10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

Or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to _____

Commission File Number: 333-134089

CPG International Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-2779385
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

801 Corey Street, Scranton, PA	18505
(address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (570) 558-8000

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yeso No x

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

There is no public market for the registrant’s common stock. As of March 25, 2008 the number of units of the registrant’s common stock, par value $0.01 per share, outstanding was 10, all of which are held by CPG International Holdings LP, the registrant’s direct parent company.

EXPLANATORY NOTE

Presentation of Financial Information

On May 10, 2005, we consummated the acquisition (the “Transaction”) of all the equity interests of the operating subsidiaries of Compression Polymers Holdings LLC, a Delaware limited liability company (the “Predecessor”). CPG International Inc., formerly known as Compression Polymers Holding II Corporation, a Delaware corporation (the “Successor”) and its wholly owned subsidiary, CPG International I Inc. (“CPG”), formerly known as Compression Polymers Holding Corporation , were each formed by AEA Investors LLC and its affiliates (“AEA Investors”) for the purpose of the Transaction. Compression Polymers Holdings LLC sold all of the equity interests of its operating subsidiaries to the Successor in connection with the Transaction.

All references in this report to the “Company,” “we,” “our” or “us” (and similar terms) mean (1) the Predecessor for periods ending on or prior to May 10, 2005, and (2) the Successor for periods beginning after May 10, 2005, in each case together with its consolidated financial subsidiaries.

As a result of the Transaction and resulting change in control and change in historical cost basis of accounting, we are required to present separately the operating results for the Predecessor periods up to and including the closing date of the Transaction (May 10, 2005) and the Successor periods following the closing date of the Transaction (May 11, 2005 and thereafter). The financial statements and operating results identified in this report as belonging to the “Predecessor” are those of Compression Polymers Holdings LLC, the parent entity existing for all periods shown prior to the completion of the Transaction. For the period beginning after the Transaction, the financial statements and operating results presented herein are those of the Successor. The Successor has guaranteed the Senior Floating Rate Notes due 2012 and the 10½% Senior Notes due 2013 of CPG, collectively, the “outstanding notes”, and, as a result, although CPG is the issuer of the outstanding notes, as required by SEC rules, the financial statements included herein for periods beginning after the Transaction are that of the Successor, unless otherwise noted. The Successor has no interests, operations or activities other than through its ownership of 100% of CPG and, accordingly, the financial statements of CPG would be substantially similar to those of the Successor included herein.

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CPG INTERNATIONAL INC.
FORM 10-K
DECEMBER 31, 2007
TABLE OF CONTENTS
	Page
Cautionary Note Regarding Forward Looking Statements	4
PART I
Item 1 Business.	6
Item 1A Risk Factors.	15
Item 1B Staff Comments.	23
Item 2 Properties.	24
Item 3 Legal Proceedings.	24
Item 4 Submission of Matters to Vote of Security Holders.	24
PART II
Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of
Equity Securities.	24
Item 6. Selected Financial Data.	25
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	26
Item7A Quantitative and Qualitative Disclosures About Market Risk.	47
Item 8 Financial Statements and Supplementary Data.	48
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	48
Item 9A Controls and Procedures.	48
Item 9B Other Information.	49
PART III
Item 10 Directors, Executive Officers and Corporate Governance.	49
Item 11 Executive Compensation.	52
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.	61
Item 13 Certain Relationships and Related Transactions and Director Independence.	63
Item 14 Principal Accountant Fees and Services.	65
PART IV
Item 15 Exhibits and Financial Statement Schedules.	65
Index to the Consolidated Financial Statements.	F-1

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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E in the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can generally identify forward-looking statements by our use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “seek,” “should,” or “will,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about (a) our acquisition of Santana Products (the “Santana Acquisition”), our acquisition of Procell Decking Systems™ (the “Procell Acquisition”) and our acquisition of Compos-A-Tron Manufacturing Inc. (the “Composatron Acquisition”); (b) the markets in which we operate, including growth of our various markets and growth in the use of synthetic products; and (c) our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance contained in this report and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section are forward-looking statements. The forward-looking statements contained herein regarding market share, market sizes and changes in markets are subject to various estimations, uncertainties and risks.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this report, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:

• risks associated with our substantial indebtedness and debt service;

• risks of increasing competition in our existing and future markets, including competition from new products introduced by competitors;

• risk that projections of increased market size do not materialize as expected;

• increases in prices and lack of availability of resin and other raw materials and our ability to pass any increased costs on to our customers in a timely manner;

• risks related to our dependence on the performance of our AZEK products;

• general economic or business conditions, either nationally, regionally or in the individual markets in which we conduct business may deteriorate and have an adverse impact on our business strategy, including without limitation, factors relating to interest rates, gross domestic product levels and activity in the residential, commercial and institutional construction market;

• changes in governmental laws and regulations, including environmental law, and regulations;

• continued increased acceptance of synthetic products as an alternative to wood and metal products;

• risks related to acquisitions we may pursue;

• our ability to retain management;

• our ability to meet future capital requirements;

• our ability to protect our intellectual property rights;

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• downgrades in our credit ratings; and

• other risks and uncertainties.

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. We do not undertake and specifically decline any obligation to update any such statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments.

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Item 1. Business.

Company Overview

We are a leading supplier of premium, low maintenance building products designed to replace wood, metal and other materials in the residential, commercial and industrial markets. With a focus on manufacturing excellence, proprietary technologies and quality, we have introduced our products through distribution networks to sizable markets increasingly converting to low maintenance materials. We have developed a number of branded products including AZEK® Trim, AZEK Deck, AZEK Moulding Comtec and Hiny Hiders bathroom partition systems, and EverTuff™ and TuffTec™ locker systems. We operate the following two business units:

• AZEK Building Products Inc., or AZEK Building Products, manufactures exterior residential building products such as AZEK Trim, AZEK Deck, and AZEK Moulding for the residential and commercial building market. Additionally AZEK Building Products produces Celtec and other non-fabricated products for the industrial market; and

• Scranton Products Inc., or Scranton Products, produces fabricated bathroom partition and locker systems under the Comtec, Santana, Hiny Hiders, EverTuff and TuffTec labels for the commercial market and Seaboard^® and Flametec^® and other non-fabricated products for special application industrial markets.

For financial information regarding our segments, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this report, as well as Note 2 “Segment Information” to our consolidated financial statements in this report.

AZEK Building Products

Our AZEK Building Products business unit, representing approximately 68%, 62% and 67% of our net sales for the years ended December 31, 2007, 2006 and 2005, respectively, manufactures product for the residential markets under the AZEK brand and product for the industrial markets under several brands including Celtec. Through our AZEK Trim and AZEK Moulding product lines, we offer a variety of products for exterior housing applications such as trim, fascia, soffit, cornerboards, millwork, mouldings and window and door casements. With AZEK Deck, we supply deck boards and porch board for residential housing. AZEK products are similar to finished wood aesthetically, but unlike wood do not require any upkeep for protection. AZEK products provide many functional advantages as they do not warp or rot, are impervious to water and insect infestation and do not require paints or stains for protection. However in the case of AZEK Trim, it can be painted to achieve a custom color and will hold paint longer in applications where the product is painted. Both AZEK Trim and AZEK Deck are listed with the International Code Council (ICC). Serving the industrial markets, Celtec and other branded products are substitutes for wood and metal in a variety of applications, including industrial tank linings, marine products, fire retardant products and commercial signage.

On January 31, 2007, we completed the acquisition of Procell Decking, referred to herein as the Procell Acquisition. This product line was rebranded as AZEK Deck in 2007. We combined the Procell Decking operations with our AZEK Building Products business unit in order to effectively leverage AZEK’s brand, sales team, and two-step distribution footprint. AZEK Deck is manufactured with a cellular PVC technology combined with agra-fiber to produce a durable, long-life product with superior attributes that serve as a replacement for wood and composite products in decking applications. The combination of cellular PVC and the agra fiber create a product that has superior attributes over wood or wood composite decks. Most notably, AZEK Deck is resistant to staining, resistant to scratching and when fastened close to the edge of the board is resistant to splitting. All of our AZEK products are manufactured from comparable raw material ingredients, including polyvinyl chloride, or PVC, and are manufactured internally through similar processes, providing significant cost benefits through vertical integration.

On February 29, 2008, we completed the acquisition of Compos-A-Tron Manufacturing Inc., referred to herein as the Composatron Acquisition. Composatron is a privately held manufacturer of Premier and Trademark

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Railing Systems, leading composite railing solutions for the residential housing market. The Premier and Trademark branded railing systems are manufactured using a PVC / wood flour composite and a co-extruded PVC capstock. The products have the subtle texture of painted wood and are ICC code listed. The product lines offered by Composatron are highly complimentary to the Company’s AZEK Deck products and already offer a successful rail system that matches the AZEK Deck color palette. Composatron will be combined with our AZEK Building Products business unit.

We sell our AZEK products through an expanding nationwide network of specialty building product distributors with over 74 locations who then sell to over 2,100 dealers including lumber yards, contractors and installers. In addition, we sell Celtec and other similarly manufactured products through a similar national distribution network. Due to our product quality, market leadership and national sales and distribution network, AZEK has developed significant brand awareness within the residential home exteriors market, making it the product of choice for consumers of low maintenance home exterior products.

Scranton Products

Our Scranton Products business unit, representing approximately 32%, 38% and 33% of our net sales for the years ended December 31, 2007, 2006 and 2005, respectively, fabricates our Comtec and Santana synthetic bathroom partition and locker systems, and manufactures non-fabricated products, such as Seaboard and Flametec, that are utilized in various applications including semiconductors and marine construction, food preparation, playground equipment and other diverse applications. We have been able to successfully differentiate our product offering from our competitors through the introduction of proprietary products that are flame retardant, ultraviolet stable and highly resistant to abrasion or chemical corrosion. In addition, we believe we are the largest vertically integrated supplier of synthetic bathroom partition and locker systems, which we sell to schools, universities, parks, recreational facilities, stadium arenas, industrial plants, as well as various retail and commercial facilities. Our bathroom partition and locker alternatives, sold under our leading brands of Comtec, Capitol, EverTuff, Hiny Hiders and TuffTec, are impervious to rust, dents, and scratches; are longer lived; graffiti resistant; easily cleaned; and require minimal maintenance once installed, unlike competing metal products. All of our products within this business unit are derived from comparable raw material ingredients, including either high density polyethylene, or HDPE, or polypropylene, or PP, and are manufactured internally through similar processes. This provides us with cost benefits compared to competitors who do not have our vertically integrated manufacturing capacity and therefore may have a less competitive cost position. We sell our bathroom partition and locker systems through both a direct and indirect sales force which covers over 1,200 local dealers across the United States, Canada and Latin America.

On April 29, 2006, we completed the acquisition of Santana Holdings Corporation, the direct parent of Santana Products, Inc., referred to herein as the Santana Acquisition. Santana was combined with our Scranton Products business unit. Santana was one of the largest, privately held manufacturers of solid plastic commercial bathroom partitions, lockers, benches and vanities in the United States. We believe that the Santana Acquisition helped us expand our product base, increase our distributor network and expanded our portfolio of premium branded products.

Our Competitive Strengths

We believe that our key competitive strengths are:

Leading Market Positions with Recognized Branded Leadership.

• AZEK Building Products. In a 2007 Brand Use survey conducted by Builder Magazine, AZEK trim was named the #1 brand, in the category of Exterior Decorative Mouldings/Trim/Columns, and was voted #1 in: in (i) brand familiarity, (ii) brand most used, (iii) brand most used in the past two years, and (iv) quality.

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• Scranton Products. We believe we are the leading manufacturer of highly engineered synthetic bathroom and locker room products with our Comtec, Capitol, Hiny Hiders and EverTuff brands. With the support of our manufacturing and distribution capabilities, we believe we have established TuffTec as the market leading brand in the synthetic locker market. Each of these brands is well established and architects frequently request our fabricated products by name. In addition, we have successfully branded many of our non-fabricated products, such as Seaboard and Flametec.

Extensive and Growing Distribution Network. Our products are distributed through an extensive network consisting of manufacturers’ representatives, distributors and dealers. We utilize a two-step distribution system through which our AZEK products are first sold to wholesale distributors, who in turn sell them to dealers, such as lumber yards or retail outlets. AZEK distributors are parties to distribution agreements which contain among other items, a clause that prohibits the distributor from carrying other brands of cellular PVC building products which may compete with the AZEK brand. Our internal AZEK sales force consists of seasoned marketing professionals, most of whom have been chosen for their experience in promoting other branded building products through two-step distribution channels. We choose distributors based on their ability to market and promote AZEK through their internal sales force and other industry contacts. Currently, our AZEK distributor network services dealers across the United States and Canada through over 74 locations. We have increased our AZEK dealer base from 150 dealers in 2001 to over 2,100 local stocking dealers as of December 31, 2007. No single dealer location accounts for more than 2% of AZEK sales. AZEK is the exclusive cellular PVC trim product carried by virtually all our dealers.

Low-Cost Manufacturer. Through over 24 years of developing highly engineered fabricated products based on our manufacturing and fabrication expertise, we have positioned our company as a low-cost vertically integrated manufacturer. Our competitive advantages include the proprietary resin blends and equipment customization techniques we have developed over many years. We believe our manufacturing expertise also allows us to obtain a much higher throughput, and consequently lower unit production costs, from our manufacturing process than most of our competitors. In addition, we have significant scale in purchasing resin that places us in a better cost position relative to many of our competitors. The combination of our market-leading size, vertically integrated business model and the cost savings associated with our high throughput operations provides us with significant cost and competitive advantages.

Experienced and Incentivized Management Team. We are led by an experienced and committed senior management team that has successfully guided us through historically high resin prices in 2005 and 2006, as well as difficult housing markets in 2006 and 2007. Members of our management team hold approximately 10% of total equity in CPG Holdings, LP, our direct parent company.

Business Strategy

The key elements of our business strategy are:

Drive Our Product Mix Toward High Value-Added End Use Building Products. We are focused on creating the leading brands of innovative building products targeted at the residential and commercial building product markets. We believe that targeting our product offering on the final end user adds substantial value to our business because it allows us to take advantage of our brands, well developed sales networks and our position as a fully integrated, low cost manufacturer of the products we sell.

• AZEK Building Products. Within AZEK Building Products, we are creating the premium brand of exterior, low maintenance, residential building products for a wide range of home exterior applications. We began this with the introduction of AZEK Trim seven years ago and have continued to expand the product offering through new product development. AZEK has expanded from trimboards, to mouldings and decking. We are committed to continue to grow the AZEK Building Products offering of home exterior products over time and we believe the scale achieved in raw materials, manufacturing and the sales channel by these product introductions will increase sales and profitability over time.

• Scranton Products. Within Scranton Products, we are focused on expanding our bathroom and locker systems business marketed through our Comtec, Capitol and Santana brands. Our low maintenance, long

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life product offering focused on the commercial building market represents another opportunity to grow our end use building product offering in a differentiated market. We benefit from being able to take advantage of our brands, well developed sales networks and our position as a fully integrated, low cost manufacturer of the products we sell. We plan to continue to leverage these strengths by growing our product offering and expanding into new markets with the goal of increasing sales and profitability over time.

Investment in and expansion of our residential home exteriors business through AZEK Building Products and our bathroom and locker room business within Scranton Products is the key element in our ability to continue to grow our business profitably over time.

Continue to Develop Brands and Innovative Products. We continuously seek opportunities to leverage our core capabilities with premium, low-maintenance branded building products to expand into adjacent end markets. Our value-added branded products, such as AZEK and TuffTec, were internally developed and now account for more than 81% of our net sales for the year ended December 31, 2007. We have also acquired families of branded products such as AZEK Deck, Hiny Hiders and Capitol to supplement internal growth. We believe that branded, end use products offer more stability in terms of pricing in the market and generate higher gross margins. In order to build upon our brand identity to further differentiate ourselves from our competitors and grow our leading market share in our markets, we seek to introduce new products, acquire well positioned products and enhance our existing offerings through research and development activities. Examples of new branded products include AZEK Moulding to complement AZEK Trim and AZEK Porch, an extension of AZEK Deck. New product development and enhancements also include our introduction of a new color palette and unique product extensions such as granite, marble, speckled and slip-resistant surfaces with respect to our bathroom partition systems. In addition, we endeavor to utilize existing products and know-how for new applications. For example, the development of our synthetic locker systems was an extension of our partition systems and demonstrates our innovative product development strategy.

Capitalize on Material Conversion Opportunity. Across all of our target markets, we are focused on capitalizing on the economic and functional advantages of our products relative to competing wood and metal products. While our AZEK and Comtec products’ initial price points can be more expensive than traditional wood, fiber or metal products on an installed cost basis, they offer customers a very attractive lifetime value relative to competing wood and metal products, driven by minimal maintenance requirements, simpler installation and longer product life. Benefits of our highly-engineered synthetic products include lower life cycle cost; ease of fabrication; low moisture absorption; superior corrosion resistance, even compared to stainless steel; high strength-to-weight ratios; low maintenance; and improved cosmetic characteristics. We have been leading this conversion in our target markets, such as synthetic trim, bathroom products, lockers and a diverse array of other markets, including marine, signage, semiconductor, industrial and recreational markets. We intend to seek additional growth in our net sales and profitability from material conversion given our products’ excellent relative aesthetics, performance characteristics and lower lifetime costs as compared to traditional wood and metal products.

Continue to Build Market Share of Our Branded Products. We have successfully created meaningful brand recognition and customer loyalty with respect to our brands such as AZEK Trim, AZEK Deck, AZEK Moulding, Comtec, Capitol, EverTuff, TuffTec, Hiny Hiders, and Celtec, and are focused on further expanding our sales of these and other branded products. We believe our branded products are market leaders in their respective market segments. We have invested heavily in a national advertising and marketing campaign focused on architects, contractors and installers to accelerate the conversion from wood to synthetic home exterior products and to promote the AZEK brand. We believe sales of AZEK Trim should continue to grow, as the exterior trim markets are still in the early stage of material conversion process. Sales of AZEK Deck should continue to grow as this conversion process is also in the early stages. In our synthetic bathroom and locker systems business, we seek to increase sales to national accounts and continue to increase our market share at the expense of metal competitors and other synthetic fabricators that are not vertically integrated and have a higher manufacturing cost position. Sales growth of our synthetic lockers was strong in 2007 and 2006, and we believe these lockers possess continued growth opportunities associated with increased market penetration and material conversion. We are focused on maintaining our market leading positions while simultaneously seeking additional growth from material conversion through further education of architects,

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builders, distributors, dealers and other consumers regarding the respective advantages of our products over competing wood, fiber and metal products.

Leverage Our Manufacturing Excellence. With over 24 years of experience in developing highly engineered synthetic products, we have gained significant internal manufacturing expertise and technical knowledge, and are focused on remaining a leader in plastic extrusion and fabrication. Our products are manufactured using internally developed resin mixes that are the product of years of research, development and experience in field application. We spent over 10 years developing AZEK Trim and, as a result, we believe that AZEK’s highly engineered manufacturing technology would be difficult to replicate. We perform significant customization on each machine following manufacturer installation. We maintain a dedicated on-site laboratory with fully functioning mixing, heating, and extrusion capabilities, and we use this facility to continue our product innovation and experiment with new additives and processes. To ensure our ongoing product quality and manufacturing leadership, we are committed to our continuous process improvement and employee empowerment model based upon LEAN manufacturing principles. We are also focused on improving our leading manufacturing technology to increase capacity and productivity, which would in turn lead to increased volume and profitability.

Our Products

AZEK Building Products

Residential Building Products. As the market leader in premium exterior branded building products, we offer a variety of products under the AZEK brand for numerous residential exterior applications which include:

• AZEK Trim: AZEK Trim was the first, and to our knowledge, the only non wood trim product to be listed with the ICC. Our free foam cellular PVC technology produces a product that has unparalleled uniformity, durability, workability and beauty. Product offerings under AZEK Trim, including:

AZEK Trim-Traditional- With a smooth surface on both sides, AZEK Traditional Trim has the look and feel of a high end wood trim board.

AZEK Trim – Frontier – The Frontier series has reversible surfaces. One side offers the traditional smooth look while the other side has a rustic patterned texture.

AZEK Sheet - AZEK Sheet is available in sizes from 4’x 8’ to 4’x 20’ in a variety of thicknesses and is intended for pop-out bay windows, raised panels and dormers and is easily used for applications over 12’ wide.

AZEK to Mill (“ATM”) – This offering represents the first free foam PVC product to be manufactured at a full 1.25” thick. This thickness makes it easier to fabricate thicker profiles such as window sills and custom millwork. ATM is available in board sizes of 1 ¼” x 9 ¼” x 18’ and sheet size of 1 ¼” x 48” x 8’.

AZEK Beadboard – Available in two board styles, this popular item is perfect for wainscoting, porch ceilings, soffits, and hot tub surrounds. The reversible edge/ center bead and v-groove offer design flexibility when planning your project.

AZEK Cornerboard – Pre-formed for easy installation, the AZEK Cornerboard has a seam that will never open ensuring long lasting good looks. The AZEK Cornerboard complements all housing exteriors and is available in either the Traditional or Frontier finish.

• AZEK Moulding: AZEK Mouldings have the look and feel of AZEK Trim and are available in the most popular moulding profiles and feature the same crisp detail found in authentic wood mouldings, with the longevity and durability that AZEK products provide.

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• AZEK Deck: AZEK Deck offers superior performance attributes for long-life, low maintenance decking. AZEK Deck is in the early stages of a material conversion process from wood and other synthetic materials. Unlike wood or composite decking materials, AZEK Deck, a cellular PVC product, does not contain wood fillers. Our Procell™ Technology allows our boards to resist stains and scratches, yet be workable like wood.

AZEK’s manufacturing process creates a superior home exterior product that possesses the following advantages over alternative materials:

Low Maintenance/Long-Life. The superior strength of its composition gives AZEK products a longer lifetime and a greater ability to withstand the elements than competing wood products. AZEK products are designed for outdoor applications, as it is impervious to termites and other insects and is not susceptible to water or moisture damage. AZEK Trim will also not rot, cup, split, twist or warp, and is covered by a 25-year warranty, while AZEK Deck is covered by a limited lifetime warranty.

Uniformity. We believe that the quality of our AZEK products is superior to that of natural wood and other exterior products. AZEK Trim products are manufactured to the highest degree of consistency with uniform thickness and premium lengths. AZEK Trim has a uniform density comparable to pine without the knots, grain, cracks, maximizing the amount of AZEK that can be used.

Workability. AZEK products offer similar workability characteristics to wood and has clear advantages over competing synthetic materials. AZEK products can be easily nailed, screwed, drilled and stapled without splitting or creating unsightly “mushrooms.” AZEK also offers a proprietary water-based cement that, when gluing two pieces of AZEK Trim together, forms a molecular bond that is stronger than the mechanical bond formed between wood and glue. In addition to its simple installation, AZEK Trim can also be easily manipulated for more complex applications. AZEK products can be shaped, routed, and mitered using standard woodworking tools and thermoforming techniques.

Aesthetics. AZEK looks and feels like traditional wood, adding significant value and beauty, but lasts longer than traditional wood trim without ongoing maintenance.

