and (vii) after giving effect to the AbilityOne Acquisition, the Borrower shall own, directly or indirectly, not less than one hundred percent of the capital stock of AbilityOne. 4.1.10 Written money transfer instructions, in substantially the form of Exhibit D, addressed to the Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Agent may have reasonably requested. 4.1.11 The Agent shall have determined that (i) there is an absence of any material adverse change or disruption in primary or secondary loan syndication markets, financial markets or in capital markets generally that would likely impair syndication of the Loans hereunder, and (ii) the Borrower has fully cooperated with the Agent's syndication efforts, including, without limitation, by providing the Agent with information regarding the Borrower's and its Subsidiaries' operations and prospects and such other information as the Agent deems necessary to successfully syndicate the Loans hereunder. 4.1.12 Evidence satisfactory to the Agent that the Existing Credit Agreement shall have been or shall simultaneously on the Closing Date be terminated (except for those provisions that expressly survive the termination thereof), all loans outstanding and other amounts owed to the lenders or agents thereunder shall have been, or shall simultaneously with the initial Advance hereunder, be paid in full, and all liens and security interests granted in connection therewith shall have been or shall simultaneously on the Closing Date be terminated. 4.1.13 A certificate of value, solvency and other appropriate factual information in form and substance reasonably satisfactory to the Agent and Arrangers from the chief financial officer of the Borrower (on behalf of the Borrower and its Subsidiaries) in his or her representative capacity supporting the conclusions that as of the initial funding date the Borrower and its Subsidiaries on a consolidated basis are Solvent and will be Solvent subsequent to incurring the Indebtedness contemplated under the Loan Documents, will be able to pay its debts and liabilities as they become due and will not be left with unreasonably small working capital for general corporate purposes. 30 4.1.14 Evidence satisfactory to the Agent that the Borrower has paid to the Agent and the Arrangers the fees agreed to in the fee letter dated August 26, 2003, among the Agent, the Arrangers and the Borrower. 4.1.15 Such other documents as any Lender or its counsel may have reasonably requested, including, without limitation, those documents set forth in Exhibit G hereto. 4.2. Initial Credit Extension. The Lenders shall not be required to make the initial Credit Extension unless on the Funding Date: 4.2.1 There exists no Default or Unmatured Default. 4.2.2 The representations and warranties contained in Article V are true and correct as of the Funding Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date. 4.2.3 All legal matters incident to the making of such Credit Extension shall be satisfactory to the Lenders and their counsel. Each Borrowing Notice with respect to each such Credit Extension shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2.1, 4.2.2 and 4.2.3 have been satisfied. Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit B as a condition to making a Credit Extension. ARTICLE V REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to each Lender and the Agent as of each of (i) the Closing Date, (ii) the Funding Date (after giving effect to the transactions contemplated by the Transaction Documents) and (iii) each other date as required by Section 4.2: 5.1. Existence and Standing. Each of the Borrower and its Subsidiaries is a corporation, partnership (in the case of Subsidiaries only) or limited liability company duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization, (ii) has all requisite corporate, partnership or limited liability company power and authority, as the case may be, to own, operate and encumber its Property and (iii) is qualified to do business and is in good standing (to the extent such concept applies to such entity) in all jurisdictions where the nature of the business conducted by it makes such qualification necessary and where failure to so qualify would reasonably be expected to have a Material Adverse Effect. 5.2. Authorization and Validity. Each Credit Party has the requisite corporate, partnership or limited liability company power and authority and legal right to execute and deliver the Transaction Documents to which it is a party and to perform its obligations thereunder. The execution and delivery by each Credit Party of the Transaction Documents to which it is a party and the performance of its obligations thereunder have been duly authorized 31 by proper corporate, partnership or limited liability company, as the case may be, proceedings, and the Transaction Documents to which each Credit Party is a party constitute legal, valid and binding obligations of such Credit Party enforceable against such Credit Party in accordance with their terms, except as enforceability may be limited by (i) bankruptcy, insolvency, fraudulent conveyances, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally; (ii) general equitable principles (whether considered in a proceeding in equity or at law); and (iii) requirements of reasonableness, good faith and fair dealing. 5.3. No Conflict; Government Consent. Neither the execution and delivery by any Credit Party of the Transaction Documents to which it is a party, nor the consummation by such Credit Party of the transactions therein contemplated, nor compliance by such Credit Party with the provisions thereof will violate (i) any applicable law, rule, regulation, order, writ, judgment, injunction, decree or award binding on such Credit Party or (ii) such Credit Party's articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating agreement or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which such Credit Party is a party or is subject, or by which it, or its Property, is bound, or conflict with, or constitute a default under, or result in, or require, the creation or imposition of any Lien in, of or on the Property of such Credit Party pursuant to the terms of, any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by any Credit Party, is required to be obtained by such Credit Party in connection with the execution and delivery of the Transaction Documents, the borrowings under this Agreement, the payment and performance by the Credit Parties of the Obligations, the consummation of the AbilityOne Acquisition or the legality, validity, binding effect or enforceability of any of the Transaction Documents. 