Industrial Building Products. We manufacture Celtec and other branded products (such as Polycarve, Ultra White and Vintec) which can be substitutes for wood and metal in a variety of industrial applications, including industrial tank linings, marine products, fire retardant products and commercial signage. Our branded Celtec products are gaining acceptance in marine and commercial markets (Celtec 550) and industrial markets (Celtec 700). Celtec products offer advantages over competing products, with high structural strength, superior workability and light weight. Celtec 550 is designed to replace wood in non-stress bearing, non-building applications. Celtec 700 is designed for industrial and commercial signage. These products are tough, high strength and lightweight, and can be ordered in a wide range of sizes, thicknesses and colors. We also manufacture industrial corrosion resistant products which are suited for applications where maximum chemical resistance, prevention of ultraviolet degradation or tolerance to high temperature environments is necessary.

Scranton Products

Commercial Building Products. We fabricate bathroom partitions, shower compartments and lockers from highly engineered synthetic sheet manufactured internally, and sell these products under our Comtec, Capitol, EverTuff, Hiny Hiders and TuffTec brands. Unlike competing metal products, our synthetic alternatives are impervious to rust, dents, and scratches; are longer-lived; graffiti resistant; easily cleaned; and require minimal maintenance once installed. As compared to metal alternatives, our partitions and locker products sell at premium prices but deliver significantly reduced lifecycle costs through increased durability and lower maintenance expenses.

Our bathroom products include custom built toilet partitions, doors, privacy screens, hardware accessories, shower cubicles, and vanities manufactured in an array of designs and color choices. They are available in wall-mounted, floor-mounted, floor-to-ceiling, and ceiling-hung models and they are also manufactured with a variety of hinges and hardware accessories. Their key features and benefits are that they are manufactured from one inch thick

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highly-engineered synthetic materials and resist moisture, stains, odors, mildew, scratches, corrosion and delamination. The primary end markets for our bathroom partition products include schools, parks, stadiums, factories, hospitals, transportation terminals, retail locations, and fitness centers.

Our synthetic locker systems are equipped with several different locking mechanisms and are available in a variety of sizes, colors and designs. They are impervious to rust, dents, scratches and graffiti and require minimal maintenance. Also, the lockers are ideal for high traffic and sanitary environments and they are easily steam cleaned to eliminate bacteria. The primary end markets for these products include schools, amusement parks, factories and fitness centers.

Industrial Building Products. We manufacture highly engineered non-fabricated products for use in a wide variety of applications including semiconductors and marine construction, food preparation, machine housing, playground equipment and other diverse applications.

Our industrial product offering is comprised of the following products:

• Protec CP—Protec CP is formulated to provide high levels of impact resistance as well as corrosion resistance against a broad group of reagents. It is used for metal plating barrels, scrubbers, acid tank linings, tank covers, fume hoods and ducts, laboratory sinks, orthopedic appliances, etching machines, etching rinse tubes, machined parts, battery cases, scrub stations and food preparation.

• Sanatec—Sanatec is formulated for the manufacture of quality food grade equipment parts.

• HiTec—HiTec is a high impact product suited for the manufacture of chemical resistance products and products that come in direct contact with foodstuffs. It is used for business machine parts, guides and wear plates, cams, washers, shims, packing rings in chemical applications, low speed bearings, laboratory vessels, rotors and blades, roll stand bearings, nuclear storage containers, skids and deflector plates, tank, chute and bin linings.

We also provide applications to marine construction through Seaboard, which is UV stable, scratch resistant, and has excellent impact and stiffness. We also support semiconductors through our Flametec product, which is in the family of flame retardant sheet formulations that meet the guidelines for clean room materials. Finally, we offer Playboard^® Modular Playground Systems, which consists of 2-color Polycarve and Grip X^® slip resistant materials utilized in flanges, flat roofs, steps, platforms, climbing walls, spring toys, park furnishings and signs.

Operations and Manufacturing Process

Our various products are manufactured through a highly technical, precision manufacturing process in which a number of variable elements must be managed in parallel in order for the product to be produced to specifications and perform to expectations. During the manufacturing process, our proprietary products are blended, heated, and then processed through an extrusion device. For our end use building products, further steps are taken to fabricate and assemble our products through internally designed, proprietary processes. Developing the correct mixture of raw materials and blends, as well as the proper speed and calibrations, is highly technical, and we have developed significant internal expertise in this process through our 24 years of experience. Each of our machines is customized according to internal proprietary specifications by our technicians in order to establish the correct mixing, speed and extrusion processes.

Sales and Marketing

We have carefully balanced the build-out of our AZEK sales and marketing, distribution and manufacturing infrastructure in a manner that enables us to meet demand and control quality. Our AZEK sales organization consisted of 52 sales representatives as of December 31, 2007, organized by geographic region. The sales force focuses on actively promoting product awareness and educating the distributor and dealer base on the attractive relative product characteristics of AZEK products. Our AZEK sales and marketing team gave presentations

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emphasizing the unique properties and design possibilities with AZEK to over 16,000 architects since 2004, and is accredited by the American Institute of Architects (AIA) as an approved continuing education provider.

We have a comprehensive marketing campaign in support of the AZEK brand, targeted towards its growing dealer base as well as the architect, custom builder, remodeler, installer and consumer demand base. Our goal is to raise the visibility of the AZEK brand and the value proposition of AZEK Trim, AZEK Deck and AZEK Moulding.

We seek to leverage our Scranton Products sales force, market leading position, promotional materials and proprietary products to develop close relationships with architects and our Pinnacle/Elite dealer network. We employ a Business Unit President, a regional sales manager, two external products specialists covering the Mid Atlantic and New England territories and one internal product specialist, who covers approximately 12 regional manufacturers’ sales representative organizations that provide nationwide coverage to over 1,200 local dealers. Our Scranton Products sales agents call on architects in order to influence project specifications in traditional institutional markets, such as schools, universities, and stadium arenas, as well as targeted new markets, such as retail stores, industrial facilities and food processing plants. We have initiated a targeted marketing effort with the goal of having our Scranton Products line of solid bathroom partitions and lockers specified by name by national accounts and large school districts.

While we distribute our industrial building products primarily through distributors, we have eight manufacturers’ sales representatives with joint product responsibility across our product lines.

Distribution

Our products are distributed throughout an extensive network consisting of manufacturing representatives, distributors and dealers. We market our products to a diverse group of end markets, including residential, commercial and industrial construction, semiconductor, marine, industrial and other markets. Our top ten distributors, through more than 35 independent branches, collectively accounted for approximately half of our net sales for the year ended December 31, 2007, and our largest distributors, The Parksite Group, through eleven branches, U.S. Lumber, through eight branches and Wolf Distributing, each accounted for more than 10% of net sales for the year ended December 31, 2007, and collectively accounted for approximately 43% of net sales for the year ended December 31, 2007.

Through a two-step distribution system, we sell our AZEK products exclusively through an expanding nationwide network of specialty building product distributors with multiple locations (each independently representing the AZEK product) who in turn sell to lumber yards, contractors and installers. Our 23 AZEK distributors are equipped to service every region of the United States and Canada in over 74 locations. We believe that AZEK has also developed the largest and most extensively trained stocking dealer network of any non-wood trim manufacturer in the industry. We have steadily grown our AZEK dealer base from 150 dealers in 2001 to over 2,100 as of December 31, 2007. We combined the AZEK Deck operations with our AZEK Building Products business unit in order to effectively leverage AZEK’s two-step distribution system.

Our bathroom partition and locker systems are sold through a national distribution network that covers over 1,200 local dealers. We market the benefits of our bathroom partition and locker systems directly to architects and facilities managers, who frequently specify building products by name and material in their designs, leaving dealers and installers less flexibility in choosing manufacturers, and enabling us to service the resulting demand through local dealer networks.

We primarily sell our non-fabricated products to over 400 regional distributors, who in turn sell full sheet, and/or fabricate products for the end users. We are typically the sole source supplier for our Original Equipment Manufacturer (“OEM”) relationships due to the breadth of our non-fabricated product offering.

Raw Materials and Suppliers

Our most significant raw materials are PP, HDPE and PVC dry petrochemical resin. These resins accounted for more than half of our cost of goods sold for fiscal year 2007 and 2006. We purchase our raw materials directly from major petrochemical suppliers. Resin purchases are based primarily on price, and we are typically awarded a

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significant customer rebate by each supplier due to purchasing scale. Prices are negotiated on a continuous basis, and we do not typically buy forward beyond six months. Historically, we have not bought resin from a sole source and we believe our raw materials are available from alternative sources on similar terms. Over the past four years, PVC resin prices had more than doubled, primarily due to the increased cost of oil and natural gas, increases in natural gas and crude oil prices and demand in the broader economy, resin prices increased to an all time high level. These significantly higher resin costs have impacted our profitability throughout 2007 and 2006. See “Risk Factors—Risks Related to Our Business—Our financial performance is dependent on raw material prices, as well as the continued availability of raw materials” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Competition

We compete with multiple companies with respect to each of our products, including divisions or subsidiaries of larger companies and foreign competitors. We compete on the basis of a number of considerations, including price (on a price-to-value basis), service, quality, performance, product characteristics, brand recognition and loyalty, marketing, product development, sales and distribution, and ability to supply products to customers in a timely manner. Our products also compete with the wood, metal and other traditional products that our synthetic products are designed to replace. For example, AZEK Trim competes primarily with wood, aluminum, engineered wood and vinyl coil wrap. In the cellular PVC trim market, there are few other competitors of scale. The decking market in which AZEK Deck operates is similarly competitive with numerous competitors who are significantly larger, manufacturing both wood and composite decking. The bathroom partition market is highly fragmented and consists of manufacturers typically producing products in several different materials and price ranges. Metal currently represents more than a majority of the overall bathroom products market. With respect to our other non-fabricated products, the market is highly fragmented, with manufacturers generally focused on a few core materials that are sold directly into end market applications. Our competitors for other non-fabricated products include other national and regional manufacturers. See “Risk Factors—Risks Related to Our Business—We face competition in each of our businesses and our customers may not continue to purchase our products.”

Intellectual Property

We rely on a combination of trademarks, trade secrets, unpatented know-how, patents, licenses, and other intellectual property rights and protective measures to protect our proprietary rights. We own approximately 22 U.S. trademark registrations, two trademark applications and eight U.S. patents. We employ various methods, including confidentiality and non-disclosure agreements with third parties and employees who have access to our trade secrets, to protect our trade secrets and know-how.

Although we use a variety of intellectual property in the development and manufacturing of our various products, we believe that none of that intellectual property is individually critical to our current operations. Taken as a whole, however, we believe our intellectual property rights are significant. For a discussion of the risks related to our intellectual property rights, please see “Risk Factors—Risks Related to Our Business—Our business operations could be negatively impacted if we fail to adequately protect our intellectual property rights or if third parties claim that we are in violation of their intellectual property rights.”

Seasonality

Our sales have historically been moderately seasonal and have been strongest in the first and third quarters of the calendar year. We typically experience increased sales of AZEK products in the first quarter of the year as a result of our “early buy” sales program, which encourages dealers to stock AZEK products through the use of incentive discounts. We have generally experienced decreased sales in the fourth quarter due to adverse weather conditions in certain markets during the winter season. In addition, we have experienced increased sales of our bathroom partition products during the summer months during which schools are typically closed. We expect these cycles to moderate as AZEK sales growth continues to consistently grow throughout the calendar year.

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Employees

As of January 15, 2008, all of our workforce was non-union and totaled 573 employees, comprised of 397 production employees and 176 office employees. We are not a party to any collective bargaining agreements. We believe our relationship with our employees is good.

Environmental

We are not aware of any environmental liabilities that would be expected to have a material adverse effect on our business or financial condition, results of operations or cash flows. We believe we are compliant with all environmental laws and regulations in all material respects and possess all necessary permits to operate our manufacturing and other facilities. Our cost of compliance with environmental laws and regulations was minimal in 2007.

Item 1A. Risk Factors

You should carefully consider the risk factors set forth below as well as the other information contained in this report, including our consolidated financial statements and related notes. Any of the following risks could materially adversely affect our business, financial condition, results of operations or cash flows. Information contained in this section may be considered forward-looking statements. See “Cautionary Note Regarding Forward Looking Statements” contained elsewhere in this report for a discussion of certain qualifications regarding such statements.

Risks Related to Our Business

Our business could be materially hurt by economic downturns.

Our business is affected by a number of economic factors, including the level of economic activity in the markets in which we operate. The demand for our products by our customers depends, in part, on general economic conditions and business confidence levels. Sales in the residential, commercial and institutional construction markets correlate closely to the number of homes, buildings and schools that are built or renovated, which in turn is influenced by factors such as interest rates, inflation, the strength or weakness of the U.S. dollar, gross domestic product levels, consumer confidence and spending habits, demographic trends, employment rates, state and local government revenues and spending on schools and other macroeconomic factors over which we have no control. Any decline in economic activity as a result of these factors could result in a decreased demand for our products, which would materially adversely impact our sales and profitability. For example, beginning in the third quarter of 2006, the residential housing market entered a period of significantly reduced activity. Distributors responded by reducing inventory levels, which had a negative impact on AZEK sales and end market demand has softened. The slowdown in the residential housing market is expected to continue beyond 2008 and will negatively impact our results.

In general, demand for new home construction as well as commercial and institutional construction may be materially adversely affected by increases in interest rates and the reduced availability of financing. Although interest rates have been low the past few years, as interest rates rise, the ability of prospective buyers to finance purchases of new homes may be materially adversely affected. As a result, our business, financial condition and results of operations may also be materially adversely impacted. The remodeling market, in which we make a large portion of our sales, tends to be less sensitive to changes in interest rates. Any changes in tax laws related to mortgages and home equity financings could materially adversely affect sales in the home construction and remodeling market. For example, in 2007, the mortgage finance market was negatively impacted by the fallout in the subprime mortgage market reducing the amounts residential home lenders were willing to finance as a result of tighter lending practices. This condition continues to exist in the market today with no indication of easing in the short term.

Our bathroom partition and locker systems are sold primarily in the institutional segment, which includes schools, government and municipal buildings and facilities, parks, military bases and hospitals. The demand for these products, whether in connection with replacement orders or new construction, is impacted by the economy, and in particular gross domestic product levels. As a result of institutional budgeting, we may experience a decrease in sales

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up to a year or more after a decline in gross domestic product levels. Decline in demand in the institutional building market can be attributed to increased energy, pension and healthcare costs that may reduce amounts available for school construction costs. Furthermore, sales to schools may be impacted by lower than anticipated tax revenues collected by state and local municipalities.

Our financial performance is dependent on raw material prices, as well as the continued availability of raw materials.

The primary raw materials we use in the manufacture of our products are various petrochemical resins, primarily PVC, HDPE and PP, which represented more than half of our total cost of goods sold for the years ended December 31, 2007 and 2006. Our financial performance therefore is dependent to a substantial extent on the petrochemical resin market.

The capacity, supply and demand for resins and the petrochemical intermediates from which they are produced are subject to cyclical price fluctuations and other market disturbances, including supply shortages. Throughout the course of previous supply shortages we were able to maintain necessary raw material supplies. However, in the event of another industry-wide general shortage of resins we use, or a shortage or discontinuation of certain types or grades of resin purchased from one or more of our suppliers, we may not be able to arrange for alternative sources of resin. Any such shortage may materially negatively impact our competitive position versus companies that are able to better or more cheaply source resin.

We purchase our raw materials directly from major petrochemical and chemical suppliers. We have long-standing relationships as well as guaranteed supply with some of these suppliers but we have no fixed-price contracts with any of our resin vendors. Resin purchases are made in accordance with our manufacturing specifications, and are based primarily on price. We are typically awarded a significant customer rebate by each supplier due to purchasing scale; however there is no assurance whether such rebates will continue beyond the current calendar year. Prices are negotiated on a continuous basis, and we do not typically buy forward beyond six months.

Dry petrochemical resin prices may continue to fluctuate as a result of changes in natural gas and crude oil prices. The instability in the world market for petroleum and the North American natural gas markets could materially adversely affect the prices and general availability of raw materials. Over the past several years we have at times experienced rapidly increasing resin prices primarily due to the increased cost of oil and natural gas. Due to the uncertainty of oil and natural gas prices, we cannot reasonably estimate our ability to successfully recover any price increases. Even if we are able to pass these price increases on to our customers, our gross margins could decline and we may not be able to implement other price increases for our products. To the extent that all of the increases in the cost of resins cannot be passed on to our customers, or the duration of time lags associated with a pass through becomes significant, such increases may have a material adverse effect on our profitability and cash flow. Moreover, increases in resin prices could negatively impact our competitive position as compared to wood and metal products that are not affected by changes in resin prices.

Additionally, we may be subject to significant increases in prices that may materially impact our financial condition. Over the past four years, PVC resin prices had more than doubled, due to increases in natural gas and crude oil prices and demand in the broader economy. Although, our annual average cost of resin decreased by approximately 11.2% from the year ended December 31, 2006 to December 31, 2007, resin prices have steadily risen from their low point in the first half of 2007. Our continued success is dependent on the performance of our AZEK products, which represent a significant portion of our net sales.

In 2007 and 2006, AZEK products accounted for a majority of our net sales, and net sales of our AZEK products have increased at an approximately 46% compound annual growth rate over the past five years. Therefore, our future prospects are largely dependent on the continued success of our AZEK products, which have been on the market for eight years. If we should experience any problems, real or perceived, with product quality, relative value and use as compared to competitive materials, distribution, delivery or consumer acceptance of AZEK as a substitute for wood in the trim and millwork segment, our sales and profitability could materially decline. In particular, the success of AZEK depends on our customers continuing to be willing to pay more for AZEK on the basis of relative

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value and use as compared to wood and other products that AZEK is intended to replace. In addition, we are subject to the risk that third parties develop new products that compete favorably with AZEK on a price-to-value relationship.

We have recently experienced economic factors that have affected our growth in the residential building market. In the third and fourth quarters of 2006 through 2007, demand for our products with our distributors and dealers declined as they maintained lower levels of inventory due to recent declines in demand in the residential building market. As a result, we experienced declining sales volume of AZEK in this period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We face competition in each of our businesses and our customers may not continue to purchase our products.

We face competition in the sale of our products. We compete with multiple companies with respect to each of our products, including divisions or subsidiaries of larger companies and foreign competitors. Our products also compete with the wood and metal products that our synthetic products are designed to replace. For example, AZEK competes primarily with wood, aluminum, engineered wood and other synthetic building materials, such as celuka-processed products. The decking market in which AZEK Deck operates is similarly competitive with numerous competitors who are significantly larger, manufacturing both wood and synthetic decking. Metal is currently the most used material in the bathroom products market. The bathroom partition market is highly fragmented and consists of manufacturers typically producing partitions in several different materials and price ranges. With respect to our other basic non-fabricated products, the market is highly fragmented, with manufacturers generally focused on a few core materials including dry petrochemical resins and other key materials, that are sold directly into end market applications. Our competitors for other non-fabricated products include national and regional manufacturers.

We compete on the basis of a number of considerations, including price (on a price-to-value basis), service, quality, performance, product characteristics, brand recognition and loyalty, marketing, product development, sales and distribution, and ability to supply products to customers in a timely manner. Increases in our prices as compared to those of our competitors could materially adversely affect us. In particular, many of these other products that we compete with on a price-to-value basis, such as wood and metal products, are not affected by the significant increases in the cost of resin that we have experienced over the past few years.

The competition we face involves the following key risks:

• loss of market share;

• failure to anticipate and respond to changing consumer preferences and demographics;

• failure to develop new and improved products;

• failure of consumers to accept our brands and exhibit brand loyalty and pay premium prices on the basis of relative value and use as compared to competitive materials;

• aggressive pricing by competitors, which may force us to decrease prices or increase marketing and promotional spending in order to maintain market share; and

• failure of our marketing and promotional spending to increase, or even maintain, sales volume and market share.

Certain of our competitors have financial and other resources that are greater than ours and may be better able to withstand price competition. In addition, our competitors may develop products that are superior to our products or may adapt more quickly to new technologies or evolving customer requirements. Technological advances by our competitors may lead to new manufacturing techniques and make it more difficult for us to compete. In addition, since we do not have long-term arrangements with many of our customers, these competitive factors could cause our customers to cease purchasing our products.

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Some of our products experience seasonality.

We typically experience moderately increased sales of AZEK products in the first quarter of the year during which we conduct an “early buy” sales program that encourages dealers to stock AZEK products through the use of incentive discounts, typically in the range of 1% to 6%. We also have experienced decreased sales during the fourth quarter due to adverse weather conditions in certain markets during the winter season. Although trim can be installed year-round, unusually adverse weather conditions can adversely impact the timing of the sales of certain of our products, causing reduced profitability when such conditions exist. In addition, we have experienced increased sales of our synthetic bathroom partition products during the summer months during which schools are typically closed.

If we are unable to meet future capital requirements, our business may be adversely affected.

We have made significant capital expenditures in our businesses in recent years to expand our facilities and enhance our production processes. We spent approximately $21.8 million, $17.0 million and $14.4 million in capital expenditures in fiscal years 2005, 2006 and 2007. We estimate that capital expenditures for 2008 will be $8.0 to $13.0 million. As we grow our businesses, we may have to incur significant additional capital expenditures. We cannot assure you that we will have, or be able to obtain, adequate funds to make all necessary capital expenditures when required, or that the amount of future capital expenditures will not be materially in excess of our anticipated or current expenditures. If we are unable to make necessary capital expenditures, our product offerings may become dated, our productivity may decrease and the quality of our products may be adversely affected, which, in turn, could reduce our sales and profitability. In addition, even if we are able to invest sufficient resources, these investments may not generate net sales that exceed our expenses, generate any net sales at all or result in any commercially acceptable products.

Our business is subject to risks associated with manufacturing processes.

We internally manufacture our own products at our production facilities. Our manufacturing facilities are in the Scranton, Pennsylvania area, where we produce all of our products, other than AZEK Deck products, which are internally manufactured at a production facility located in Foley, Alabama. While we maintain insurance covering our manufacturing and production facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of our facilities due to accident, fire, explosion, labor issues, weather conditions, other natural disaster or otherwise, whether short or long-term, could have a material adverse effect on us.

Unexpected failures of our equipment and machinery may result in production delays, revenue loss and significant repair costs, as well as injuries to our employees. Any interruption in production capability may require us to make large capital expenditures to remedy the situation, which could have a negative impact on our profitability and cash flows. Our business interruption insurance may not be sufficient to offset the lost revenues or increased costs that we may experience during a disruption of our operations. Moreover, there are a limited number of manufacturers that make the machines we use in our business. Because we supply our products to original equipment manufacturers, or OEMs, a temporary or long-term business disruption could result in a permanent loss of customers that will seek out alternate suppliers. If this were to occur, our future sales levels, and therefore our profitability, could be materially adversely affected.

Our sales, cash flows from operations and results of operations may decrease if our relations with our key distributors decline.

Our top ten distributors, through more than 35 independent branches, collectively accounted for approximately half of our net sales for the year end December 31, 2007. Our largest distributor, The Parksite Group, through eleven branches, U.S. Lumber, through eight branches and Wolf Distributing, each accounted for more than 10% of net sales for the year ended December 31, 2007, and collectively accounted for approximately 43% of net sales for the year ended December 31, 2007. We expect our relationship with The Parksite Group, US Lumber, Wolf and our other key distributors to continue; however the loss of or a significant adverse change in our relationships with The Parksite Group, US Lumber, Wolf, or any other significant distributor could temporarily disrupt our net sales. Our operations depend upon our ability to maintain our relations with our network of distributors and dealers. If our key distributors and dealers are unwilling to continue to sell our products, if we do not provide product offerings

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and price points that meet the needs of our key distributors and dealers, or if our key distributors and dealers merge with or are purchased by a competitor, we could experience a decline in sales. The loss of, or a reduction in orders from, any significant distributor or dealer, losses arising from disputes regarding shipments, fees, merchandise condition or related matters, or our inability to collect accounts receivable from any significant distributor or dealer could cause a decrease in our net income and our cash flow. If we are unable to replace such distributors or dealers, or otherwise replace the resulting loss of sales, our business and results of operations could be materially adversely affected.

Acquisitions we may pursue in the future may be unsuccessful.

We may opportunistically consider the acquisition of other manufacturers or product lines of other businesses that either complement or expand our existing business. We cannot assure you that we will be able to consummate any such acquisitions or that any future acquisitions will be able to be consummated at acceptable prices and terms. Any future acquisitions we pursue involve a number of special risks, including some or all of the following:

• the diversion of management’s attention from our core businesses;

• the disruption of our ongoing business;

• entry into markets in which we have limited or no experience;

• the ability to integrate our acquisitions without substantial costs, delays or other problems;

• inaccurate assessment of undisclosed liabilities;

• the incorporation of acquired products into our business;

• the failure to realize expected synergies and cost savings;

• the loss of key employees or customers of the acquired business;

• increasing demands on our operational systems;

• possible adverse effects on our reported operating results, particularly during the first several reporting periods after the acquisition is completed; and

• the amortization of acquired intangible assets.

Additionally, any acquisitions we may make could result in significant increases in our outstanding indebtedness and debt service requirements. The terms of our outstanding notes and credit agreements may limit the acquisitions we may pursue.

Our insurance coverage may be inadequate to protect against the potential hazards incident to our business.

We maintain property, business interruption, product liability and casualty insurance coverage, but such insurance may not provide adequate coverage against potential claims, including losses resulting from war risks, terrorist acts or product liability claims relating to products we manufacture. Consistent with market conditions in the insurance industry, premiums and deductibles for some of our insurance policies have been increasing and can in the future increase substantially. In some instances, some types of insurance may become available only for reduced amounts of coverage, if at all. In addition, there can be no assurance that our insurers would not challenge coverage for certain claims. If we were to incur a significant liability for which we were not fully insured or that our insurers disputed, it could have a material adverse effect on our financial position.

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We provide product warranties that could expose us to claims, which could in turn damage our reputation and adversely affect our business.

We provide a 15-year limited warranty on Scranton Products commercial building products, a 25-year limited warranty on AZEK products and a lifetime limited warranty on AZEK Deck products sold for residential use. The warranty period for all other uses of AZEK Deck, including commercial use, is 25 years. The Scranton Products warranty guarantees against breakage, corrosion and delamination. AZEK products are guaranteed against manufacturing defects that cause the products to rot, corrode, delaminate, or excessively swell from moisture. The AZEK Deck warranty guarantees against manufacturing defects in material and workmanship that result in blistering, peeling, flaking, cracking, splitting, cupping, rotting or structural defects from termites or fungal decay.

Warranty reserves require a high level of judgment as AZEK products have only been on the market for eight years and AZEK Deck has only been on the market for five years, therefore we must estimate warranty costs over a considerable length of time without significant historical data on warranty costs for these products. Management assesses warranty reserves based on sales by product as well as historical warranty costs which have been immaterial thus far. However, the impact resulting from the aforementioned factors could cause actual results to vary.

Our business operations could be significantly disrupted if members of our management team were to leave.

Our success depends to a significant degree upon the continued contributions of our senior management. Our senior operating management members have extensive engineering, manufacturing and finance backgrounds. We believe that the depth of our management team is instrumental to our continued success. The loss of any of our key executive officers in the future could significantly impede our ability to successfully implement our business strategy, financial plans, expansion of services, marketing and other objectives.

Our business operations could be negatively impacted if we fail to adequately protect our intellectual property rights or if third parties claim that we are in violation of their intellectual property rights.

As a company that manufactures and markets branded products, we rely heavily on trademark and service mark protection to protect our brands. In particular, the value of the AZEK brand is significant to the success of our business. We generally rely on a combination of unpatented proprietary know-how and trade secrets, and to a lesser extent, patents, in order to preserve our position in the market. Because of the importance of our proprietary know-how and trade secrets, we employ various methods to protect our intellectual property, such as entering into confidentiality agreements with third parties, and controlling access to and distribution of our proprietary information.

There is no assurance that these protections are adequate to prevent competitors from copying, imitating or reverse engineering our products, or from developing and marketing products that are substantially equivalent to or superior to our own. Further, we may not be able to deter current and former employees, contractors and other parties from breaching confidentiality obligations and misappropriating proprietary information. Due to the nature of our products and technology, it is difficult for us to monitor unauthorized uses of our products and technology. The steps we have taken may not prevent unauthorized use of technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. If third parties take actions that affect our rights or the value of our intellectual property, similar proprietary rights or reputation, or we are unable to protect our intellectual property from infringement or misappropriation, other companies may be able to use our intellectual property to offer competitive products at lower prices and we may not be able to effectively compete against these companies. In addition, if any third party copies or imitates our products, including our AZEK products, in a manner that projects a lesser quality or carries a negative connotation, this could have a material adverse effect on our goodwill in the marketplace since it would damage the reputation of synthetic products generally, whether or not it violates our intellectual property rights.

In addition, we face the risk of claims that we are infringing third parties’ intellectual property rights. We believe that our intellectual property rights are sufficient to allow us to conduct our business without incurring liability to third parties. We have received, and from time to time, may receive in the future, claims from third parties by which such third parties assert infringement claims against us in connection with the manufacture and sale of our products and we can give no assurance that claims or litigation asserting infringement by us of third parties’

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intellectual property rights will not be initiated in the future. Any such claim, even if it is without merit, could be expensive and time-consuming; could cause us to cease making, using or selling certain products that incorporate the disputed intellectual property; could require us to redesign our products, if feasible; could divert management time and attention; and could require us to enter into costly royalty or licensing arrangements, to the extent such arrangements are available. In the future, we may also rely on litigation to enforce our intellectual property rights and contractual rights, and, if such enforcement measures are not successful, we may not be able to protect the value of our intellectual property. Regardless of its outcome, any litigation could be protracted and costly and could have a material adverse effect on our business and results of operations.

The cost of complying with laws relating to the protection of the environment may be significant.

We are subject to extensive federal, state, municipal, local and foreign laws and regulations relating to the protection of human health and the environment, including those limiting the discharge of pollutants into the environment and those regulating the treatment, storage, disposal and remediation of, and exposure to, solid and hazardous wastes and hazardous materials. Certain environmental laws and regulations impose joint and several strict liability on responsible parties, including past and present owners and operators of sites, to clean up, or contribute to the cost of cleaning up sites at which hazardous wastes or materials were disposed or released.

While we believe that the future cost of compliance with environmental laws and regulations and liabilities associated with claims or known environmental conditions will not have a material adverse effect on our business, we cannot assure you that future events, such as new or more stringent environmental laws and regulations, any related damage claims, the discovery of previously unknown environmental conditions requiring response action, or more vigorous enforcement or a new interpretation of existing environmental laws and regulations would not require us to incur additional costs that would be material.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Any inability to provide reliable financial reports or prevent fraud could harm our business. We are continuing to evaluate and, where appropriate, enhance our policies, procedures and internal controls. If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, our financial statements may not accurately reflect our financial condition.

Risks Related Our Indebtedness

Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our indebtedness.

We have a significant amount of indebtedness. As of December 31, 2007, we had total indebtedness of $284.9 million, excluding up to an additional $38.6 million that was available for borrowing under our then outstanding senior secured revolving credit facility. On February 13, 2008, we terminated our senior secured revolving credit facility and entered into a new senior secured revolving credit agreement. On February 29, 2008, we also entered into a $25.0 million term loan and agreement. For further details regarding these transactions, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Subsequent Financing”.

Our substantial indebtedness could have important consequences. For example, it could:

• make it more difficult for us to satisfy our obligations with respect to our indebtedness;

• increase our vulnerability to general adverse economic and industry conditions;

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• require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes;

• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• place us at a competitive disadvantage compared to our competitors that have less debt; and

• limit our ability to borrow additional funds for capital expenditures, acquisitions, working capital or other purposes.

In addition, a substantial portion of our debt bears interest at variable rates. If market interest rates increase, such variable-rate debt will create higher debt service requirements, which could adversely affect our cash flow. Each 0.25% increase or decrease in the applicable interest rates on our outstanding floating rate notes would correspondingly change our interest expense by approximately $0.3 million per year.

The indenture governing our outstanding notes and our credit agreements contain financial and other restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debts. Our new senior secured revolving credit facility matures in 2013 and our new term loan matures in 2011. As a result, we may be required to refinance any outstanding amounts under our term loan prior to the maturity of the notes and amounts outstanding under our new revolving credit facility prior to the maturity of the fixed rate notes. We may not be able to obtain such financing on commercially reasonable terms or at all. Failure to refinance our indebtedness could have a material adverse effect on us and could require us to dispose of assets if we are unable to refinance our indebtedness. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage. To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures and research and development efforts will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot be assured that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under our senior secured revolving credit facility, or otherwise in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before the maturity thereof. We cannot assure you that we will be able to refinance any of our indebtedness, including our credit agreements and our notes, on commercially reasonable terms or at all. If we are unable to generate sufficient cash flow to refinance our debt obligations on favorable terms, it could have a significant adverse effect on our financial condition and on our ability to pay principal and interest on our indebtedness. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

In addition, if for any reason we are unable to meet our debt service obligations, we would be in default under the terms of our agreements governing our outstanding debt. If such a default were to occur, the lenders under our senior secured revolving credit facility could elect to declare all amounts outstanding under the senior secured revolving credit facility immediately due and payable, and the lenders would not be obligated to continue to advance funds under our senior secured revolving credit facility. In addition, if such a default were to occur, our term loan and our notes would become immediately due and payable. If the amounts outstanding under these debt agreements are accelerated, our assets may not be sufficient to repay in full the money owed to the banks or to our debt holders.

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The indenture governing our outstanding notes and our credit agreements impose significant operating and financial restrictions, which may prevent us from capitalizing on business opportunities and taking some actions.

The indenture governing our outstanding notes and our credit agreements contain customary restrictions on our activities, including covenants that restrict us and our restricted subsidiaries from:

• incurring additional indebtedness and issuing preferred stock;

• creating liens on our assets;

• making certain investments;

• consolidating or merging with, or acquiring, another business;

• selling or otherwise disposing of our assets;

• paying dividends and making other distributions with respect to capital stock, or repurchasing, redeeming or retiring capital stock or subordinated debt; and

• entering into transactions with our affiliates. m

Our new senior secured revolving credit facility also requires us to maintain a minimum fixed charge coverage ratio in certain circumstances. We may not be able to maintain this ratio, and if we fail to be in compliance with this test when required to be in compliance, we will not be able to borrow funds under our senior secured revolving credit facility which could make it difficult for us to operate our business. In addition, our new term loan requires us to not exceed a senior secured leverage ratio. We may not be able to maintain this ratio, and any failure in compliance with this test could result in default under our term loan agreement.

The restrictions in the indenture governing our notes and our credit agreements may prevent us from taking actions that we believe would be in the best interest of our business, and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility. We may not be granted waivers or amendments to these agreements if for any reason we are unable to comply with these agreements, and we may not be able to refinance our debt on terms acceptable to us, or at all.

The breach of any of these covenants and restrictions could result in a default under the indenture governing our notes or under our credit agreements. An event of default under our debt agreements would permit some of our lenders to declare all amounts borrowed from them to be due and payable. If we are unable to repay debt, lenders having secured obligations, such as the lenders under our credit agreements, could proceed against the collateral securing the debt. Because the indenture governing our notes and the credit agreements have customary cross-default provisions, if the indebtedness under our notes or under our credit agreements or any of our other facilities is accelerated, we may be unable to repay or finance the amounts due.

Item 1B. Staff Comments.

Not applicable.

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Item 2. Properties.

On our main property in the Scranton, Pennsylvania area, we operate five facilities that are organized by material type for manufacturing purposes for both AZEK Building Products as well as Scranton Products. We operate two additional facilities in Scranton, Pennsylvania: (i) Winfield Avenue, which is utilized for cutting, fabricating and shipping bathroom partition and locker systems for Scranton Products and (ii) Keyser Avenue, for PVC manufacturing and fabricating to support the growth of our AZEK Building Products. We also operate an extrusion facility in Foley, Alabama for manufacturing product for AZEK Building Products. Our administrative offices are located in Moosic, Pennsylvania within two miles of our manufacturing facilities. The chart below summarizes our facilities.

Facility(1)	Square Feet	Ownership	Use
Scranton Building #5	343,000	Owned	Office and Extrusion Facility(2)
Scranton / Keyser Avenue	308,000	Leased	Dry Blend, Extrusion and Fabrication(3)
Scranton / Winfield Avenue	224,214	Leased	Office and Fabrication(2)
Scranton Building #1	153,330	Owned	Pressing and Storage Facility(2)
Scranton Building #2	67,500	Owned	Extrusion Facility(3)
Scranton Building #3	67,500	Owned	Extrusion Facility(3)
Scranton Building #4	16,050	Owned	Dry Blend and Lab Facility(3)
Administrative Offices	22,000	Leased	Administrative Services(4)
Foley, Alabama	109,500	Leased	Office and Extrusion Facility(3)

_____

(1) We will operate two manufacturing facilities in Toronto, Ontario, Canada in connection with the Composatron Acquisition.

(2) Facility used by our Scranton Products business segment.

(3) Facility used by our AZEK Building Products business segment.

(4) Facility utilized for both segments of our business.

Item 3. Legal Proceedings.

From time to time, we are subject to litigation in the ordinary course of business. Currently, there are no claims or proceedings against us that we believe would be expected to have a material adverse effect on our business or financial condition, results of operations or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Part II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

There is no established public market for the Company’s Common Shares.

As of December 31, 2007 all of the Company’s issued and outstanding shares of common stock are held by CPG International Holdings LP, its direct parent company.

Item 6. Selected Financial Data.

The selected historical financial data presented below as of and for the years ended December 31, 2003 and 2004 and for the period from January 1, 2005 to May 10, 2005 have been derived from the Predecessor’s

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audited consolidated financial statements. The selected historical financial data presented below as of December 31, 2005, 2006 and 2007, for the period from May 11, 2005 to December 31, 2005 and the years ended December 31, 2006 and 2007 have been derived from the Successor’s audited consolidated financial statements. You should read this data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes included elsewhere in this report.

								Combined
								Predecessor
								and
		Successor			Successor			Successor (1)			Successor			Predecessor
											Period			Period
		Year			Year			Year			May 11,			January 1,			Year			Year
		Ended			Ended			Ended			2005 to			2005 to			Ended			Ended
		December 31,			December 31,			December 31,			December 31,			May 10,			December 31,			December 31,
(Dollars in thousands)		2007			2006			2005			2005			2005			2004			2003
Statement of Operations
Net sales	$	313,703		$	261,790		$	222,603		$	140,672		$	81,931		$	171,060		$	136,284
Cost of sales		(225,436	)		(193,417	)		(171,930	)		(113,076	)		(58,854	)		(121,121	)		(97,240	)
Gross margin		88, 267			68,373			50,673			27,596			23,077			49,939			39,044
Selling general and administrative (2)		(46,844	)		(40,249	)		(40,775	)		(18,870	)		(21,905	)		(20,451	)		(17,111	)
Gain on sale of property		422			–			–			–			–			–			–
Operating income		41,845			28,124			9,898			8,726			1,172			29,488			21,933
Interest expense, net		(33,698	)		(28,685	)		(23,035	)		(21,175	)		(1,860	)		(14,082	)		(10,119	)
Miscellaneous, net		240			306			(226	)		158			(384	)		(266	)		(5	)
Income (loss) before income taxes		8,387			(255	)		(13,363	)		(12,291	)		(1,072	)		15,140			11,809
Income tax (expense) benefit		(3,760	)		(230	)		1,622			4,682			(3,060	)		(5,870	)		(4,531	)
Net income (loss)	$	4,627		$	(485	)	$	(11,741	)	$	(7,609	)	$	(4,132	)	$	9,270		$	7,278
Other Data
Volume sold (000’s lbs)		231,615			186,695			180,260			110,600			69,660			147,869			114,341
Capital expenditures	$	14,386		$	16,995		$	21,784		$	17,295		$	4,489		$	7,299		$	7,402
Balance Sheet Data
(at end of period)
Cash	$	9,608		$	2,173		$	14,785			14,785					$	2,697		$	4,549
Working capital (3)	$	39,058		$	35,511		$	32,822			32,822					$	50,360		$	33,131
Total assets	$	600,496		$	507,796		$	464,918			464,918					$	200,537		$	185,171
Total debt	$	284,933		$	258,297		$	216,602			216,602					$	143,917		$	92,637
Total shareholder’s equity	$	196,494		$	156,972		$	157,457			157,457					$	30,557		$	72,786

______________________

(1) Represents the mathematical addition of the Predecessor period January 1, 2005 to May 10, 2005 and the Successor period beginning after May 10, 2005 through December 31, 2005. The Combined Predecessor and Successor results of operations are not indicative of our future results of operations or results of operations that would have actually occurred had the Transaction been consummated as of January 1, 2005, due to the fair values assigned to our assets and liabilities, the changes made in the related estimated useful lives of the assets at May 11, 2005, as well as changes in interest and income tax expenses as a result of the Transaction.

(2) We incurred a one-time compensation charge of approximately $12.8 million relating to the vesting of certain restricted units upon closing of the Transaction. This amount was included in selling, general and administrative expenses for the period from January 1, 2005 to May 10, 2005, and was funded by the seller, Compression Polymers Holding LLC, our Predecessor, from the purchase price of the Transaction. As such, there was no cash impact on the financial statements of the Successor related to this compensation charge.

(3) Working capital is defined as current assets less current liabilities.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with and is qualified in its entirety by reference to the audited consolidated financial statements and accompanying notes of CPG International Inc. (Successor), and Compression Polymers Holdings LLC, (Predecessor), included elsewhere in Item 15 of this report. Except for historical information, the discussions in this section contain forward-looking statements that involve risks and uncertainties. Future results could differ materially from those discussed below. See discussion under the caption “Cautionary Note Regarding Forward-Looking Statements.” Except where the context otherwise requires, all references to “we,” “us,” and “our” (and similar terms) herein mean the Successor for periods beginning after May 10, 2005 and the Predecessor for periods ending on or prior to May 10, 2005.

OVERVIEW

We are a leading supplier of premium, low maintenance building products designed to replace wood, metal and other materials in the residential, commercial and industrial markets. With a focus on manufacturing excellence, proprietary technologies and quality, we have introduced our products through distribution networks to sizable markets increasingly converting to low maintenance materials. We have developed a number of branded products including AZEK® Trim, AZEK Deck, AZEK Moulding Comtec and Hiny Hiders bathroom partition systems, and EverTuff™ and TuffTec™ locker systems. We operate the following two business units:

• AZEK Building Products Inc., or AZEK Building Products, manufactures exterior residential building products such as AZEK Trim, AZEK Deck, and AZEK Moulding for the residential and commercial building market. Additionally AZEK Building Products produces Celtec and other non-fabricated products for the industrial market; and

• Scranton Products Inc., or Scranton Products, produces fabricated bathroom partition and locker systems under the Comtec, Santana, Hiny Hiders, EverTuff and TuffTec labels for the commercial market and Seaboard® and Flametec® and other non-fabricated products for special application industrial markets.

On April 29, 2006, we completed the acquisition of Santana Holdings Corporation, the direct parent of Santana Products, Inc. for a purchase price of $36.0 million (the “Santana Acquisition”). Santana is included in the Scranton Products operating segment.

On January 31, 2007, we completed the acquisition of Pro-Cell, LLC, which owned and operated Procell Decking Systems (“Procell”) for a purchase price of $77.3 million (“Procell Acquisition”). Procell is included in the AZEK Building Products operating segment.

On February 29, 2008, we completed the acquisition of Compos-A-Tron Manufacturing Inc. (“Composatron”) for CAD $30.0 million (“Composatron Acquisition”). Composatron will be included in the AZEK Building Products operating segment. For further discussion, see—“Acquisitions” below.

OUR BUSINESS

The core of our operation has been to produce high-quality products across all of the building and industrial end markets we serve. In the last decade, our expertise in manufacturing has allowed us to successfully develop value-added, branded building products such as AZEK, Comtec, EverTuff, TuffTec and Celtec products, which offer accelerated volume growth and higher margins. Our volume growth has been the result of penetrating the building and industrial end markets that create value-added substitution opportunities from more traditional wood, fiber and steel products. We believe many of our products are still in the early stages of the material conversion opportunity. As a result, we believe our growth should be less sensitive to the growth rate of our various end markets. We have generally increased our margins through volume growth that has allowed us to self-fund investment in new technology and equipment that has enabled us to lower our manufacturing conversion costs. In addition, we have attained higher margins for our branded products through highly developed sales channels and continued product

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innovation. We continually look to utilize existing products and know-how for new applications, including the development of additional branded building products.

Over the eight years since their introduction, our AZEK branded building products have gained significant market acceptance and brand loyalty as a leader within the non-wood home exterior market. In 2007 and 2006, AZEK products have accounted for a majority of our net sales. Through our two-step, dual distribution system, we have established an extensive network of distributors and dealers throughout the United States and Canada. Our strategy continues to be to maintain two distributors in each geographic region that we enter. As of December 31, 2007, our distributors were selling our products to over 2,100 local stocking dealers who frequently request our products by brand name. In the first quarter of each year, we conduct an “early buy” sales promotion that encourages distributors to stock AZEK products through the use of incentive discounts, typically in the range of 1% to 6%. Over the course of 2007 we have expanded AZEK Building Products through internal development of additional product offerings as well as through the Procell Acquisition in 2007 and the Composatron Acquisition in 2008. With the introduction of AZEK Moulding and AZEK Deck in 2007, we continued to establish ourselves as a premier provider of branded building products. Our goal is to continue to expand our product offerings through the development of additional trim, moulding and decking products, as well as through the introduction of additional product lines.

Across all of our target markets, we are focused on capitalizing on the functional advantages of our synthetic products relative to competing wood, fiber and metal products. In this regard, we have developed the leading brand in the synthetic bathroom and locker room products market, Comtec. Our product offerings which include Comtec, Capitol, Hiny Hider, EverTuff and TuffTec brands, and are sold to similar primary end-markets, which include schools, stadiums, prisons, retail locations and other high-traffic environments. Through Scranton Product’s widely established distribution network, we are able to service our customers through representatives in all 50 states. Although we were able to successfully integrate the Santana Acquisition and benefit from various manufacturing synergies through integration, we experienced some erosion in our customer base in 2007. Our current focus is to regain market share within the commercial building markets, by actively engaging key dealers and productive sales representatives prior to the 2008 bid season. We are also focusing on improving our customer service experience by making improvements within our customer service departments. Our focus is also to continue to develop leading brands for 2008 including new locker designs as well as a line of fire rated partitions. We believe that these additional goals will allow us to continue our market penetration into the commercial building market.