5.4. Financial Statements. The April 26, 2003 consolidated financial statements of the Borrower and its Subsidiaries and, to the best of the Borrower's knowledge, the December 31, 2002 consolidated financial statements of AbilityOne and its Subsidiaries, in each case, heretofore delivered to the Agent and the Lenders were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Borrower and its Subsidiaries and, to the best of the Borrower's knowledge, AbilityOne and its Subsidiaries, as applicable, at such date and the consolidated results of their operations for the period then ended. 5.5. Material Adverse Change. Since April 26, 2003, there has been no change in the business, Property, condition (financial or otherwise), operations or results of operations, performance or prospects of the Borrower and its Subsidiaries taken as a whole which could reasonably be expected to have a Material Adverse Effect. To the best of the Borrower's knowledge, since December 31, 2002, there has been no change in the business, Property, condition (financial or otherwise), operations or results of operations, performance or prospects of AbilityOne and its Subsidiaries taken as a whole which could reasonably be expected to have a Material Adverse Effect. 32 5.6. Taxes. The Borrower and the Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any Subsidiaries, except in respect of such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided in accordance with Agreement Accounting Principles and as to which no Lien exists (except as permitted by Section 6.15.1) and as to which the failure to file such return or pay such taxes could not reasonably be expected to have a Material Adverse Effect. The United States income tax returns of the Borrower and the Subsidiaries (other than AbilityOne and its Subsidiaries) have been audited by the Internal Revenue Service through the fiscal year ended April 25, 1998. No liens have been filed and no claims are being asserted with respect to such taxes. The charges, accruals and reserves on the books of the Borrower and the Subsidiaries in respect of any taxes or other governmental charges are adequate. 5.7. Litigation and Contingent Obligations. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Loans or the consummation of the AbilityOne Acquisition. Other than any liability incident to any litigation, arbitration or proceeding which could not reasonably be expected to have a Material Adverse Effect, the Borrower and its Subsidiaries has no material contingent obligations required to be reflected on the Borrower's consolidated balance sheet in accordance with generally accepted accounting principles and not provided for or disclosed in the financial statements referred to in Section 5.4. 5.8. Subsidiaries. Schedule 5.8 contains an accurate list of all Subsidiaries of the Borrower as of the Funding Date (after giving effect to the AbilityOne Acquisition), setting forth their respective jurisdictions of organization and the percentage of their respective capital stock or other ownership interests owned by the Borrower or other Subsidiaries. All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable. 5.9. ERISA. The Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $10,000,000. Neither the Borrower nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, pursuant to Section 4201 of ERISA, any withdrawal liability to Multiemployer Plans. Each Plan complies in all material respects with all applicable requirements of law and regulations. No Reportable Event has occurred with respect to any Plan. Neither the Borrower nor any other member of the Controlled Group has withdrawn from any Multiemployer Plan within the meaning of Title IV of ERISA or initiated steps to do so, and, to the knowledge of the Borrower, no steps have been taken to reorganize or terminate, within the meaning of Title IV of ERISA, any Multiemployer Plan. 5.10. Accuracy of Information. The information, exhibits or reports furnished by the Borrower or any Subsidiary to the Agent or to any Lender in connection with the negotiation of, or compliance with, the Transaction Documents do not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein, in 33 light of the circumstances under which they were made, not misleading. The projected and pro-forma financial information furnished by or on behalf of any Credit Party to the Agent or any Lender in connection with the negotiation of, or compliance with, the Transaction Documents, were prepared in good faith based upon assumptions believed to be reasonable at the time. 5.11. Regulation U. Neither the Borrower nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate of buying or carrying margin stock (as defined in Regulation U), and after applying the proceeds of each Credit Extension, margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets of the Borrower and the Subsidiaries which are subject to any limitation on sale, pledge, or any other restriction hereunder. 5.12. Material Agreements. Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement or instrument to which it is a party, which default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or instrument evidencing or governing Indebtedness. 5.13. Compliance With Laws. The Borrower and the Subsidiaries have complied in all material respects with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property except for any failure to comply with any of the foregoing which could not reasonably be expected to have a Material Adverse Effect. 5.14. Ownership of Properties. The Borrower and the Subsidiaries have good title, free of all Liens other than those permitted by Section 6.15, to all of the assets reflected in the Borrower's most recent consolidated financial statements provided to the Agent, as owned by the Borrower and the Subsidiaries except (i) assets sold or otherwise transferred as permitted under Section 6.12 and (ii) to the extent the failure to hold such title could not reasonably be expected to have a Material Adverse Effect. 5.15. Plan Assets; Prohibited Transactions. None of the Credit Parties is an entity deemed to hold "plan assets" within the meaning of 29 C.F.R. (S) 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and assuming the accuracy of the representations and warranties made in Section 9.12 and in any assignment made pursuant to Section 12.3.3, neither the execution of this Agreement nor the making of Loans hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. 5.16. Environmental Matters. In the ordinary course of its business, the officers of the Borrower and the Subsidiaries consider the effect