Dry petrochemical resins, primarily PVC, HDPE and PP, represented a majority of our raw material costs and cost of sales in 2007. Throughout our 24-year history, resin prices have been subject to cyclical price fluctuations. Due to increases in natural gas and crude oil prices and demand in the broader economy, dry petrochemical resin prices have risen to higher levels than in previous years. Although, our annual average cost of resin decreased by approximately 11.2% from the year ended December 31, 2006 to December 31, 2007, resin prices have steadily risen from their low point in the first half of 2007. In the past, we have been able to partially offset the impact of significantly higher resin costs through increased sales volumes, improved productivity, and selling price increases in all of our product lines. We have not taken any significant pricing actions since we took several pricing actions late in the third quarter and early in the fourth quarter of 2005 that were used to mitigate higher resin prices. These pricing actions have not resulted in reduced volume growth in our products, on a period to period basis, through 2007. In addition, we have developed significant scale in purchasing resin, which we believe places us in a better cost position relative to many of our competitors. With respect to our basic non-fabricated products, we have been moderately successful in passing through resin cost increases to our customers.

Our AZEK Building Products are sold in various building and industrial end markets. AZEK products are sold in various stages of the home building construction market, including remodeling and renovation and new construction, thereby diversifying sales across the construction cycle. Celtec products are sold to several industrial sectors, thereby diversifying sales across sectors sensitive to differing economic factors. Scranton Products fabricated and non-fabricated products are sold to various non-residential construction and industrial markets further adding to our end market diversity. In 2007, approximately 25% of our products were sold for new construction, 34% were for remodeling, and 22% were in the commercial building sector, with the remaining 19% sold to various industrial end markets. Over 98% and 96% of our sales in 2007 and 2006, respectively, were in the United States.

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We experienced economic factors that had affected our growth in the residential building market. Sales were stronger in the first three quarters of 2007 due to the Procell Acquisition and the expansion of our AZEK sales network that was partially offset by the impact of a declining market for residential construction. These factors combined to slow AZEK trim, millwork and moulding sales as dealers and distributors worked through inventory purchased in AZEK’s successful early-buy program in the first quarter of 2007. By late second quarter, distributors and dealers had worked through their early-buy inventories causing order demand for AZEK trim, millwork and mouldings to improve. Overall, we expect to see continued moderate growth in our AZEK Building Products trim, millwork and mouldings business despite declines in the residential building market. Growth in our AZEK decking is anticipated to continue as we expand its distribution foot print and invest to increase its production capacity.

ACQUISITIONS

On February 11, 2008, we entered into a purchase and sale agreement to acquire 100% of the outstanding stock of Compos-A-Tron Manufacturing Inc. (“Composatron”) for CAD $30.0 million. If certain financial targets are met in 2008, that purchase price may increase by approximately CAD $4.0 million in cash. The acquisition closed on February 29, 2008. Composatron is a privately held manufacturer of Premier and Trademark Railing Systems, leading composite railing solutions for the residential housing market. The Premier and Trademark branded railing systems are manufactured using a PVC / wood flour composite and a co-extruded PVC capstock. The products have the subtle texture of painted wood and are ICC code listed. The product lines offered by Composatron are highly complimentary to our AZEK Deck products and already offer a successful rail system that matches the AZEK Deck color palette. We believe the acquisition of Composatron is ideal for the expansion of our product offerings within the building products market. The Composatron business reports as part of our AZEK Building Products business unit.

On December 13, 2006, we entered into a unit purchase agreement to acquire all of the outstanding equity of Pro-Cell, LLC, which owns and operates Procell Decking Systems for a purchase price of $77.3 million. The acquisition of Procell closed on January 31, 2007. Since certain financial targets were met for the year ended December 31, 2007, the purchase price was increased up to approximately $12.3 million in cash, plus additional equity in CPG International Holdings, our parent company, valued at approximately $5.7 million. Procell was a privately held manufacturer located in Foley, Alabama, that had developed the next generation product in the synthetic decking market. Procell leverages solid-core, cellular PVC technology combined with agra-fiber to produce a durable, long-life product with superior attributes that serve as a replacement for wood and composite products in decking applications. Procell’s use of cellular solid-core technology is complementary to our AZEK Trimboards manufacturing process, creating a solid, load-bearing yet lightweight decking product. We believe that the acquisition of Procell was key to our strategy of expanding AZEK Building Products to be the market leader for premium low maintenance exterior home products and that the Procell Acquisition will help us expand our product base, increase our presence throughout our distribution and dealer network and expand our portfolio of premium branded building products. The Procell business reports as part of our AZEK Building Products business unit.

RECENT DEVELOPMENTS

On October 3, 2007, we announced the resignation of John R. Loyack, the President and Chief Executive Officer of the Company, effective October 3, 2007. We also announced the appointment of Glenn M. Fischer as our Interim Chief Executive Officer, effective the same date.

On March 10, 2008, we announced the appointment of Eric K. Jungbluth as Chief Executive Officer. Mr. Jungbluth, 47, joins the Company from HNI Corporation, where he served as an Executive Vice President and the President of The HON Company. Mr. Jungbluth joined HNI Corporation in 2003 as President of Allsteel Inc. Prior to joining Allsteel, Mr. Jungbluth held several senior roles at Moen Incorporated (a division of Fortune Brands) including Vice President of National Accounts, Vice President of Business Development, and VP/General Manager of CSI Accessories. Mr. Jungbluth also spent two years at Kirsch (a division of Newell) as Vice President of Sales, and ten years at Warner Lambert in sales, marketing, and brand management roles. Mr. Jungbluth has a BA degree from the University of Wisconsin with a major in accounting and finance. Effective April 7, 2008, Mr.

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Jungbluth will replace Glenn Fischer, the Company’s Interim Chief Executive Officer prior to Mr. Jungbluth’s appointment. Glenn Fischer will continue to serve on the Company’s Board of Directors.

BASIS OF PRESENTATION

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. Our consolidated financial statements include the accounts of CPG International, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation

The consolidated financial statements for the period January 1, 2005 through May 10, 2005 discussed herein include the accounts of our Predecessor, Compression Polymers Holdings LLC and its wholly owned subsidiaries after elimination of intercompany accounts and transactions. For the purpose of these financial statements, reference to the Predecessor are references to the periods ended on or prior to May 10, 2005 and references to the Successor are references to the periods from May 11, 2005 and beyond.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and judgments that affect the amounts reported in the financial statements. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, allowance for doubtful accounts, inventories, vendor rebates, product warranties and goodwill and intangible assets. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

Revenue is recognized in accordance with SEC Staff Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB 101A, SAB 101B and SAB 104. SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the fee is fixed or determinable; and (4) collectibility is reasonably assured. Our revenues are recognized at the time product is shipped to the customer and title transfers.

We accrue for sales returns, discounts and other allowances based on a current evaluation of our experience based on the stated terms of the transactions. Should actual experience differ from our estimates, revisions to the estimated accruals would be required.

Allowance for Doubtful Accounts

Our allowance for doubtful accounts is based on management’s assessment of the business environment, customers’ financial condition, historical collection experience, accounts receivable aging and customer disputes. When circumstances arise or a significant event occurs that comes to the attention of management, the allowance is reviewed for adequacy and adjusted to reflect the change in the estimated amount to be received from the customer. Changes in the allowance for doubtful accounts between December 31, 2007 and December 31, 2006 reflect management’s assessment of the factors noted above, including past due accounts, disputed balances with customers, and the financial condition of customers. The allowance for doubtful accounts is adjusted when uncollectible accounts receivable balances are actually written off.

Inventories

Inventories (mainly, petrochemical resin), are valued at the lower of cost or market, determined on a first-in, first-out basis (“FIFO”) and reduced for slow-moving and obsolete inventory.

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Inventory obsolescence write-downs are recorded for damaged, obsolete, excess and slow-moving inventory. At the end of each quarter, management within each business segment, performs a detailed review of its inventory on an item by item basis and identifies which products are believed to be obsolete or slow-moving. Management assesses the need for, and the amount of, an obsolescence write-down based on customer demand of the item, the quantity of the item on hand and the length of time the item has been in inventory.

Vendor Rebates

Certain vendor rebates and incentives are earned by us only when a specified level of annual purchases are achieved. We account for vendor rebates in accordance with EITF 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. EITF 02-16 states that a rebate or refund of a specified amount of cash consideration that is payable pursuant to a binding arrangement (only if a customer completes a specified cumulative level of purchases), should be recognized on a systematic and rational allocation of the cash consideration offered to each of the underlying transactions that results in progress by the customer toward earning the rebate or refund, provided the amounts are probable and reasonably estimable. We record the incentives as a reduction to the cost of inventory. Upon sale of inventory, the incentive is recognized as a reduction to cost of sales. We record such incentives during interim periods based on actual results achieved on a year-to-date basis and our expectation that purchase levels will be obtained to earn the rebate.

Product Warranties

We provide a 15-year limited warranty on our Scranton Products commercial building products and a 25-year limited warranty on AZEK Trim and Moulding products, and a lifetime limited warranty on AZEK Deck products sold for residential use. The warranty period for all other uses of AZEK Deck, including commercial use, is 25 years. The Scranton Products warranty guarantees against breakage, corrosion and delamination. AZEK products are guaranteed against manufacturing defects that cause the products to rot, corrode, delaminate, or excessively swell from moisture. Warranty reserves require a high level of judgment as our AZEK products have only been on the market for eight years, so we must estimate warranty costs over a considerable length of time without significant historical data on warranty costs for this product. Management assesses warranty reserves based on sales by product as well as historical warranty costs which have been immaterial thus far. Management believes that the warranty reserves at December 31, 2007 are adequate. However, the impact resulting from the aforementioned factors could cause actual results to vary.

Goodwill and Intangible Assets

We account for costs of acquired assets in excess of fair value (“Goodwill”) in accordance with SFAS No. 142. In accordance with SFAS No. 142, management reviews Goodwill and other intangibles not subject to amortization for impairment annually, or when events or circumstances indicate that its value may have declined. The evaluation, based on various analyses including cash flow and profitability projections, addresses the impact on the existing Company business. The evaluation necessarily involves significant management judgment. The Company has determined that no impairment of goodwill or other intangibles existed at December 31, 2007 and 2006.

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RESULTS OF OPERATIONS

Year Ended December 31, 2007 Compared with Year Ended December 31, 2006

The following table summarizes certain financial information relating to the Company’s operating results that have been derived from their consolidated financial statements:

		Year			Year
		Ended			Ended
		December 31,			December 31,
(Dollars in thousands)		2007			2006
Net sales	$	313,703		$	261,790
Cost of sales		(225,436	)		(193,417	)
Gross margin		88,267			68,373
Selling, general and administrative expenses		(46,844	)		(40,249	)
Gain on sale of property		422			-
Operating income		41,845			28,124
Interest expense, net		(33,698	)		(28,685	)
Miscellaneous, net		240			306
Income (loss) before income taxes		8,387			(255	)
Income tax (expense) benefit		(3,760	)		(230	)
Net income (loss)	$	4,627		$	(485	)

The following table summarizes certain information relating to the operating results as a percentage of net sales and has been derived from the financial information presented above. We believe this presentation is useful to investors in comparing historical results. Certain amounts in the table may not sum due to the rounding of individual components.

	Year		Year
	Ended		Ended
	December 31,		December 31,
	2007		2006
Net sales	100.0	%	100.0	%
Cost of sales	(71.9	)	(73.9	)
Gross margin	28.1		26.1
Selling, general and administrative expenses	(14.9	)	(15.4	)
Gain on sale of property	0.1		-
Operating income	13.3		10.7
Interest expense, net	(10.7	)	(11.0	)
Miscellaneous—net	0.1		0.1
Income(loss) before income taxes	2.7		(0.1	)
Income tax (expense) benefit	(1.2	)	(0.1	)
Net income (loss)	1.5	%	(0.2	%)

Net Sales. Net sales increased by $51.9 million, or 19.8%, to $313.7 million for the year ended December 31, 2007, from $261.8 million for the year ended December 31, 2006 primarily due to increased volumes from the Procell Acquisition. Overall, AZEK Building Products net sales increased 31.9% from December 31, 2007 compared to December 31, 2006, and Scranton Products net sales remained flat from December 31, 2007 compared to December 31, 2006. Overall, we sold 231.6 million pounds of product during the year ended December 31, 2007, which was a 24.0% increase from the 186.7 million pounds sold during the year ended December 31, 2006. Volume growth was primarily attributable to the Procell Acquisition offset by volume declines in AZEK industrial building products and Scranton Products commercial and industrial building products.

Cost of Sales. Cost of sales increased by $32.0 million, or 16.6%, to $225.4 million for the year ended December 31, 2007 from $193.4 million for the same period in 2006. The increase was primarily attributable to increased volumes

from the Procell Acquisition. We also benefited from an 11.2% reduction in average resin costs for the year ended December 31, 2007 compared to the same period in 2006, as well as from other operating cost reductions. Despite year over year reductions in resin costs, resin prices have steadily risen from their low point in the first half of 2007.

Gross Margin. Gross margin increased by $19.9 million, or 29.1%, to $88.3 million for the year ended December 31, 2007 from $68.4 million for the same period of 2006. Gross margin as a percent of net sales increased to 28.1% for the year ended December 31, 2007 from 26.1% for the same period in 2006. This increase was mainly attributable to the increase in sales volume from the Procell Acquisition and the decrease in average resin costs and operational improvements.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $6.6 million, or 16.4 %, to $46.8 million, or 14.9% of net sales for the year ended December 31, 2007 from $40.2 million, or 15.4% of net sales for the same period in 2006. The increase in selling, general and administrative was primarily attributable to the Procell Acquisition, including a $1.8 million increase in amortization related to the intangibles acquired in the Procell Acquisition, a $2.5 million increase in corporate costs, which includes $1.0 million in severance costs, primarily related to the departure of our former chief executive officer, additional costs related to public company requirements, as well as increased selling and marketing costs.

Gain on Sale of Property. Gain on sale of property was $0.4 million, or 0.1% of net sales for the year ended December 31, 2007. This transaction involved the sale of one of Scranton Product’s manufacturing facilities for net proceeds of $2.0 million in May 2007.

Interest Expense, net. Interest expense, net, increased by $5.0 million, or 17.5%, to $33.7 million for the year ended December 31, 2007 from $28.7 million for the same period in 2006. Interest expense was higher primarily from the addition of $33.0 million related to the Procell Acquisition, which closed on January 31, 2007.

Income Taxes. Income taxes increased by $3.5 million, or 1,534.8%, to $3.8 million for the year ended December 31, 2007 from a $0.2 million expense for the same period in 2006. Income tax expense increased primarily from the increase in pretax income (determined primarily based on the pretax income of the specific subsidiaries, and the states where they are subject to income tax), as well from adjustments in the rate at which state deferred taxes are recorded.

Net Income. Net income increased by $5.1 million, to net income of $4.6 million for the year ended December 31, 2007 from a net loss of $0.5 million for the comparable period in 2006 as a result of reasons described above, particularly from the Procell Acquisition, lower average resin costs, offset by increased selling, general and administrative expenses, mainly from additional amortization on the intangible assets acquired in the Procell Acquisition, additional costs related to public company requirements and additional marketing costs related to the additional branding efforts for our decking products.

Year Ended December 31, 2006 Compared with Year Ended December 31, 2005

32

The following table summarizes certain financial information relating to the Successor and Predecessor operating results that have been derived from their consolidated financial statements:

					Combined
					Predecessor
		Successor			and Successor			Successor			Predecessor
								Period			Period
		Year Ended			Year Ended			May 11, 2005 to			January 1,
		December 31,			December 31,			December 31,			to May 10,
(Dollars in thousands)		2006			2005(a)			2005			2005
Net sales	$	261,790		$	222,603		$	140,672		$	81,931
Cost of sales		(193,417	)		(171,930	)		(113,076	)		(58,854	)
Gross margin		68,373			50,673			27,596			23,077
Selling, general and administrative expenses		(40,249	)		(40,775	)		(18,870	)		(21,905	)
Operating income		28,124			9,898			8,726			1,172
Interest expense, net		(28,685	)		(23,035	)		(21,175	)		(1,860	)
Miscellaneous, net		306			(226	)		158			(384	)
Loss before income taxes		(255	)		(13,363	)		(12,291	)		(1,072	)
Income tax (expense) benefit		(230	)		1,622			4,682			(3,060	)
Net loss	$	(485	)	$	(11,741	)	$	(7,609	)	$	(4,132	)

________________

(a) Represents the mathematical addition of the Predecessor period January 1, 2005 to May 10, 2005 and the Successor period May 11, 2005 to December 31, 2005.The Combined Predecessor and Successor results of operations are not indicative of our future results of operations or results of operations that would have actually occurred had the Transaction with the Predecessor been consummated as of January 1, 2005, due to the fair values assigned to our assets and liabilities, the changes made in the related estimated useful lives of the assets at May 11, 2005, as well as changes in interest and income tax expenses as a result of the Transaction.

The following table summarizes certain information relating to the Successor and Predecessor operating results as a percentage of net sales and has been derived from the financial information presented above. We believe this presentation is useful to investors in comparing historical results. Certain amounts in the table may not sum due to the rounding of individual components.

			Combined
			Predecessor
	Successor		and Successor		Successor		Predecessor
					Period		Period
	Year Ended		Year Ended		May 11, 2005 to		January 1, 2005
	December 31,		December 31,		December 31,		to May 10,
	2006		2005(a)		2005		2005
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	(73.9	)	(77.2	)	(80.4	)	(71.8	)
Gross margin	26.1		22.8		19.6		28.2
Selling, general and administrative expenses	(15.4	)	(18.3	)	(13.4	)	(26.7	)
Operating income	10.7		4.4		6.2		1.4
Interest expense, net	(11.0	)	(10.3	)	(15.1	)	(2.3	)
Miscellaneous—net	0.1		(0.1	)	0.1		(0.5	)
(Loss) income before income taxes	(0.1	)	(6.0	)	(8.7	)	(1.3	)
Income tax benefit (expense)	(0.1	)	0.7		3.3		(3.7	)
Net (loss) income	(0.2	%)	(5.3	%)	(5.4	%)	(5.0	)%

___________________

(a) Represents the mathematical addition of the Predecessor period January 1, 2005 to May 10, 2005 and the Successor period May 11, 2005 to December 31, 2005. The Combined Predecessor and Successor results of operations are not indicative of our future results of operations or results of operations that would have actually occurred had the

33

Transaction with the Predecessor been consummated as of January 1, 2005, due to the fair values assigned to our assets and liabilities, the changes made in the related estimated useful lives of the assets at May 11, 2005, as well as changes in interest and income tax expenses as a result of the Transaction.

Net Sales. Net sales increased by $39.2 million, or 17.6%, to $261.8 million for the year ended December 31, 2006, from $222.6 million for the year ended December 31, 2005 due to increased volumes and higher average selling prices. Overall, AZEK Building Products net sales increased 8.4% from December 31, 2006 compared to December 31, 2005, and Scranton Products net sales increased 36.6% from December 31, 2006 compared to December 31, 2005. We sold 186.7 million pounds of product during the year ended December 31, 2006, which was a 3.5% increase from the 180.3 million pounds sold during the year ended December 31, 2005. Volume growth was primarily attributable to the Santana Acquisition and year over year growth within AZEK Building Products, offset by volume decline in Scranton Products industrial building products. In addition to volume growth, revenues increased as a result of the full year benefit from price increases across all of our product lines, implemented in the second half of 2005.

Cost of Sales. Cost of sales increased by $21.5 million, or 12.5%, to $193.4 million for the year ended December 31, 2006 from $171.9 million for the same period in 2005. The increase was primarily attributable to increased volumes from the Santana Acquisition, as well as an increase in average resin prices per pound of 5.6% in the year ended December 31, 2006 compared to the same period in 2005. Despite the period over period increase in average resin prices, resin costs have significantly declined from their peak levels in the fall of 2005. In 2005, our cost of sales included the effect of the fair value adjustment of acquired inventories recorded in connection with the Transaction. The $5.2 million non-cash fair value adjustment increased acquired inventory values to estimated selling price at May 11, 2005. This increase was then recognized as an increase to cost of sales during the period May 11, 2005 to December 31, 2005 as the related inventory was sold.

Gross Margin. Gross margin increased by $17.7 million, or 34.9%, to $68.4 million for the year ended December 31, 2006 from $50.7 million for the same period of 2005. This increase was mainly attributable to increases in selling prices which allowed us to offset the increase in average resin costs. Gross margin as a percent of net sales increased to 26.1% for the year ended December 31, 2006 from 22.8% for the same period in 2005. This increase was mainly due to the increase in selling prices and volume growth. The increase in gross margin in 2006 from 2005 was also attributable to the impact of the fair value adjustment we incurred in 2005 as a result of the Transaction as discussed above.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $0.5 million, or 1.3%, to $40.2 million, or 15.4% of net sales for the year ended December 31, 2006 from $40.8 million, or 18.3% of net sales for the same period in 2005. The decrease in selling, general and administrative expenses from 2005 was primarily attributable to a one-time compensation charge of approximately $12.8 million relating to the vesting of certain restricted stock units upon the closing of the Transaction in 2005. This decrease was primarily offset by the addition of Santana, increased sales staff and marketing efforts for both our residential and commercial building product lines, an approximately $0.9 million increase in amortization of intangible assets recorded in conjunction with the Transaction and the Santana Acquisition, approximately $0.5 million in transition costs related to the Santana Acquisition, approximately $1.0 million attributable to management fees to our majority shareholder and approximately $1.2 million of increased professional fees such as Sarbanes-Oxley compliance, accounting and legal costs, to support our development of a public infrastructure and the SEC registration process.

Interest Expense, net. Interest expense, net, increased by $5.7 million, or 24.5%, to $28.7 million for the year ended December 31, 2006 from $23.0 million for the same period in 2005. Interest expense was higher due to higher interest rates in 2006, as well as from the addition of $30.0 million in debt attributable to the Santana Acquisition.

Income Taxes. Income tax expense, net, increased by $1.9 million to income tax expense of $230 thousand for the year ended December 31, 2006 compared to an income tax benefit of $1.6 million for the year ended December 31, 2005. The increase in income tax expense is primarily attributable to a significantly lower pretax loss before taxes in 2006 compared to 2005.

Net Income. Net income increased by $11.3 million, to a net loss of $0.5 million for the year ended December 31, 2006 from a net loss of $11.7 million for the comparable period in 2005 as a result of reasons described above,

34

particularly as a result of the vesting of $12.8 million in restricted stock units in 2005 offset by higher interest expense and increased selling, general and administrative expenses, mainly from the Santana Acquisition and public company requirements.

Segment Results of Operations

The following discussion provides a review of results for our two business segments: AZEK Building Products, which includes products such as AZEK and Celtec, as well as other branded highly engineered, metal and wood replacement products; and Scranton Products, which includes highly engineered fabricated products such as Comtec and Santana bathroom products and locker systems. The components of each segment are based on similarities in product line, production processes and methods of distribution and are considered reportable segments under SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. Corporate overhead costs, which include corporate payroll costs and corporate related professional fees, are not allocated to segments, and as such are discussed separately.

AZEK Building Products – Year Ended December 31, 2007 Compared With Year Ended December 31, 2006

The following table summarizes certain financial information relating to the AZEK Building Products segment results that have been derived from the Company’s consolidated financial statements:

		Year			Year
		Ended			Ended
		December 31,			December 31,
(Dollars in thousands)		2007			2006
Net sales	$	213,991		$	162,198
Cost of sales		(151,984	)		(118,921	)
Gross margin		62,007			43,277
Selling, general and administrative expenses		(24,097	)		(21,001	)
Loss on sale of fixed assets		(21	)		–
Operating income	$	37,889		$	22,276

Net Sales. Net sales increased by $51.8 million or 31.9%, to $214.0 million for the year ended December 31, 2007 from $162.2 million for the same period in 2006. Overall, we sold 181.7 million pounds of product during the year ended December 31, 2007, which was a 34.4% increase from the 135.2 million pounds sold during the comparable period in 2006. This volume increase was primarily attributable to the Procell Acquisition, offset by declines in our industrial business.

Cost of Sales. Cost of sales increased by $33.1 million, or 27.8%, to $152.0 million for the year ended December 31, 2007 from $118.9 million for the same period of 2006. The increase was primarily attributable to higher sales volume from the Procell Acquisition. We also benefited from the decrease in our average resin costs of 11.2% in the year ended December 31, 2007 compared to the same period in 2006.

Gross Margin. Gross margin increased by $18.7 million, or 43.3% to $62.0 million for the year ended December 31, 2007 from $43.3 million for the same period in 2006. This increase was primarily attributable to increased sales volume and favorable average resin costs. Gross margin as a percent of net sales was 29.0% for the year ended December 31, 2007 compared to 26.7% for the same period in 2006.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $3.1 million, or 14.7% to $24.1 million, or 11.3% of sales for the year ended December 31, 2007 from $21.0 million, or 12.9% of net sales for the same period in 2006. The increase in selling, general and administrative expenses was primarily due to increased selling and marketing costs attributable to the expansion and introduction of additional product lines, and an increase of $1.8 million from the amortization of intangibles related to the Procell Acquisition.

35

Operating Income. Operating income increased by $15.6 million, or 70.1% to $37.9 million for the year ended December 31, 2007 from $22.3 million for the comparable period in 2006 primarily due to the Procell Acquisition and lower average resin costs.

AZEK Building Products – Year Ended December 31, 2006 Compared With Year Ended December 31, 2005

The following table summarizes certain financial information relating to the AZEK Building Products segment results that have been derived from the Company’s consolidated financial statements:

					Combined
					Predecessor
		Successor			and Successor			Successor			Predecessor
								Period			Period
		Year Ended			Year Ended			May 11, 2005 to			January 1, 2005
		December 31,			December 31,			December 31,			to May 10,
(Dollars in thousands)		2006			2005 (a)			2005			2005
Net sales	$	162,198		$	149,695		$	91,310		$	58,385
Cost of sales		(118,921	)		(109,570	)		(68,429	)		(41,141	)
Gross margin		43,277			40,125			22,881			17,244
Selling, general and administrative expenses		(21,001	)		(18,109	)		(11,795	)		(6,314	)
Operating income	$	22,276		$	22,016		$	11,086		$	10,930

_____________________

(a) Represents the mathematical addition of the Predecessor period January 1, 2005 to May 10, 2005 and the Successor period May 11, 2005 to December 31, 2005. The Combined Predecessor and Successor results of operations are not indicative of our future results of operations or results of operations that would have actually occurred had the Transaction with the Predecessor been consummated as of January 1, 2005, due to the fair values assigned to our assets and liabilities, the changes made in the related estimated useful lives of the assets at May 11, 2005, as well as changes in interest and income tax expenses as a result of the Transaction.

Net Sales. Net sales increased by $12.5 million or 8.4%, to $162.2 million for the year ended December 31, 2006 from $149.7 million for the same period in 2005. Overall, we sold 135.2 million pounds of product during the year ended December 31, 2006, which was a 2.9% increase from the 131.4 million pounds sold during the comparable period in 2005. This increase was primarily attributable to increases in sales volume of AZEK in the first half of 2006. Net sales were affected by lower volumes in the second half of 2006 due to a substantial slow down in the residential building market as housing starts fell from approximately 2.1 million in the first quarter of 2006 to 1.6 million in the last quarter of 2006. The decline in new home construction caused an associated reduction in inventory throughout the distribution channel. Net sales were also affected by increases in selling price due to AZEK residential and industrial pricing actions enacted in the second half of 2005.

Cost of Sales. Cost of sales increased by $9.4 million, or 8.5%, to $118.9 million for the year ended December 31, 2006 from $109.6 million for the same period of 2005. The increase was primarily attributable to higher sales volume as well as an increase in average resin prices of 5.6% in the year ended December 31, 2006 compared to the same period in 2005.

Gross Margin. Gross margin increased by $3.2 million, or 7.9% to $43.3 million for the year ended December 31, 2006 from $40.1 million for the same period in 2005. This increase was primarily attributable to sales volume and increased selling prices which offset resin costs. Gross margin as a percent of net sales was 26.7% for the year ended December 31, 2006 compared to 26.8% for the same period in 2005.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $2.9 million, or 16.0% to $21.0 million, or 12.9% of sales for the year ended December 31, 2006 from $18.1 million, or 12.1% of net sales for the same period in 2005. The increase in selling, general and administrative expenses was primarily due to an increase in the direct selling effort and from higher marketing and advertising expenses associated with the

36

expansion of the AZEK brand, as well as approximately $0.4 million from the amortization of intangible assets recorded in conjunction with the Transaction.

Scranton Products – Year Ended December 31, 2007 Compared With Year Ended December 31, 2006

The following table summarizes certain financial information relating to the Scranton Products segment results that have been derived from its consolidated financial statements:

		Year			Year
		Ended			Ended
		December 31,			December 31,
(Dollars in thousands)		2007			2006
Net sales	$	99,712		$	99,592
Cost of sales		(73,452	)		(74,496	)
Gross margin		26,260			25,096
Selling, general and administrative expenses		(12,138	)		(11,206	)
Gain on sale of property		443			—
Operating income	$	14,565		$	13,890

Net Sales. Net sales of $99.7 million for the year ended December 31, 2007 remained fairly level when compared to sales for the same period of 2006. Net sales were affected by declines in our partition lines due to difficulty surrounding the integration of product lines and shared customer bases with those from the Santana Acquisition, as well as declines in our industrial business line, only partially offset by growth in our locker systems. Overall, we sold 49.9 million pounds of product in the year ended December 31, 2007, which is a decrease of 3.0% from the 51.5 million pounds sold during the comparable period in 2006.

Cost of Sales. Cost of sales decreased by $1.0 million, or 1.4%, to $73.5 million for the year ended December 31, 2007 from $74.5 million for the same period of 2006. The decrease was primarily attributable to the decline in volumes, an 11.2% year over year decrease in average resin costs as well as merger integration savings related to the Santana Acquisition. Despite year over year declines in average resin costs, currently resin costs continue to rise.

Gross Margin. Gross margin increased by $1.2 million, or 4.6% to $26.3 million for the year ended December 31, 2007 from $25.1 million for the same period in 2006. This increase was primarily attributable to the benefit of lower average resin costs and merger integration savings related to the Santana Acquisition, partially offset by lower sales volumes. Gross margin as a percent of net sales increased to 26.3% for the year ended December 31, 2007 from 25.2% for the same period in 2006.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $0.9 million, or 8.3%, to $12.1 million, or 12.2% of sales for the year ended December 31, 2007 from $11.2 million, or 11.3% of net sales for the same period in 2006. The increase in selling, general and administrative expenses was largely attributable to a non-recurring legal settlement of $0.5 million in June 2007.

Gain on Sale of Property. Gain on sale of property was $0.4 million, or 0.4% of net sales for the year ended December 31, 2007. This transaction involved the sale of one of Scranton Product’s manufacturing facilities for net proceeds of $2.0 million in May 2007.

Operating Income. Operating income increased by $0.7 million, or 4.9% to $14.6 million for the year ended December 31, 2007 from $13.9 million for the comparable period in 2006 due to lower sales volumes offset by lower average resin costs.

Scranton Products – Year Ended December 31, 2006 Compared With Year Ended December 31, 2005

37

The following table summarizes certain financial information relating to the Scranton Products segment results that have been derived from its consolidated financial statements:

					Combined
					Predecessor
		Successor			and Successor			Successor			Predecessor
								Period			Period
								May 11, 2005			January 1,
		Year Ended			Year Ended			to			2005
		December 31,			December 31,			December 31,			to May 10,
(Dollars in thousands)		2006			2005 (a)			2005			2005
Net sales	$	99,592		$	72,908		$	49,362		$	23,546
Cost of sales		(74,496	)		(62,360	)		(44,647	)		(17,713	)
Gross margin		25,096			10,548			4,715			5,833
Selling, general and administrative expenses		(11,206	)		(6,409	)		(4,654	)		(1,755	)
Operating income	$	13,890		$	4,139		$	61		$	4,078

____________________

(a) Represents the mathematical addition of the Predecessor period January 1, 2005 to May 10, 2005 and the Successor period May 11, 2005 to December 31, 2005. The Combined Predecessor and Successor results of operations are not indicative of our future results of operations or results of operations that would have actually occurred had the Transaction with the Predecessor been consummated as of January 1, 2005, due to the fair values assigned to our assets and liabilities, the changes made in the related estimated useful lives of the assets at May 11, 2005, as well as changes in interest and income tax expenses as a result of the Transaction.

Net Sales. Net sales increased by $26.7 million or 36.6%, to $99.6 million for the year ended December 31, 2006, from $72.9 million for the same period of 2005. This increase was attributable to the Santana Acquisition and higher average selling price. We experienced a 29.5% increase in average selling prices year over year through price increases in the industrial and commercial building product lines during the later half of 2005, as well as from changes in product mix sold during the year ended December 31, 2006 compared to the same period in 2005. We increased prices in our bathroom products and locker systems, as well as industrial business. Net sales were also affected by increases attributable to additional sales volumes associated with the Santana Acquisition. Increased volumes within commercial building products were partially offset by lower volumes within industrial building segment. Overall, we sold 51.5 million pounds of product in the year ended December 31, 2006, which is an increase of 5.3% from the 48.9 million pounds sold during the comparable period in 2005.

Cost of Sales. Cost of sales increased by $12.1 million, or 19.5%, to $74.5 million for the year ended December 31, 2006 from $62.4 million for the same period of 2005. The increase was primarily attributable to higher sales volumes in the year ended December 31, 2006 from the Santana Acquisition and higher average resin prices per pound. Despite the 5.6% year over year increase in average resin prices, resin costs have declined from their peak levels in the fall of 2005.

Gross Margin. Gross margin increased by $14.5 million, or 137.9% to $25.1 million for the year ended December 31, 2006 from $10.5 million for the same period in 2005. This increase was primarily attributable to increased sales volumes from the Santana Acquisition and the benefit of higher average selling prices. Gross margin as a percent of net sales increased to 25.2% for the year ended December 31, 2006 from 14.5% for the same period in 2005.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $4.8 million, or 74.8%, to $11.2 million, or 11.3% of sales for the year ended December 31, 2006 from $6.4 million, or 8.8% of net sales for the same period in 2005. The increase in selling, general and administrative expenses was primarily attributable to the addition of Santana product lines, as well as approximately $0.5 million from the amortization of intangible assets recorded in conjunction with the Transaction and Santana Acquisition, along with approximately $0.5 million in transition costs related to the Santana Acquisition.

38

Operating Income. Operating income increased by $9.8 million to $13.9 million for the year ended December 31, 2006 from $4.1 million for the comparable period in 2005 due to increased sales volumes and average selling price, partially offset by higher average resin costs and increased selling general and administrative expenses due to increased amortization and the Santana Acquisition.

Corporate Costs– The Year Ended December 31, 2007 compared to the Year Ended December 31, 2006.

The following table summarizes certain information relating to our corporate costs, which include corporate payroll costs, as well as corporate-related professional fees.

		Year			Year
		Ended			Ended
		December 31,			December 31,
(Dollars in thousands)		2007			2006
Net sales	$	—		$	—
Cost of sales		—			—
Gross margin		—			—
General and administrative expenses		(10,609	)		(8,042	)
Operating income	$	(10,609	)	$	(8,042	)

General and Administrative Expenses.Corporate general and administrative expenses increased by $2.6 million, or 31.9%, to $10.6 million for the year ended December 31, 2007 from $8.0 million for the year ended December 31, 2006. The increase in general and administrative expenses was primarily attributable to a $0.7 million increase in depreciation expense primarily related to our information system upgrade completed in the third and fourth quarters of 2006, $1.0 million in severance costs, primarily attributable to the resignation of our former chief executive officer and approximately $1.0 million of increased professional fees such as Sarbanes-Oxley compliance, information technology, accounting and legal costs, to support our continued development of a public company infrastructure.

Corporate Costs–The Year Ended December 31, 2006 compared to the Year Ended December 31, 2005.

The following table summarizes certain information relating to our corporate overhead costs, which include corporate payroll costs, as well as corporate-related professional fees.

					Combined
					Predecessor
		Successor			and Successor			Successor			Predecessor
								Period			Period
		Year Ended			Year Ended			May 11, 2005 to			January 1, 2005
		December 31,			December 31,			December 31,			to May 10,
(Dollars in thousands)		2006			2005 (a)			2005			2005
Net sales	$	—		$	—		$	—		$	—
Cost of sales		—			—			—			—
Gross margin		—			—			—			—
General and administrative expenses		(8,042	)		(16,257	)		(2,421	)		(13,836	)
Operating loss	$	(8,042	)	$	(16,257	)	$	(2,421	)	$	(13,836	)

__________________

(a) Represents the mathematical addition of the Predecessor period January 1, 2005 to May 10, 2005 and the Successor period May 11, 2005 to December 31, 2005. The Combined Predecessor and Successor results of operations are not indicative of our future results of operations or results of operations that would have actually occurred had the Transaction with the Predecessor been consummated as of January 1, 2005, due to the fair values assigned to our assets and liabilities, the changes made in the related estimated useful lives of the assets at May 11, 2005, as well as changes in interest and income tax expenses as a result of the Transaction.

General and Administrative Expenses.Corporate general and administrative expenses decreased by $8.2 million, or 50.5%, to $8.0 million for the year ended December 31, 2006 from $16.3 million for the year ended December 31,

39

2005. The higher level of general and administrative expenses in 2005 was primarily attributable to a one-time compensation charge in the Predecessor period of approximately $12.8 million relating to the vesting of certain restricted stock units upon the closing of the Transaction in 2005. This charge was partially offset by increases of approximately $1.2 million in professional fees such as accounting, Sarbanes-Oxley compliance preparation and legal costs, to support our preparation of a public infrastructure, $1.0 million attributable to our management fee, as well as increases from management additions made at corporate to support our growth and to meet the requirements of a public registrant.

Liquidity and Capital Resources

Our primary cash needs are working capital, capital expenditures and debt service. We have historically financed these cash requirements through internally-generated cash flow and debt financings. We also have a senior secured revolving credit facility which provides additional liquidity to support our growth. In addition, we may also issue additional equity and/or debt to finance acquisitions in the future.

Net cash provided by operating activities was $21.3 million, $1.9 million and $35.1 million for the years ended December 31, 2007, 2006 and 2005, respectively. The increase in cash provided by operating activities in the year 2007 was primarily due to higher earnings and non-cash expenses including depreciation and amortization, as well as continued improvements in receivables and accounts payables management, offset by increased levels of finished goods related to our winter buy at the end of 2007 compared to 2006. The decrease in cash provided by operating activities from 2005 to 2006 was primarily due to higher interest payments on our long-term debt, increased raw material costs, reduction in levels of payables at the end of 2006 compared to 2005 (mainly for resin purchases made at the end of 2005) and higher working capital levels to support growth. These factors were only partially offset by improved finished good inventory management.

Net cash used in investing activities was $70.6 million, $52.0 million and $234.5 million for the years ended December 31, 2007, 2006 and 2005, respectively. In 2007, cash used in investing activities of $58.2 million related to the Procell Acquisition completed on January 31, 2007. The remaining cash used in investing activities in 2007 related to $14.4 million in capital expenditures primarily for the capacity expansion at our Foley Alabama manufacturing facility. On May 10, 2007 we also sold one of our manufacturing facilities for approximately $2.0 million. Cash used in investing activities in 2006 was primarily attributable to $35.0 million related to the Santana Acquisition completed on April 28, 2006. The majority of the remaining cash used in investing activities in 2006 related to $17.0 million of capital expenditures for the continued development of our new facility to manufacture AZEK Trim products, as well as for a company-wide accounting software upgrade that was implemented during the quarter ended September 30, 2006. In the period of May 11, 2005 to December 31, 2005, cash used in investing activities of $212.8 million related to the acquisition of the equity interests in the Predecessor in connection with the Transaction, while $17.3 million was attributable to capital expenditures for the AZEK Building Products facility. Predecessor cash used in investing activities in 2005 and 2004 related to capital expenditures of $4.5 million. We estimate that capital expenditures for 2008 will be $8.0 to $13.0 million.

Net cash provided by financing activities was $56.7 million, $37.4 million, and $211.5 million for the years ended December 31, 2007, 2006 and 2005, respectively. On January 31, 2007 we received proceeds of $33.0 million related to the additional financing of floating rate notes as well as $34.9 million in additional capital contributions, in order to finance the Procell Acquisition. The majority of cash provided by financing activities in 2006 related to the proceeds from the $30.0 million additional financing of floating rate notes, as well as $9.0 million in proceeds from our senior secured credit facility, $5.3 of which we incurred as part of the Santana Acquisition, with the remaining proceeds used for operating activities. We also incurred an additional $1.9 million in financing costs related to the public registration and exchange offer of our Notes. Cash provided by financing activities for the year ended December 31, 2005 primarily represented proceeds from the refinancing and issuance of $65.0 million of senior floating rate notes, $150.0 million in senior fixed rate notes, $5.0 million in borrowings from our revolving credit facility and $128.4 million in capital contributions, partially offset by payments on the Predecessor’s long-term debt obligations of $142.3 million.

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Floating Rate Notes and Fixed Rate Notes. In connection with the Transaction, CPG issued $215.0 million of indebtedness on May 10, 2005. On June 29, 2005, CPG priced a refinancing of the Transaction debt with the issuance of $65.0 million aggregate principal amount of Senior Floating Rate Notes due 2012 (the “Floating Rate Notes”) and $150.0 million aggregate principal amount of 10½% Senior Notes due 2013 (the “Fixed Rate Notes,” and collectively with the Floating Rate Notes, the “Notes”). The Notes have been guaranteed by the Company and all of the subsidiaries of CPG. The indenture governing the Notes, which is material to our company, contains a number of covenants that, among other things, restrict CPG’s ability, and the ability of any subsidiary guarantors, subject to certain exceptions, to sell assets, incur additional debt, repay other debt, pay dividends and distributions on CPG’s capital stock or repurchase CPG’s capital stock, create liens on assets, make investments, loans or advances, make certain acquisitions, engage in mergers or consolidations and engage in certain transactions with affiliates.

On April 28, 2006, in connection with the Santana Acquisition, CPG issued an additional $30.0 million aggregate principal amount of Floating Rate Notes. These additional notes are governed by the same indenture dated as of July 5, 2005, governing the previously issued Floating Rate Notes.

In connection with the Procell Acquisition, CPG issued an additional $33.0 million aggregate principal amount of Floating Rate Notes on January 31, 2007. These additional notes are governed by the same indenture dated as of July 5, 2005, governing the previously issued Floating Rate Notes.

Senior Secured Credit Facility. Concurrently with the closing of the Transaction, CPG entered into a senior secured revolving credit facility that provides availability of up to $40.0 million. However, the amount of borrowing capacity available is limited to an amount equal to the sum of (a) 85% of our accounts receivable and (b) 60% of our inventory. The borrowings under the senior secured revolving credit facility are available until its maturity in 2011 to fund our ongoing working capital requirements, capital expenditures and other general corporate needs. Indebtedness under the senior secured revolving credit facility is secured by substantially all of CPG’s present and future assets. In addition, the senior secured credit facility is guaranteed by us and all of CPG’s domestic subsidiaries, including Scranton Products Inc. and AZEK Building Products, Inc.

The senior secured revolving credit facility imposes certain restrictions on the Company, CPG and the subsidiary guarantors, including restrictions on the ability to incur additional indebtedness or issue guarantees, grant liens, make fundamental changes in our business, corporate structure or capital structure, including, among other things, entering into mergers, acquisitions and other business combinations, make loans and investments, enter into transactions with affiliates, modify or waive material agreements in a manner that is adverse in any material respect to the lenders, or prepay or repurchase subordinated indebtedness. In addition, the senior secured revolving credit facility includes a material financial covenant that requires CPG to maintain at all times a maximum total senior secured leverage ratio less than or equal to 1.5 to 1.0. For more details of the terms of the senior secured credit facility, see “—Covenant Ratios in Indenture and Senior Secured Credit Facility” below. As of December 31, 2007, we were in compliance with all covenants contained in our senior secured credit facility.

On February 13, 2008, the Company and its subsidiaries terminated its senior secured revolving credit facility and entered into a new senior secured revolving credit agreement. On February 29, 2008, the Company and its subsidiaries, also entered into a Term Loan and Security Agreement. For further details regarding these transactions, see “—Subsequent Financing” below.

Change in Control Provisions in Indebtedness. The occurrence of certain kinds of change of control events would constitute an event of default under the agreement governing our senior secured revolving credit facility, and would also trigger a requirement under the indenture governing the Notes to offer to repurchase all then outstanding Notes at 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase, unless all Notes have been previously called for redemption. A default under our senior secured revolving credit facility would result in a default under the indenture governing the Notes if the lenders accelerate the debt under our senior secured revolving credit facility. In addition, our failure to purchase tendered Notes would constitute an event of default under the indenture governing the notes, which in turn, would constitute a default under our senior secured revolving credit facility. Moreover, our senior secured revolving credit facility restricts our ability to repurchase the Notes, including following a change of control event. As a result, following a change

41

of control event, we would not be able to repurchase Notes unless we first repay all indebtedness outstanding under our senior secured revolving credit facility and any of our other indebtedness that contains similar provisions, or obtain a waiver from the holders of such indebtedness to permit us to repurchase the Notes. We may be unable to repay all of that indebtedness or obtain a waiver of that type. Any requirement to offer to repurchase outstanding Notes may therefore require us to refinance our other outstanding debt, which we may not be able to do on commercially reasonable terms, if at all.

Covenant Ratios in Indenture and Senior Secured Credit Facility. As discussed above under “—Senior Secured Credit Facility,” the credit agreement governing our senior secured credit facility includes a material financial covenant that requires CPG to maintain at all times a maximum total senior secured leverage ratio less than or equal to 1.5 to 1.0 (referred to in the credit agreement as the “Senior Secured Leverage Ratio”). The Senior Secured Leverage Ratio, for the twelve-month period ending on the last day of any fiscal quarter, is defined in the credit agreement as the ratio of (a) senior secured indebtedness on the last day of such period to (b) “Consolidated EBITDA,” or earnings before interest, taxes, depreciation and amortization for the such twelve-month period, which we refer to herein as “Adjusted EBITDA,” in each case calculated on a pro forma basis as provided below. Non-compliance with this financial covenant could result in an event of default under our credit agreement and, under certain circumstances, a requirement to immediately repay all amounts outstanding under the credit agreement and could trigger a cross-default under our indenture governing the Notes or other indebtedness we may incur in the future. Moreover, we will not be able to borrow additional amounts under our senior secured credit facility if we are in default under our credit agreement, including non-compliance with this financial covenant.

In addition, the indenture governing the Notes includes a material covenant limiting the amount of indebtedness that the Company, CPG and its subsidiaries may incur. Under the indenture, CPG and the subsidiary guarantors are permitted to incur indebtedness only if the ratio of Adjusted EBITDA (referred to in the indenture as “Consolidated EBITDA”) for the four most recent full fiscal quarters to certain fixed charges for such period, calculated on a pro forma basis is greater than 2.0 to 1.0 (referred to in the indenture as the “Consolidated Fixed Charge Coverage Ratio”) or, if the ratio is less, only if the indebtedness falls into specified debt baskets, including, for example, a credit agreement debt basket, an existing debt basket, a capital lease and purchase money debt basket, an intercompany debt basket, a permitted guarantee debt basket, a hedging debt basket, a letter of credit basket, an acquired debt basket and a general debt basket. The acquired debt basket permits CPG or any of its restricted subsidiaries to incur debt to finance an acquisition so long as the Consolidated Fixed Charge Coverage Ratio would be equal to or greater than immediately prior to such acquisition. CPG utilized this debt basket to finance the Santana Acquisition and the Procell Acquisition. Non-compliance with this covenant could result in an event of default under the indenture and, under certain circumstances, a requirement to immediately repay all amounts outstanding under the Notes and could trigger a cross-default under our credit agreement or other indebtedness we may incur in the future.

Adjusted EBITDA is calculated similarly under both the credit agreement and the indenture governing the Notes by adding consolidated net income, income taxes, interest expense, depreciation and amortization and other non-cash expenses, income or loss attributable to discontinued operations and amounts payable pursuant to the management agreement with AEA Investors. In addition, consolidated net income is adjusted to exclude, among other items: after-tax gains or losses from asset sales; unrealized gains or losses arising from hedging agreements or derivative instruments; any after-tax extraordinary or nonrecurring gains or losses and any unusual or nonrecurring charges (including severance, relocation costs and one-time compensation charges or restructuring charges or reserves related to the closure of facilities), including any expenses, gains or losses incurred in connection with any issuance of debt or equity; any non-cash compensation charges arising from the grant or issuance of equity instruments; fees, costs and expenses in connection with any acquisition (including the Transaction), including, without limitation, amortization of debt issuance costs, debt discount or premium and other financing fees and expenses directly relating thereto and write-offs of any debt issuance costs relating to indebtedness being retired or repaid in connection with such acquisition, as well as bonus payments paid to employees in connection with such acquisition; any amortization of premiums, fees, or expenses incurred in connection with the Transaction or any other acquisition, or any non-cash write-ups and non-cash charges relating to inventory, fixed assets, intangibles or goodwill, as permitted by Accounting Principles Board Opinions Nos. 16 and 17, respectively; any non-cash impact attributable to the application of purchase method of accounting in accordance with GAAP; the cumulative effect of

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a change in accounting principles; and any impairment charge or asset write-off pursuant to SFAS No. 142 and No. 144 and the amortization of intangibles arising pursuant to SFAS No. 141.

In calculating the Senior Secured Leverage Ratio, Adjusted EBITDA and senior secured indebtedness, as the case may be, are each adjusted by giving pro forma effect to acquisitions and dispositions that occurred in the prior four quarters, including certain cost savings and synergies expected to be obtained in the succeeding nine months.

The following table sets forth the Senior Secured Leverage Ratio pursuant to our credit agreement, as well as the amount of senior secured indebtedness and Adjusted EBITDA, on a pro forma basis as defined by our credit agreement:

				Year Ended
				December 31,
(	Dollars in thousands)	Covenant Amount		2007
	Senior Secured Leverage Ratio	Maximum of 1.5x		0.22x
	Senior secured indebtedness		$	1,430
	Adjusted EBITDA		$	63,845

The following table provides the calculation of Adjusted EBITDA, pursuant to the covenants described above in our credit agreement and indenture, for the year ended December 31, 2007, on a pro forma basis as defined by our credit agreement: 

		Year Ended
		December 31,
		2007
Net income (a)	$	4,627
Interest expense, net (a)		33,698
Income tax expense		3,760
Depreciation and amortization		18,157
EBITDA		60,242
Settlement charges (b)		500
Severance costs (c)		1,009
Management fee (d)		1,733
Gain on sale of property (e)		(422	)
Santana Acquisition costs (f)		13
Procell non—recurring charges (g)		60
Adjusted EBITDA		63,135
Pro forma adjustments		710
Adjusted EBITDA with pro forma adjustments	$	63,845

______________

(a) Net loss and interest expense each includes the amortization of approximately $1.9 million of deferred financing costs classified as interest expense for the year ended December 31, 2007.

(b) Represents the one-time settlement expense CPG incurred over its patent infringement settlement during the year end December 31, 2007.

(c) Represents severance costs attributable to individuals whose positions had not been replaced.

(d) Represents the elimination of the AEA Investors management fee and expenses that were charged during the period presented.

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(e) Represents the gain CPG recorded related to the sale of one of Scranton Product’s manufacturing facilities on May 10, 2007, offset by a loss on the disposal of some machinery and equipment of approximately $22,000 at its AZEK Building Product’s facility.

(f) Represents charges related to integration and moving expenses from the Santana Acquisition, which we acquired on April 28, 2006.

(g) Represents charges related to integration costs from the Procell Acquisition, which we acquired on January 31, 2007.

While the determination of appropriate adjustments in the calculation of Adjusted EBITDA is subject to interpretation under our debt agreements, management believes the adjustments described above are in accordance with the covenants in our credit agreement and indenture, as discussed above. Adjusted EBITDA should not be considered in isolation or construed as an alternative to our net income or other measures as determined in accordance with GAAP and should be utilized in understanding our ability to comply with our debt instruments. Adjusted EBITDA should be used to analyze our ability to comply with our covenants. In addition, other companies in our industry or across different industries may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Long-term Liquidity. At December 31, 2007, we had the availability of $38,570,000 under our revolving credit facility. We anticipate that the funds generated by our operations, as well as funds available under our senior secured revolving facility, will be sufficient to meet working capital requirements and to finance capital expenditures over the next several years. There can be no assurance, however, that our business will generate sufficient cash flow from operations, that anticipated net sales growth and operating improvements will be realized or that future borrowings will be available under our senior secured revolving credit facility in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs. Our ability to meet our debt service obligations and other capital requirements, including capital expenditures and acquisitions, will depend upon our future performance and our ability to stay in compliance with our financial covenants, which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. We may also need to obtain additional funds to finance acquisitions, which may be in the form of additional debt or equity. Some other risks that could materially adversely affect our ability to meet our debt service obligations include, but are not limited to, risks related to increases in the cost and lack of availability of resin and our ability to pass through costs or price increases to cover such costs on a timely basis, our ability to protect our intellectual property, rising interest rates, a decline in gross domestic product levels, weakening of the residential, commercial and institutional construction markets, the loss of key personnel, our ability to continue to invest in equipment, and a decline in relations with our key distributors and dealers.

Subsequent Financing. On February 13, 2008, the Company and its subsidiaries entered into a Loan and Security Agreement (the “Loan Agreement”) with Wachovia Bank, National Association, as administrative agent, and General Electric Capital Corporation, as syndication agent.  The Loan Agreement provides subsidiaries of the Company with up to $65.0 million in borrowing capacity, with the actual borrowing base limited to a percentage of eligible receivables and inventory, subject to reserves established by the administrative agent in its permitted discretion.  The Loan Agreement requires subsidiaries of the Company to repay the outstanding principal on any loans thereunder at the maturity date as defined therein, but in any case no later than February 13, 2013. Borrowings under the Loan Agreement bear interest, at the Company’s option, at the base rate (prime rate) plus a spread of up to 0.5% or adjusted LIBOR plus a spread of 1.5% to 2.25%, or a combination thereof. The Loan Agreement also provides for a fee ranging between 0.25% and 0.5% of unused commitments. Substantially all of the Company’s and its subsidiaries’ assets (excluding real property) are pledged as collateral for any borrowings under the Loan Agreement.

The Loan Agreement contains various covenants, including a financial covenant which requires the Company and its subsidiaries to maintain, in certain circumstances and as defined, a minimum ratio of consolidated EBITDA to

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consolidated fixed charges of 1.0 to 1.0.  The Loan Agreement also imposes certain restrictions on us, and our subsidiaries, including restrictions on the ability to issue guarantees, grant liens, make fundamental changes in their business, corporate structure or capital structure, make loans and investments, enter into transactions with affiliates, modify or waive material agreements, or prepay or repurchase indebtedness.

On February 13, 2008, concurrently with the execution of the Loan Agreement, the Company and its subsidiaries terminated its senior secured revolving credit facility. On February 13, 2008, the Company repaid the outstanding principal amount of approximately $15.1 million under its prior facility with an approximately $15.1 million draw under the Loan Agreement.  

On February 29, 2008, the Company and its subsidiaries, entered into a Term Loan and Security Agreement (“Term Loan Agreement”). Subsidiaries of he Company borrowed approximately $25.0 million under the term loan as part of the financing for the Composatron Acquisition. The Term Loan Agreement requires the borrowers thereunder to repay the outstanding principal of the Term Loan in quarterly installments of $62,500 from March 31, 2008 through December 31, 2010, with the remaining outstanding principal balance of the Term Loan due no later than February 28, 2011. Interest on the Term Loan will accrue at a rate per annum, equal to, at the option of the borrowers, either (i) base rate (prime rate) plus a spread of 4.00%, (ii) adjusted LIBOR plus a spread of 5.00%, or (iii) a combination thereof.

The Term Loan Agreement contains various covenants, including a financial covenant which requires the Company and its subsidiaries to maintain, as defined, a maximum ratio of consolidated senior secured indebtedness to consolidated EBITDA of 2.5 to 1.0. The Term Loan Agreement also imposes certain restrictions on the Company and its subsidiaries, including restrictions on the ability to issue guarantees, grant liens, make fundamental changes in their business, corporate structure or capital structure, make loans and investments, enter into transactions with affiliates, modify or waive material agreements, or prepay or repurchase indebtedness. The Term Loan is secured by all personal and real property and fixtures of the Company and its subsidiaries, and obligations thereunder are guaranteed (or cross-guaranteed) by the Company and its subsidiaries (subject to customary exceptions with respect to foreign subsidiaries). The priority of liens on assets of the Company and its subsidiaries created pursuant to the Term Loan Agreement, on one hand, and the Loan Agreement, on the other hand, are governed by and subject to an intercreditor agreement entered into by the Company and its subsidiaries and agents for lenders under each of the Term Loan Agreement and the Loan Agreement.

Contractual Obligations

The following table summarizes our contractual cash obligations as of December 31, 2007. This table does not include information on our recurring purchases of materials for use in production, as our raw materials purchase contracts do not require fixed or minimum quantities. This table also excludes payments relating to income tax due to the fact that, at this time, we cannot determine either the timing or the amounts of payments for all periods beyond December 31, 2007 for certain of these liabilities.

				Due in
				Less than 1		Due in		Due in		Due after
(Dollars in thousands)		Total		Year		1-3 years		3-5 years		5 years
Notes	$	278,000	$	—	$	—	$	278,000	$	—
Interest on Notes		152,281		30,340		91,021		30,920		—
Raw materials in transit		1,937		1,937		—		—		—
Capital lease obligations		15,427		2,285		4,226		2,148		6,768
Operating lease obligations		7,902		1,430		2,409		1,798		2,265
Total (a)(b)(c)	$	455,547	$	35,992	$	97,656	$	312,866	$	9,033

__________________

(a) The interest rates used in the calculation of our interest payments were 10.5% related to our Fixed Notes and 11.4% related to our Floating Rate Notes.

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(b) As of December 31, 2007, there was a letter of credit of $1.4 million held against our senior secured revolving credit facility, which provides for borrowings of up to $40.0 million.

(c) On February 13, 2008, the Company repaid the outstanding principal amount of approximately $15.1 million under its then existing senior secured credit facility with an approximately $15.1 million draw under the Loan Agreement. See—“Subsequent Financing” above.

Off-Balance Sheet Arrangements

None.

Seasonality

Our sales have historically been moderately seasonal and have been strongest in the first and third quarters of the calendar year. We typically experience increased sales of AZEK products in the first quarter of the year as a result of our “early buy” sales program, which encourages dealers to stock AZEK products through the use of incentive discounts. We have generally experienced decreased sales in the fourth quarter due to adverse weather conditions in certain markets during the winter season. In addition, we have experienced increased sales of our bathroom partition products during the summer months during which schools are typically closed. We expect these cycles to moderate as AZEK sales growth continues to consistently grow throughout the calendar year.

Recent Accounting Pronouncements

In June 2006, the FASB issued Interpretation 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”). This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. This interpretation became effective for fiscal years beginning after December 15, 2006 (January 1, 2007 for the Company). The Company adopted the provisions of FIN 48 as of January 1, 2007, and as a result of that adoption, recorded $800,000 of unrecognized tax benefits on the balance sheet, which did not result in a cumulative effect adjustment to retained earnings as the adjustment was recorded to goodwill based on the nature of the tax position involved.  Of the total unrecognized tax benefits, $664,000 is carried at December 31, 2007 as a non-current liability, and $136,000 as an offset to non-current deferred tax assets.  If the unrecognized tax benefits were recognized in the future, there would be no impact to the Company’s effective tax rate.

In February 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statement No. 133 and 140 (“SFAS No. 155”). SFAS 155 allows financial instruments that contain an embedded derivative that otherwise would require bifurcation to be accounted for as a whole on a fair value basis. This statement is effective for all financial instruments acquired or issued after the beginning of the first fiscal year that begins after September 15, 2006. The adoption of SFAS 155 did not have a material impact on our consolidated financial statements.

In September 2006, the FASB issued SFAS 157, Fair Value Measurement. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This statement is effective for fiscal years beginning after November 15, 2007 for financial instruments, and non-financial instruments beginning after November 15, 2008, and interim periods within those fiscal years. We do not expect that the adoption of SFAS 157 will have a material impact on our consolidated financial statements.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of this standard on our consolidated financial statements.

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In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, which establishes principles over the method entities use to recognize and measure assets acquired and liabilities assumed in a business combination and enhances disclosures on business combinations. SFAS No. 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We are currently evaluating the impact of this standard on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We are subject to interest rate market risk in connection with our long-term debt. Our principal interest rate exposure relates to the floating rate notes and any outstanding amounts under our senior secured revolving credit facility. In addition, the market value of the fixed rate notes will fluctuate with interest rates.

Our outstanding floating rate notes bear interest at variable rates based on LIBOR. Each quarter point increase or decrease in the interest rate would change our interest expense by approximately $0.3 million per year. Our senior secured revolving credit facility provides for borrowings of up to $40.0 million, which also bear interest at variable rates. Assuming the senior secured revolving credit facility is fully drawn, each quarter point increase or decrease in the applicable interest rate would change our interest expense by approximately $0.1 million per year. In the future, we may enter into interest rate swaps, involving the exchange of floating for fixed rate interest payments, to reduce interest rate volatility.

Inflation

Our cost of sales is subject to inflationary pressures and price fluctuations of the raw materials we use, particularly, the cost of petrochemical resin. Historically, we have generally been able over time to recover the effects of inflation and price fluctuations through sales price increases and production efficiencies associated with technological enhancements and volume growth.

Raw Material; Commodity Price Risk

We rely upon the supply of certain raw materials and commodities in our production processes; however, we do not typically enter into fixed price contracts with our suppliers. The primary raw materials we use in the manufacturing of our products are various dry petrochemical resins, primarily PVC, HDPE and PP, which represented more than half of our cost of goods sold for the years ended December 31, 2007, 2006 and 2005. The exposures associated with these costs are primarily managed through terms of the sales and by maintaining relationships with multiple vendors. Prices are negotiated on a continuous basis, and we do not typically buy forward beyond six months and we have not entered into hedges with respect to our raw material costs.

Dry petrochemical resin prices may continue to fluctuate as a result of changes in natural gas and crude oil prices, other precursor raw materials for the products and underlying demand for these products. The instability in the world market for petroleum and the North American natural gas markets could materially adversely affect the prices and general availability of raw materials. Over the past several years we have at times experienced rapidly increasing resin prices primarily due to the increased cost of oil and natural gas. Due to the uncertainty of oil and natural gas prices, we cannot reasonably estimate our ability to successfully recover any cost increases. Even if we are able to pass these cost increases on to our customers, we may not be able to do so, on a timely basis, our gross margins could decline and we may not be able to implement other price increases for our products. To the extent that increases in the cost of resins cannot be passed on to our customers, or the duration of time lags associated with a pass through becomes significant, such increases may have a material adverse effect on our profitability and financial condition. Moreover, we do not reprice any existing orders. Also, increases in resin prices could negatively impact our competitive position as compared to wood and metal products that are not affected by changes in resin prices.

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Our raw material supplies are subject to not only price fluctuations but also other market disturbances including supply shortages and natural disasters. In the event of industry-wide general shortage of resins, or a shortage or discontinuation of certain types of resins purchased from one or more of our suppliers, we may not be able to arrange for alternative sources of resin. In the past, we have been able to maintain necessary raw material supplies, but any such shortages may materially negatively impact our production process as well as our competitive position versus companies that are able to better or more cheaply source resin.

Item 8. Financial Statements and Supplementary Data.

The financial statements of the Company, together with the report of the Independent registered public accounting firm thereon, are presented as part of this report on pages F-1 through F-31 under Item 15 hereof.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A(T). Controls and Procedures.

Evaluation of Controls and Procedures

We have carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13(a)-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon our evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2007, the disclosure controls and procedures are effective.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the Company’s management concluded that, as of December 31, 2007, the Company’s internal control over financial reporting was effective.

Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

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This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control of financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

On January 31, 2007, the Company acquired Pro-Cell, LLC, which owned and operated Procell Decking Systems, later rebranded as AZEK Deck. As permitted by SEC rules and regulations, management has excluded this business from its evaluation of internal controls over financial reporting as of December 31, 2007 because this business was acquired in 2007. The Company’s total consolidated net sales for the year ended December 31, 2007 was $313.7 million, of which net sales associated with the AZEK Deck operations were $56.2 million. The Company’s total consolidated assets at December 31, 2007 were $600.5 million, of which assets associated with the AZEK Deck operations were $92.2 million .

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended December 31, 2007 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The following table provides information about our directors and executive officers.

Name	Age	Position with our Company
Glenn M. Fischer	57	Interim Chief Executive Officer and Director
Scott Harrison	35	Executive Vice President and Chief Financial Officer
Ralph Bruno	44	President, AZEK Building Products Inc.
Chris Bardasian	49	President, Scranton Products Inc.
Kevin Sloan	49	Senior Vice President, Operations
James Andersen	45	Director
Vincent A. Calarco	65	Director
Shivanandan A. Dalvie	35	Director
Brian R. Hoesterey	40	Director
James Keisling	59	Chairman of the Board
Christopher P. Mahan	41	Director
Scott B. Perper	52	Director
Vincent A. Sarni	79	Director
Julian M. Steinberg	53	Director

Glenn M. Fischer, our Interim Chief Executive Officer has served on our Board of Directors since October 2005 and will continue to do so. Mr. Fischer is currently an Operating Partner with AEA Investors LLC, which he joined in 2005. Mr. Fischer currently serves on the boards of Henry Company and Pregis Corporation. He also served as the Interim CEO of Pregis Corporation shortly after AEA Investors acquired the company from November 2005 to February 2006. From 2000 to 2005, Mr. Fischer was President and Chief Operating Officer of Airgas, Inc., the largest U.S. distributor of industrial, medical and specialty gases, welding, safety, and related

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products. Mr. Fischer joined Airgas after spending 19 years with The BOC Group in a wide range of positions leading to his appointment in 1997 as president of BOC Gases, North America. In addition to his responsibility for all North American operations, Mr. Fischer served on The BOC Group Executive Management Board. Prior to joining BOC in 1981, Mr. Fischer served at W.R. Grace in a variety of finance, planning, and management roles..

Scott Harrison, our Executive Vice President and Chief Financial Officer, joined us in November 2005 as our Vice President of Finance. Mr. Harrison was appointed our Senior Vice President and Chief Financial Officer in February 2006. Prior to joining us, Mr. Harrison was director of business development at Silgan Plastics Corporation since 2003. Prior to joining Silgan Plastics, Mr. Harrison held various positions with First Union Capital Partners and Bowles Hollowell Conner & Co. Mr. Harrison received a B.A. in economics from Duke University and an M.B.A. from The Tuck School of Business at Dartmouth.

Ralph Bruno, our President, AZEK Building Products Inc., joined us in 2001. Prior to joining us, Mr. Bruno served as a national sales manager with Trex Corp., a leading manufacturer of composite decking products, from 1991 to 2001. Mr. Bruno has been in the synthetic materials industry his entire career. He received a B.A. from Cortland (NY) State University in 1985.

Chris Bardasian, our President, Scranton Products Inc., joined us in January 2007. Chris began his professional career at Hobart Corporation in 1977 and then went to Bendix Automation and Measurement in 1981. Chris held positions within the manufacturing, information technology and sales organizations, advancing through supervisory and senior management roles. In 1992, Chris joined Alside and went on to serve as Vice President & General Manager of Alside’s UltraGuard Vinyl Fencing, Railing and Decking Division, reporting directly to Alside’s chief executive officer. His responsibilities involved managing all aspects of the business unit, including manufacturing operations, sales & marketing. In 2004 Chris joined Procell where he focused on Sales & Marketing, as the Co-President & CEO.

Kevin Sloan, our Senior Vice President, Operations, joined us in January 2007. Kevin began his professional career at The GSI Group in 1977, where he held various management positions, and in 1989 he was appointed President of Heritage Vinyl Fence. In 1996, Heritage Vinyl Fence was sold to Outdoor Technology, which is the largest vinyl fence manufacturer today. In 2003, Kevin established Procell where he focused on manufacturing operations and product development, as Co-President & CEO.

James Andersen became a director upon consummation of the Transaction. Mr. Andersen is the Managing Partner and co-founder of Clearview Capital, a buyout firm which he formed in 1999. Prior to joining Clearview Capital, Mr. Andersen was with Capital Partners from 1996 to 1999. Previously, Mr. Andersen was a project manager at Mars and Company, an international strategy consulting firm, and prior to that, he was an international staff field engineer with Schlumberger. Mr. Andersen received a B.S.E. in Civil Engineering, cum laude, from Princeton University and earned an M.B.A. from the Wharton School in 1989. He is currently a director of Twinco -Romax LLC, Senior Care Centers of America, Inc., Hillsdale Furniture LLC, M.H. Zeigler and Sons, LLC, Rowmark, LLC and Hettinger Welding, LLC.

Vincent A. Calarco became a director in June 2006. Mr. Calarco was Chairman, President and Chief Executive Officer of Crompton Corporation (now known as Chemtura Corporation), a producer of specialty chemicals and polymer products, from 1999 to 2004. Previously, he was President and Chief Executive Officer of Crompton & Knowles Corporation, a predecessor of Crompton Corporation, from 1985 to 1999, and Chairman from 1986 to 1999. Mr. Calarco received a B.S. in chemical engineering from Polytechnic University and an M.B.A. with distinction from The Harvard Business School. He is currently a director of Consolidated Edison, Inc. and Newmont Mining Corporation. In addition, Mr. Calarco is the Chairman of the Chemical Heritage Foundation and a Trustee of Saint Raphael Healthcare System.

Shivanandan A. Dalvie became a director upon consummation of the Transaction. Mr. Dalvie is a Partner with AEA Investors, which he joined in 1997. Prior to joining AEA, he was in the mergers and acquisitions group of Credit Suisse First Boston. Mr. Dalvie received a B.S. in computer science and economics from Yale University and an M.B.A. from Stanford University.

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Brian R. Hoesterey became a director upon consummation of the Transaction. Mr. Hoesterey is a Partner with AEA Investors, which he joined in 1999. Prior to joining AEA Investors, he was with BT Capital Partners, the private equity investment vehicle of Bankers Trust. Mr. Hoesterey has also previously worked for McKinsey & Co. and the investment banking division of Morgan Stanley. Mr. Hoesterey graduated summa cum laude from Texas Christian University with a B.B.A. in accounting and received an M.B.A. with honors from The Harvard Business School. He is currently a director of Henry Company, Pregis Holding II Corporation, Unifrax Corporation, Houghton International and Suncoast Roofers.

James Keisling, our non-executive Chairman of the Board as of January 1, 2007, previously served as our Chief Executive Officer. Mr. Keisling has over 30 years of experience in developing and manufacturing highly-engineered synthetic replacement products for wood and metal. He joined the family business in 1971, one year after graduating from Lycoming College with a degree in accounting. Prior to that he worked with Haskins & Sells in New York, from 1970 to 1971.

Christopher P. Mahan became a director upon consummation of the Transaction. Mr. Mahan is a Partner with AEA Investors, which he joined in 1991. Prior to joining AEA, Mr. Mahan was a consultant at Bain & Company, working on a range of projects with global manufacturing companies. Mr. Mahan received a B.A. with honors from Amherst College. He is currently a director of Convenience Food Systems B.V.

Scott B. Perper became a director in January 2006. Mr. Perper is a Managing Partner with Wachovia Capital Partners, LLC, which he joined in 1989. Prior to joining Wachovia Capital Partners, Mr. Perper served as a Vice President in the Media & Entertainment Group of Kidder, Peabody & Company Incorporated in New York. Mr. Perper earned his undergraduate degree from Bowdoin College and an M.B.A. from The Harvard Business School. He is currently a director of American Renal Associates Inc., NuVox Communications, Inc. and several other private companies. In addition, Mr. Perper is a Trustee of Bowdoin College, the Charlotte Country Day School and the North Carolina Outward Bound School.

Vincent A. Sarni became a director in August 2005. Mr. Sarni was Chairman of the board of directors and Chief Executive Officer of PPG Industries, a global supplier of coatings, glass, fiber glass, and chemicals, from 1984 to 1993. Mr. Sarni joined PPG as a Marketing Vice President of the former Industrial Chemical Department in 1968, after 12 years with Olin Corporation. He is a former director of Mueller Holding Co., Noveon Inc., Amtrol Inc., Brockway Inc., Hershey Foods Corp., Honeywell Inc., Mellon Bank Inc., PNC Financial Corp., and PPG Industries. Mr. Sarni is also the former Chairman of the Board for the Pittsburgh Pirates and Allegheny General Hospital.

Julian M. Steinberg became a director in August 2005. Mr. Steinberg currently serves as Senior Vice President and Chief Operating Officer of Lubrizol Advances Materials, a business segment of the Lubrizol Corporation. Prior to this position, he was General Manager of Performance Coatings at Noveon, Inc. He was also Senior Vice President and General Manager of Estane® TPU, as well as Global Marketing and Business Development and General Manager of Estane® Americas. Mr. Steinberg joined Noveon in October 2001 from CompX International, a manufacturer of components for office furniture. Previous to that position, Mr. Steinberg spent twenty-two years with the BFGoodrich Company in various Business Management, Marketing and Financial roles. His last assignment at BFGoodrich was Commercial Vice President Specialty Plastics. Subsequent to that, he served as Vice President and General Manager of the TempRite® CPVC division. Mr. Steinberg has served on the Board of Directors for the Society of Plastics Industries and the Plastic Pipe and Fittings Association. He has a Bachelor’s and M.B.A. from Washington University.

On March 10, 2008, we announced the appointment of Eric K. Jungbluth as Chief Executive Officer. Mr. Jungbluth, 47, joins the Company from HNI Corporation, where he served as an Executive Vice President and the President of The HON Company. Mr. Jungbluth joined HNI Corporation in 2003 as President of Allsteel Inc. Prior to joining Allsteel, Mr. Jungbluth held several senior roles at Moen Incorporated (a division of Fortune Brands) including Vice President of National Accounts, Vice President of Business Development, and VP/General Manager of CSI Accessories. Mr. Jungbluth also spent two years at Kirsch (a division of Newell) as Vice President of Sales, and ten years at Warner Lambert in sales, marketing, and brand management roles. Mr. Jungbluth has a BA degree from the University of Wisconsin with a major in accounting and finance. Effective April 7, 2008, Mr.

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Jungbluth will replace Glenn Fischer, the Company’s Interim Chief Executive Officer prior to Mr. Jungbluth’s appointment. Glenn Fischer will continue to serve on the Company’s Board of Directors.

Committees of the Board of Directors

Our board of directors has established an audit committee and a compensation committee. The members of the audit committee are Brian Hoesterey, Chairman, Scott Perper and Vincent Sarni. Mr. Sarni qualifies as our “audit committee financial expert” within the meaning of regulations adopted by the SEC. The audit committee recommends the annual appointment and reviews independence of auditors and reviews the scope of audit and non-audit assignments and related fees, the results of the annual audit, accounting principles used in financial reporting, internal auditing procedures, the adequacy of our internal control procedures, related party transactions, and investigations into matters related to audit functions.

The members of the compensation committee are Christopher Mahan, Chairman, Brian Hoesterey and James Andersen. The compensation committee reviews and approves the compensation and benefits for our senior employees and directors, authorizes and ratifies equity and other incentive arrangements, and authorizes employment and related agreements. From time to time, our board of directors may contemplate establishing other committees.

Code of Ethics

We have adopted a code of ethics applicable to all of our directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees, known as the Code of Business Conduct & Ethics. The Code of Business Conduct & Ethics is available on our website at www.cpgint.com/html/conduct.html. In the event that we amend or waive certain provisions of the Code of Business Conduct & Ethics applicable to our principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable SEC rules, we intend to disclose the same on our website at www.cpgint.com/html/conduct.html .

Item 11. Executive Compensation.

Compensation Discussion and Analysis

The following discussion and analysis of compensation arrangements of our named executive officers for 2007 should be read together with the compensation tables and related disclosure set forth below. This discussion contains forward looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion.

Introduction

Since May 2005, we have been privately owned and controlled by three private equity firms. Together these firms own 90 percent, while management owns 10 percent of our parent company CPG International Holdings LP (“Holdings”). The typical private equity firm makes an investment in a company and then oversees and nurtures the investment. The overriding objective of our owners and management is to increase the economic value and size of the company during the period of ownership to assist the company in achieving its owners’ goals. As a result, our compensation philosophy is designed to directly support achieving those goals and objectives. Our named executive officers during 2007 were John R. Loyack, our former President and Chief Executive Officer, Glenn M. Fischer, our Interim Chief Executive Officer, Scott Harrison our Executive Vice President and Chief Financial Officer, Ralph Bruno our President of AZEK Building Products Inc., Chris Bardasian, our President of Scranton Products Inc. and Mr. Kevin Sloan, Senior Vice President, Operations. Mr. Loyack resigned on October 3, 2007 and concurrently Glenn M. Fischer was named as our Interim Chief Executive Officer. Mr. Fischer did not enter into an employment agreement with the Company and did not receive any compensation from the Company for his service as Interim Chief Executive Officer. On March 10, 2008, we announced the appointment of Eric K.

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Jungbluth as Chief Executive Officer. Mr. Jungbluth joins the Company on April 7, 2008. Mr. Fischer will continue to serve on our Board of Directors.

Corporate Governance

Compensation Committee Authority. Executive officer compensation is administered by the compensation committee of our board of directors, which is comprised of three members. Mr. Christopher Mahan, a director, has been the chairperson for the compensation committee from its inception in 2005. In addition, Mr. Brian Hoesterey and Mr. James Andersen, directors, also sit on the compensation committee. Our board of directors appoints the members of the compensation committee and the board has delegated the direct responsibility for compensation matters to the compensation committee, including:

• approving all benefit plans;

• approving, in advance, the compensation and employment arrangements for our executive officers;

• reviewing and approving the compensation of annual cash incentive awards; and

• reviewing and approving all grants of equity units in Holdings.

Due to the nature of our ownership, the members of the compensation committee hold significant ownership positions in the business. Therefore, they are not independent directors under the Securities and Exchange Commission rules. The compensation committee met five times in 2007.

Role of Compensation Experts. The compensation committee is authorized at the expense of the company to obtain surveys, reports on the design and implementation of compensation programs for directors, executives and employees, and any other data or documentation necessary for the compensation committee to carry out its responsibilities. However, due to the nature of our ownership and the fact that our executive officers are covered by arms-length, negotiated employment agreements, the compensation committee has not used such experts in the determination of executive compensation in 2007. An employment agreement typically reflects our judgment regarding an executive’s impact on the business and our subjective assessment of the relative importance of this executive to the overall success of the business. Although these employment agreements require us to pay severance if an executive officer is terminated under certain circumstances and limits, to some extent, the flexibility to adjust the compensation paid to the officer, we believe we derive substantial value from these arrangements from having non-compete agreements with these executive officers.

Role of Executive Officers in the Compensation Process. Our Chief Executive Officer is actively involved in providing recommendations to the compensation committee in its evaluation and design of the compensation programs for our executive officers, including the recommendation of individual compensation levels for executive officers other than himself. Our Chief Executive Officer relied on his personal experience serving in the capacity of an executive officer for a public company as well as publicly available compensation information. Mr. Loyack played an active role in the evaluation, design or administration of 2007 executive officer compensation programs through October 2007. Mr. Fischer actively served in this role as Interim Chief Executive Officer and Mr. Jungbluth will serve an active role in the evaluation, design and administration of officer compensation once he assumes the role of Chief Executive Officer on April 7, 2008.

Executive Officer Compensation Strategy and Philosophy

Our executive officer compensation strategy has been designed to attract executives with true entrepreneurial spirit and strong ability to manage a rapidly growing business. The compensation strategy is focused on aligning our executives with the long-term business strategy of creating a profitable, high growth building products company with market leading brands. As such, a significant amount of our executive compensation is in the form of equity incentives in Holdings and annual cash incentive awards. It has been our view that compensation for executives and key managers should consist of the following components:

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• base salaries;

• annual cash incentive awards;

• long term equity incentives; and

• certain other benefits

All of these forms of compensation are connected by our philosophy to create a reward system that focuses our executive team and key managers on profitably growing the Company through expanding markets, introducing new products, identifying and successfully implementing strategic acquisitions, improving the productivity of business processes and operations, technological innovation and de-levering the business over time with an end goal of increasing the Company’s overall economic value.

These key initiatives are used in determining each executive’s and key managers’ annual performance level. Awards under these compensation components are determined by how well each executive or key manager performs in the key initiative areas within their individual span of control. In addition, a significant component of the annual cash incentive award and any equity award is based upon meeting specific economic targets, including sales growth, market expansion and profitability.

The compensation components the Company uses to reward executives and key managers also provide an effective way to reward short-term performance while ensuring that long-term business strategy is being implemented successfully and value creation is occurring. This is accomplished by incorporating both annual cash and multi-year equity incentive award program.

The following provides an overview of each compensation component:

Base Salaries. We believe that salaries are an essential element of a competitive compensation program to attract and retain qualified executives. Our executive officers are covered by employment agreements, and as such, we pay compensation initially in accordance with the term of the agreement and thereafter based upon our assessment of their relative responsibilities, performance and contribution to creating value for our owners.

Annual Cash Incentive Awards. We believe the payment of annual cash incentives based upon specific performance criteria is consistent with our goal of creating alignment between our executives and the goals of our owners. The 2007 cash incentive award was focused on both corporate and business unit EBITDA goals set by the compensation committee. The 2007 consolidated EBITDA target was $71.6 million, with $58.5 million attributable to the AZEK Building Products business unit and $22.6 million attributable to the Scranton Products business unit. In addition, the 2007 incentive award program included the following personal performance targets:

• meeting certain business unit sales growth targets;

• expansion of our business into new geographies;

• successful integration of our recent Procell acquisition;

• successful introductions of new products;

• other accomplishments critical to our business strategy.

The 2007 bonus payable to each Named Executive was determinable, in part, on our EBITDA or our divisions’ EBITDA and, in part, on individualized performance goals, except for Mr. Bardasian and Mr. Sloan., whose bonuses were negotiated under the Procell Acquisition as a percentage of Procell’s sales. The proportion based on EBITDA and individualized performance goals was 65%-35%, 65%-35%, 50%-50%, for each of Messrs. Loyack, Harrison and Bruno, respectively.

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Equity Ownership. We believe the most critical component of compensation for an entrepreneurial business such as ours is appropriate long-term equity incentives. We believe that long-term equity ownership directly aligns the interests of management with our other equity owners. All of our executive officers own an equity interest in Holdings.

Beginning in 2005, Holdings established an equity compensation program for executive officers and other key managers under which officers and key managers are awarded the right to purchase limited partnership units in Holdings. These equity interests in Holdings are intended to allow each participant to share in the value created at the time the current owners sell or otherwise exit the business based upon the number of limited partnership units held in Holdings by the executive officer or key manager when the sale or exit transaction is completed. In 2007, Mr. Harrison purchased an additional 400 units and Mr. Bruno purchased 100 units. The employees choose to buy the units offered at their then fair market value, payable immediately. Mr. Bardasian and Mr. Sloan were not offered Class B Units in 2007 due to their significant Class A Unit ownership upon completion of the Procell Acquisition. For further detail regarding Messrs. Bardasian and Sloan’s ownership, please see – “Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” below. In addition, Mr. Jungbluth will be purchasing 3,000 B Units and an undetermined number of Class A Units within 30 days of his employment agreement, dated March 3, 2008.

As part of Mr. Loyack’s Separation Agreement described below, Holdings exercised its right to redeem and purchase for cash 2,500 Class B Units held by Mr. Loyack for an aggregate purchase price of $194,465. Mr. Loyack continues to hold 500 Class B Units.

The following table sets forth information regarding compensation earned during 2007 by our former President and Chief Executive Officer, Interim Chief Executive Officer, Chief Financial Officer, and our three other most highly compensated executive officers serving on December 31, 2007 (the “Named Executives”): 

					Non—Equity
				Class B	Incentive Plan	All Other
Name and Principal				Partnership	Compensation	Compensation
Position	Year	Salary	Bonus(1)	Units ($) (2)	(3)	(4)	Total
John R. Loyack
Former President and Chief Executive Officer (5)	2007	400,000	—	—	281,000	13,072	694,072
	2006	300,000	96,250	—	—	14,620	410,870
Glenn M. Fischer
Interim Chief Executive Officer	2007	—	—	—	—	—	—
Scott Harrison
Executive Vice President and Chief Financial Officer	2007	193,000	29,000	—	21,750	4,834	248,584
	2006	159,176	37,500	—	—	—	196,676
Ralph Bruno
President, AZEK Building Products	2007	250,000	20,875	—	23,484	5,970	300,329
	2006	228,638	40,000	—	—	3,349	271,987
Chris Bardasian
President, Scranton Products (6)	2007	250,000	—	—	56,250	500,000	806,250
	2006	—	—	—	—	—	—
Kevin Sloan
Senior Vice President, Operations(6)	2007	250,000	—	—	56,250	500,000	806,250
	2006	—	—	—	—	—	—

___________________________________

(1) Represents only the individualized performance component of the 2007, 2006 and 2005 bonus.

(2) Represents the amount of compensation recognized in 2007, as would be reflected in the financial statements of Holdings, in accordance with FAS 123R, with respect to purchases of Class B limited partnership units for their fair market value of $10.00 per unit. For further detail regarding the vesting of Class B units, please see Footnote 1 of the “Outstanding Equity Awards” table below.

(3) Represents only the EBITDA component of the 2007 bonus except for Messrs. Bardasian and Sloan whose bonuses were based on sales thresholds obtained on the AZEK Deck product line. These bonuses were part of their negotiated compensation in connection with the Procell Acquisition.

(4) Amounts reflect: (i) matching contributions to our 401(k) defined contribution retirement plan for 2007 which were made in the amounts of $5,271, $4,834 and $5,970 on behalf of each of Messrs Loyack, Harrison and Bruno, respectively and (ii) $7,801 in insurance reimbursements to Mr. Loyack. In 2006 amounts reflect (i) matching contributions to our 401(k) defined contribution retirement plan for 2005 which were made in 2006 in the amounts of $3,349 on behalf of Mr. Bruno, and (ii) $14,620 in insurance reimbursements to Mr. Loyack. In connection with the closing of the Procell Acquisition in 2007, Messrs. Bardasian and Sloan received transaction bonuses totaling $500,000 each, paid for by the former stockholders of Procell Decking Systems, Inc.

(5) Mr. Loyack served as our Chief Executive Officer until October 3, 2007. Concurrently, Mr. Glenn Fischer was named Interim Chief Executive Officer for the remainder of 2007.

(6) Mr. Bardasian and Mr. Sloan became employees of the Company on February 1, 2007, upon the closing of the Procell Acquisition.

2007 GRANTS OF PLAN BASED AWARDS
						Grant
		Estimated Future Payouts Under Non-Equity				Date Fair
		Incentive Plan Awards (2)				Value of
					Class B	Class
					Partnership	B
					Units	Partnership
	Grant Date	Threshold	Target	Maximum	(Number of	Units
Name and Principal Position	(1)	($) (2)	($) (2)	($) (2)	Units) (#) (3)	(4)
John R. Loyack
Former President and Chief Executive Officer (5)	_____	281,250	375,000	515,625	—	—
Glenn M. Fischer
Interim Chief Executive Officer	—	—	—	—	—	—
Scott Harrison	_____	83,250	111,000	152,625	—	—
Executive Vice President and Chief Financial Officer	2/1/07	—	—	—	133	1,330
	7/1/07	—	—	—	133	1,330
	12/1/07	—	—	—	134	1,340
Ralph Bruno	_____	62,625	167,000	229,625	—	—
President, AZEK Building Products, Inc.	1/1/07				100	1,000
Chris Bardasian	_____	25,000	75,000	100,000	—	—
President, Scranton Products
Kevin Sloan	_____	25,000	75,000	100,000	—	—
Senior Vice President, Operations

_________________________________________

(1) These are the grant dates for equity based awards. Non-equity incentive plan awards for 2007 were determined in the beginning of 2008.

(2) Represents only the EBITDA component of the 2007 bonus. For Mr. Bruno, a portion of his 2007 bonus was determinable based solely on the EBITDA of AZEK Building Products. For Mr. Bardasian and Mr. Sloan, 2007 bonuses were based on sales thresholds obtained on the AZEK Deck product line.

(3) Class B limited partnership units purchased during 2006 and on January 1, 2007 for $10.00 per unit.

(4) Represents the aggregate grant date fair value for the Class B limited partnership units purchased by our Named Executives, as would be reflected in the financial statements of Holdings, in accordance with FAS 123R, for their then fair market value of $10.00 per unit.

(5) Mr. Loyack served as our President and Chief Executive Officer until October 3, 2007. Concurrently, Mr. Glenn Fischer was named Interim Chief Executive Officer for the remainder of 2007.

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Employment Arrangements

Compensation payable to the Named Executives is determined primarily by the terms of their individually negotiated employment agreements.

Mr. Ralph Bruno

We have entered into an employment agreement with Mr. Ralph Bruno, President, AZEK Building Products Inc. Mr. Bruno’s current base salary is $250,000. Mr. Bruno is eligible to receive an annual cash bonus based upon our company’s performance and individualized performance goals. In addition, if Mr. Bruno’s employment is terminated by us without cause or if Mr. Bruno terminates his employment for good reason, (i) Mr. Bruno would be entitled to continuation of his then base salary for one year from the date of termination, (ii) all accrued but unpaid amounts payable to Mr. Bruno under his employment agreement and any bonus, incentive or other plan and (iii) in general, an additional 25% of Mr. Bruno’s Class B limited partnership units in Holdings, which would otherwise become repurchasable by Holdings upon termination of employment at the lower of cost and fair market value, would become subject to repurchase by Holdings at fair market value. Mr. Bruno has entered into an agreement that contains standard non-competition, non-solicitation and confidentiality covenants.

Mr. Scott Harrison

We have entered into an employment agreement with Mr. Scott Harrison, Executive Vice President and Chief Financial Officer. Mr. Harrison’s current base salary is $235,000. Mr. Harrison is eligible to receive an annual cash bonus based upon our company’s performance and individualized performance goals. In addition, in the event Mr. Harrison’s employment is terminated by us without cause, (i) Mr. Harrison would be entitled to a lump sum payment equal to his then base salary plus any bonus accrued to the date of termination and (ii) in general, an additional 25% of Mr. Harrison’s Class B limited partnership units in Holdings which would otherwise become repurchasable by Holdings upon termination of employment at the lower of cost and fair market value, would become subject to repurchase by Holdings at fair market value. Mr. Harrison has entered into an agreement that contains standard non-competition, non-solicitation and confidentiality covenants.

Mr. Christopher Bardasian

We have entered into an employment agreement with Mr. Christopher Bardasian, President, Scranton Products Inc. Mr. Bardasian’s current base salary is $250,000 and he is eligible to receive an annual cash bonus based upon our company’s performance and individualized performance goals. If Mr. Bardasian should terminate his employment, Mr. Bardasian’s compensation and other benefits shall terminate on the date of termination. If Mr. Bardasian’s employment is terminated by us without cause or by him for good reason, Mr. Bardasian would be entitled to continuation of then current base salary, for one year from the date of termination plus any bonus accrued to the date of termination. Mr. Bardasian has entered into an agreement that contains standard non-competition, non-solicitation and confidentiality covenants.

Mr. Kevin Sloan

We have entered into an employment agreement with Mr. Kevin Sloan, Senior Vice President, Operations. Mr. Sloan’s current base salary is $250,000 and he is eligible to receive an annual cash bonus eligible to receive an annual cash bonus based upon our company’s performance and individualized performance goals. If Mr. Sloan should terminate his employment, Mr. Sloan’s compensation and other benefits shall terminate on the date of termination. If Mr. Sloan’s employment is terminated by us without cause or by him for good reason, Mr. Sloan would be entitled to continuation of his then current base salary, for one year from the date of termination plus any bonus accrued to the date of termination. Mr. Sloan has entered into an agreement that contains standard non-competition, non-solicitation and confidentiality covenants.

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Mr. Eric Jungbluth

In March 2008, we entered into an employment agreement with Mr. Jungbluth for a 3 year term.  His annual base salary is $400,000.  He is receiving a one-time signing bonus of $100,000. He is eligible to receive an annual bonus of up to 100% of his annual base salary based upon the Company’s achievement of budgeted performance goals.  He is also eligible to receive an additional bonus if in the next 36 months the Company is sold to a strategic buyer.  Within 30 days, Mr. Jungbluth will be purchasing 3,000 B Units and an undetermined number of Class A Units of CPG International Holdings LP, the Company’s parent within 30 days of his employment agreement.  If we terminate Mr. Jungbluth's employment without cause or he resigns his employment for good reason, the Company would be required to pay Mr. Jungbluth his base annual salary until the eighteen month anniversary of the termination date and a pro rata annual bonus for the year of termination, provided Mr. Jungbluth executes a release in favor of the us and he does not violate a non-competition agreement with the us. In addition, 25% of Mr. Jungbluth’s Class B limited partnership units in Holdings which would otherwise become repurchasable by Holdings upon termination of employment at the lower of cost and fair market value, would become subject to repurchase by Holdings at fair market value.

Mr. John R. Loyack

On November 5, 2007, subsidiaries of the Company, together with its parent company, Holdings, entered into a Separation Agreement and Release (“Separation Agreement”) with Mr. Loyack. The Separation Agreement provided Mr. Loyack with a severance benefit equal to his base salary effective immediately preceding the October 3, 2007 through December 31, 2008 ($100,000 being payable with respect to the remainder of the 2007 calendar year at such times and in such amounts as would have been paid in accordance with the Company’s normal payroll procedures and $400,000 being payable in a lump sum on the first regular payroll date in 2008). The Separation Agreement provides that Mr. Loyack will receive an amount equal to $281,000 in respect of his 2007 annual bonus, payable in a lump sum on the first regular payroll date in 2008. From the Separation Date through December 31, 2008, the Company will provide Mr. Loyack with the right to continue to participate in the Company’s group medical, vision and dental insurance plans and the Company will continue to pay the normal monthly employer’s share of the premium payments for the medical plans while Mr. Loyack is a participant. As part of Mr. Loyack’s Separation Agreement, Holdings exercised its right to redeem and purchase for cash 2,500 Class B Units held by Mr. Loyack for an aggregate purchase price of $194,465.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
	Class B Limited Partnership Units
	Number of Units Subject to	Market Value of Units
	Repurchase at the Lower of	Subject to Repurchase at
	Cost and Fair Market	the Lower of Cost and Fair
Name and Principal Position	Value (#) (1)	Market Value ($)
John R. Loyack
President and Chief Executive Officer (2)	250	2,500
Glenn M. Fischer
Interim Chief Executive Officer	–	–
Scott Harrison
Chief Financial Officer	717	7,170
Ralph Bruno
President, AZEK Building Products Inc.	750	7,500
Chris Bardasian
President, Scranton Products Inc.	–	–
Kevin Sloan
Senior Vice President, Operations	–	–

_________________

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(1) All of the Class B limited partnership units sold to management are generally subject to repurchase by Holdings at the lower of cost and fair market value upon termination of employment during the first twelve months following their purchase. Thereafter, generally, 75% of such Class B limited partnership units are subject to repurchase by Holdings at the lower of cost and fair market value upon termination during the second twelve months following their purchase, 50% during the third twelve months and 25% during the fourth twelve months. Interests which are not repurchasable for such amounts are nonetheless repurchasable by Holdings upon termination of employment for their then fair market value.

(2) Mr. Loyack served as our Chief Executive Officer until October 3, 2007. As part of Mr. Loyack’s Separation Agreement, Holdings exercised its right to redeem and purchase for cash 2,500 Class B Units held by Mr. Loyack for an aggregate purchase price of $194,465.

CLASS B UNITS VESTED
	Class B Limited Partnership Units
	Number of Units Subject to
	Subject to Repurchase at the Lower of
	At Fair Market	Value Realized
Name and Principal Position	Value (#)	on Vesting ($)
John R. Loyack
President and Chief Executive Officer (2)	250	44,866
Glenn M. Fischer
Interim Chief Executive Officer	–	–
Scott Harrison
Executive Vice President and Chief Financial Officer	283	50,789
Ralph Bruno
President, AZEK Building Products Inc.	700	125,626
Chris Bardasian
President, Scranton Products Inc.	–	–
Kevin Sloan
Senior Vice President, Operations	–	–

_____

(1) Mr. Loyack served as our Chief Executive Officer until October 3, 2007.

Payments upon Termination and Change in Control

Mr. Eric Jungbluth. If Mr. Jungbluth's employment is terminated by us without cause or he resigns his employment for good reason, the Company would be required to pay Mr. Jungbluth his base annual salary, currently $400,000 until the eighteen month anniversary of the termination date and a pro rata annual bonus for the year of termination, provided Mr. Jungbluth executes a release in favor of the us and he does not violate a non-competition agreement with the us.

Mr. Scott Harrison. If Mr. Harrison’s employment is terminated by us without cause , Mr. Harrison would be entitled to a lump sum payment equal to his current base salary, $235,000, plus any accrued but unpaid amounts payable to Mr. Harrison under his employment agreement and any bonus, incentive or other plan and (ii) in general, an additional 25% of Mr. Harrison’s Class B limited partnership units in Holdings, which would otherwise become repurchasable by Holdings upon termination of employment at the lower of cost and fair market value, would become subject to repurchase by Holdings at fair market value. If Mr. Harrison is terminated for cause, Holdings will be entitled to redeem all of Mr. Harrison’s Class B limited partnership units at the lower of cost and the fair market value of the Class B limited partnership units on the date of termination.

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Mr. Ralph Bruno. If Mr. Bruno’s employment is terminated by us without cause or if Mr. Bruno terminates his employment for good reason, (i) Mr. Bruno would be entitled to continuation of his current base salary, $250,000, for one year from the date of termination, (ii) all accrued but unpaid amounts payable to Mr. Bruno under his employment agreement and any bonus, incentive or other planand (iii) in general, an additional 25% of Mr. Bruno’s Class B limited partnership units in Holdings, which would otherwise become repurchasable by Holdings upon termination of employment at the lower of cost and fair market value, would become subject to repurchase by Holdings at fair market value. If Mr. Bruno is terminated for cause, Holdings will be entitled to redeem all of Mr. Bruno’s Class B limited partnership units at the lower of cost and the fair market value of the Class B limited partnership units on the date of termination.

Mr. Christopher Bardasian. If Mr. Bardasian should terminate his employment, Mr. Bardasian’s compensation and other benefits shall terminate on the date of termination. If Mr. Bardasian’s employment is terminated by us without cause or by him for good reason, (i) Mr. Bardasian would be entitled to continuation of his current base salary, $250,000, for one year from the date of termination.

Mr. Kevin Sloan. If Mr. Sloan should terminate his employment, Mr. Sloan’s compensation and other benefits shall terminate on the date of termination. If Mr. Sloan’s employment is terminated by us without cause or by him for good reason, (i) Mr. Sloan would be entitled to continuation of his current base salary, $250,000, for one year from the date of termination.

Mr. John Loyack. On November 5, 2007, subsidiaries of the Company, together with its parent company, Holdings, entered into a Separation Agreement and Release (“Separation Agreement”) with Mr. Loyack. The Separation Agreement provided Mr. Loyack with a severance benefit equal to his base salary effective immediately preceding the October 3, 2007 through December 31, 2008 ($100,000 being payable with respect to the remainder of the 2007 calendar year at such times and in such amounts as would have been paid in accordance with the Company’s normal payroll procedures and $400,000 being payable in a lump sum on the first regular payroll date in 2008). The Separation Agreement provides that Mr. Loyack will receive an amount equal to $281,000 in respect of his 2007 annual bonus, payable in a lump sum on the first regular payroll date in 2008. From the Separation Date through December 31, 2008, the Company will provide Mr. Loyack with the right to continue to participate in the Company’s group medical, vision and dental insurance plans and the Company will continue to pay the normal monthly employer’s share of the premium payments for the medical plans while Mr. Loyack is a participant.

Director Compensation. Our Directors have not received any annual cash compensation in 2007 or 2006. However, in 2006 our Directors purchased Class B Units from the Company. No Class B Units were purchased by directors in 2007. The following table reflects total Class B Units purchased by our directors in 2006 as follows:

DIRECTOR COMPENSATION
Name	Class B Limited Partnership Units ($) (1)	Total ($)
Vincent A. Calarco	2,500	2,500
Julian M. Steinberg	2,500	2,500
Vincent A. Sarni	3,500	3,500

___________

(1) Vincent A. Calarco, Julian M. Steinberg, and Vincent A. Sarni purchased 250, 250, and 350 Class B limited partnership units, respectively, on January 17, 2006 for $10.00 per unit, their then fair market value. This represents the aggregate fair value of all Class B limited partnership units purchased by our Directors, as would be reflected in the financial statements of Holdings in accordance with FAS 123R. All of these units are currently subject to repurchase over four years in the same manner as Class B units held by our Named Executives.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

All of our issued and outstanding common stock is held by CPG International Holdings LP, our direct parent company (“Holdings”). Holdings is a limited partnership. The general partner of Holdings is CPG Holding I LLC, which is an affiliate of AEA Investors. The business and affairs of Holdings is managed exclusively by the general partner. The general partner has full and complete authority, power and discretion to act on behalf of Holdings in all matters respecting the partnership and its operations, business and properties, to manage and control the business, affairs and properties (including the disposition of all or part thereof) of the partnership, to make all decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of the partnership’s business. The units reflected in the following table are the limited partnership units of Holdings. The limited partners are not agents of Holdings or any other partner, and have no right or authority to act for or bind the partnership, or to incur any expenditure on behalf of or with respect to the partnership.

The following table sets forth information with respect to the beneficial ownership of our parent, Holdings, as of the date of this report, by (a) any person or group who will beneficially own more than five percent of the outstanding Class A limited partnership units and Class B limited partnership units of Holdings (b) each of our directors and executive officers and (c) all of our directors and executive officers as a group.

	Number of
	Class A Units		Number of Class B	Percent of
	Beneficially	Percent of Class A	Units Beneficially	Class B
Name of Beneficial Owner:	Owned(1)	Units Outstanding	Owned(1)(2)	Units Outstanding
AEA Investors(3)	75,019	68.9%	—	—
Wachovia Capital Partners 2005, LLC(4)	16,126	14.8%	—	—
KF Equities(5)	6,272	5.8%	—	—
Clearview/CP/Vycom Acquisition, LLC(6)	5,006	4.6%	—	—
AEA Mezzanine (7)	1,146	1.0%	—	—
James Keisling(8)	6,272	5.76%	2,000	20.9%
John R. Loyack	—	*	500	5.2%
Ralph Bruno	731	*	1,350	15.1%
Chris Bardasian	553	*	—	—
Kevin Sloan	553	*	—	—
Scott Harrison	240	*	1,000	10.4%
James Andersen(9)	—	*	—	—
Vincent A. Calarco(10)	—	*	250	2.6%
Shivanandan A. Dalvie(11)	—	*	—	—
Glenn M. Fischer(11)	—	*	—	—
Brian R. Hoesterey(11)	—	*	—	—
Christopher P. Mahan(11)	—	*	—	—
Scott B. Perper(11) (12)	—	*	—	—
Vincent A. Sarni(10)	—	*	350	3.7%
Julian M. Steinberg(10)	219	*	250	2.6%
All directors and executive officers as a group (15 persons)	8,568	7.9%	5,700	59.5%

_________________________

* Represents beneficial ownership of less than 1%.

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(1) As used in this table, each person or entity with the power to vote or direct the disposition of units is deemed to be a beneficial owner.

(2) The Class B limited partnership units of Holdings entitle the holders thereof to share in profits of Holdings with the holders of Class A limited partnership units only after the holders of the Class A limited partnership units have received a 7% preferred return.

(3) Consists of Class A units held by investment vehicles managed by AEA Investors LLC or AEA Management (Cayman) Ltd. The address for AEA Investors LLC is 65 East 55th Street, New York, New York 10022. The address for AEA Management (Cayman) Ltd. is c/o Walkers SPV Limited, P.O. Box 908GT, George Town, Grand Cayman, Cayman Islands.

(4) The address for Wachovia Capital Partners 2005, LLC is 301 South College Street, 12th Floor, Charlotte, North Carolina 28288.

(5) Consists of Class A limited partnership units held by KF Equities, a partnership whose members include Mr. James Keisling and other members of the Keisling family. The address for KF Equities is 5 Bucknell Drive, Clarks Green, Pennsylvania 18411.

(6) The address for Clearview/CP/Vycom Acquisition, LLC is 1445 East Putnam Avenue, Old Greenwich, Connecticut 06870.

(7) Consists of Class A limited partnership units held by AEA Mezzanine Fund L.P. and AEA Mezzanine (Unleveraged) Fund L.P., which are affiliated with AEA Investors LLC. The address for AEA Mezzanine Fund L.P. and AEA Mezzanine (Unleveraged) Fund L.P. is 200 First Stamford Place, Stamford, CT 06902.

(8) Includes 6,272 Class A limited partnership units held by KF Equities, which may be deemed to be beneficially owned by Mr. James Keisling. The address for Mr. James Keisling is c/o CPG International I Inc., 801 Corey Street, Scranton, PA 18507.

(9) Does not include Class A limited partnership units beneficially owned by Clearview/CP/Vycom Acquisition, LLC. Mr. Andersen serves on our board of directors as a representative of Clearview/CP/Vycom Acquisition, LLC. Mr. Andersen is the Managing Partner and co-founder of Clearview Capital, an indirect parent of Clearview/CP/Vycom Acquisition, LLC. Mr. Andersen disclaims beneficial ownership of the Class A limited partnership units owned by Clearview/CP/Vycom Acquisition, LLC, except to the extent of his pecuniary interest therein.

(10) Messrs. Calarco, Sarni and Steinberg serve on our board of directors as representatives of AEA Investors LLC.

(11) Messrs. Dalvie, Fischer, Hoesterey and Mahan serve on our board of directors as representatives of AEA Investors LLC. Messrs. Dalvie, Hoesterey and Mahan are Partners of AEA Investors LLC and Mr. Fischer is an Operating Partner of AEA Investors LLC. Messrs. Dalvie, Fischer, Hoesterey and Mahan disclaim beneficial ownership of the Class A limited partnership units owned by investment vehicles managed by AEA Investors LLC and AEA Management (Cayman) Ltd., except to the extent of their respective pecuniary interests therein.

(12) Does not include Class A limited partnership units beneficially owned by Wachovia Capital Partners 2005, LLC. Mr. Perper serves on our board of directors as a representative of Wachovia Capital Partners 2005, LLC. Mr. Perper is a Managing Partner with Wachovia Capital Partners, LLC, an indirect parent of Wachovia Capital Partners 2005, LLC. Mr. Perper disclaims beneficial ownership of the Class A limited partnership units owned by Wachovia Capital Partners 2005, LLC, except to the extent of his pecuniary interest therein.

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ITEM 13. Certain Relationships and Related Transactions and Director Independence.

Related Party Transaction Policy

Our Company, CPG and all other operating subsidiaries follow the same policy regarding the definition of a related party transaction. A related party transaction is defined by the Company as any transaction or series of similar transactions in which the Company or any of its subsidiaries is a participant with any related person who has a direct or indirect material interest. A related person can include any person who is either a director or officer of the Company or any of our subsidiaries, any person who is a director or officer of Holdings, our direct parent company, or a person known by Holdings as the beneficial owner of more than 5% of any class of Holdings partnership units, any family member of the foregoing, and any entity which any foregoing person is employed or has a 5% or greater beneficial ownership interest.

AEA Investors

Upon consummation of the Transaction, we entered into a management agreement with AEA Investors relating to the provision of advisory and consulting services. AEA Investors agreed not to charge a fee for the first year following the Transaction, but commencing as of May 1, 2006, AEA Investors receives a $1.5 million annual fee, subject to the limitations under our bank facility covenants. In addition, in consideration of services performed in connection with the Santana Acquisition and the related financings, we paid a $0.4 million fee to AEA Investors upon the closing of the Santana Acquisition, and in consideration of services performed in connection with the Procell Acquisition and the related financings, we paid a $1.0 million fee to AEA Investors upon closing of the Procell Acquisition. We believe that the management agreement and the services mentioned above are or were on terms at least as favorable to us as we would expect to negotiate with unrelated third parties.

Certain mezzanine funds affiliated with AEA Investors purchased $16.5 million aggregate principal amount of our floating rate notes in connection with the Procell Acquisition, as well as approximately 1,146 units in Holdings. In connection with the foregoing, these funds received certain registration rights and/or management rights. We believe that these rights were granted on terms at least as favorable to us as we would expect to negotiate with unrelated third parties.

Management Equity Participation Following the Transaction

Members of our management team own Class A limited partnership units of Holdings, our direct parent, representing approximately 10% of the total equity of Holdings and also own Class B limited partnership units of Holdings. See “Security Ownership of Certain Beneficial Owners and Management.”

Wachovia Capital Partners 2005, LLC

Wachovia Capital Partners 2005, LLC (“Wachovia Capital”) is a co-investor in our company. See “Security Ownership of Certain Beneficial Owners and Management.” As described below, Wachovia Capital has one representative on our board of directors as well as one representative on the advisory board of CPG International Holdings. An affiliate of Wachovia Capital served as an initial purchaser in the placement of a portion of our outstanding notes in 2006 for which it received approximately $0.6 million of fees.

Partnership Agreement and Registration Rights Agreement

A partnership agreement with respect to Holdings has been entered into among AEA Investors, Wachovia Capital, Clearview/CP/Vycom Acquisition, LLC (“Clearview”) and certain members of management. The partnership agreement contains, among other things, preemptive rights and certain restrictions on the ability of the parties thereto to freely transfer the partnership units of CPG International Holdings LP or shares of our stock, which may be distributed by CPG International Holdings LP to the partners. CPG International Holdings has an advisory board whose role is to advise and make recommendations to the general partner of CPG International Holdings (which is an affiliate of AEA Investors) with respect to the business of CPG International Holdings. The

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advisory board consists of ten members, which includes seven members (Messrs. Calarco, Dalvie, Fischer, Hoesterey, Mahan, Sarni and Steinberg) who are representatives of AEA Investors, one member (Mr. Perper) who is a representative of Wachovia Capital, one member (Mr. Andersen) who is a representative of Clearview and James Keisling, our Chairman of the Board. The parties to the partnership agreement have agreed to enter into a registration rights agreement upon the distribution to the partners of shares of our stock. The registration rights agreement will provide that, upon certain conditions, the parties will have the ability to cause us to register our securities under the Securities Act, and other parties to the registration rights agreement may participate in such registrations.

Board of Directors

The company’s board of directors consists of ten members, which includes seven members (Messrs. Calarco, Dalvie, Fischer, Hoesterey, Mahan, Sarni and Steinberg) who are representatives of AEA Investors, one member (Mr. Perper) who is a representative of Wachovia Capital, one member (Mr. Andersen) who is a representative of Clearview, and James Keisling, our non-executive Chairman of the Board.

Lease and Option to Purchase

Upon the closing of the Transaction, AZEK Building Products Inc. (formerly known as Vycom Corp.), our wholly owned subsidiary, entered into an amended lease with respect to the 308,000 square foot property located in Scranton, Pennsylvania (Keyser Avenue). The lessor and owner of the property is an entity whose owners include affiliates of Clearview and Wachovia Capital, co-investors of our company in connection with Transaction, as well as affiliates of certain members of our management team, including Mr. James Keisling, our Chairman of the Board. The initial term of the lease is four years, and AZEK Building Products Inc. has options to extend the lease term for five additional four-year periods. Rent for the lease is paid monthly at a rate of $492,800 per year, increasing by 1% each year thereafter.

In addition, pursuant to a separate agreement with the lessor and owner of this property, we have an option to purchase the property for $4.0 million at any time from January 1, 2006 until January 1, 2009.

Upon completion of the Procell Acquisition, the Company entered into an amended lease agreement related to Procell’s office and manufacturing facilities location, with North Alabama Property Leasing, Inc. The lessor of the property is an entity whose sole shareholder is an equity holder in Holdings. Total lease payments for year ended December 31, 2007 were approximately $464,000.

Tide Transport, Inc., a freight company owned by two equity holders of Holdings, provides certain freight services to our Foley, Alabama facility on a regular basis. These services include shipping finished product and for the transportation of resin purchases. Total freight costs for this arrangement were approximately $802,000 for the year ended December 31, 2007.

Director Independence

As a privately held corporation, whose securities are not listed on any national securities exchange, we are not required to have a majority of, or any, independent directors. Further, even if we had securities listed on a national securities exchange, because AEA Investors owns more than 50% of the outstanding equity of the Parent, and Parent owns all of our common stock, we would be deemed a “controlled company” under the rules of either the New York Stock Exchange or Nasdaq and, therefore, would be exempt from the requirements to have a majority of independent directors or compensation and nominating committees consisting entirely of independent directors. However, the rules of the SEC require us to disclose in this Form 10-K which of our directors would be considered independent within the meaning of the rules of a national securities exchange that we may choose. We currently have three directors who would be considered independent within the definitions of either the New York Stock Exchange or NASDAQ: Messrs. Calarco, Sarni (audit committee member) and Steinberg. Mr. Fischer, our Interim Chief Executive Officer, is not an independent director because of his position as an executive officer and as an operating director of AEA Investors, and Mr. Keisling, our Chairman of the Board, is not an independent

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director because of his ownership, directly or indirectly, of a significant amount of equity interests in the Parent. Our remaining directors are not independent because of their affiliations with private equity funds that hold approximately 5% or more of the equity interests in the Parent: Messrs. Dalvie, Hoesterey (audit committee member) and Mahan are partners of AEA Investors; Mr. Andersen is the managing partner and co-founder of Clearview; and Mr. Perper (audit committee member) is a managing partner with Wachovia Capital.

Item 14. Principal Accountant Fees and Services.

Audit Fees

The aggregate fees billed by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, "Deloitte & Touche") for professional services rendered for the audit of the Company’s annual financial statements for the years ended December 31, 2007 and 2006 and for the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q for that year were $507,185 and $485,255, respectively.

Aggregate Audit-Related Fees

The aggregate fees billed by Deloitte & Touche for professional services rendered for the Company for the year ended December 31, 2007 and 2006 were $90,825 and $438,340, respectively. Audit-related fees include reviews of and required procedures related to other 1933 and 1934 Act filings and registration statements (Forms 8-K, S-1, S-4) and related consents and comfort letters and employee benefit plans.

Tax Fees

The aggregate fees billed by Deloitte & Touche for professional tax services rendered for the Company for the year ended December 31, 2007 and 2006 were $280,051 and $221,423, respectively. Professional tax services include tax compliance, tax planning and related tax services.

Pre-Approval Policies and Procedures

The Audit Committee annually engages and pre-approves the audit and audit-related services performed by the independent registered public accounting firm, for the following year, to assure that the provision of such services does not impair the auditor’s independence. All allowable non-audit services are required to be specifically identified and submitted to the Audit Committee for approval during regularly scheduled meetings.

For 2007, the Audit Committee discussed the non-audit services with Deloitte and Touche LLP and management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the SEC and the Public Accounting Oversight Board. Following such discussions, the Audit Committee determined that the provision of such non-audit services by Deloitte and Touche LLP was compatible with maintaining their independence.

Item 15. Exhibits.

(a) The following documents are filed as part of this report:

(i) Financial Statements

(b) Exhibits:

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Exhibit Number	Description
2.1	Stock Purchase Agreement, dated as of March 12, 2005, by and among Compression LLC
	Polymers Holdings LLC, Compression Polymers Holding II Corporation, Vycom Corp.,
	Compression Polymers Corp. and CPCapitol Acquisition Corp. and North Keyser Partners,
	(filed as Exhibit 2.1 to the Registration Statement on Form S-4 filed on May 12, 2006 (the
	“Form S-4”) and incorporated herein by reference).
2.2	First Amendment to the Stock Purchase Agreement, dated as of May 5, 2005, by and among
	Compression Polymers Holdings LLC, Compression Polymers Holding II Corporation,
	Compression Polymers Corp., Vycom Corp. and CPCapitol Acquisition Corp. (filed as
	Exhibit 2.2 to the Form S-4 and incorporated herein by reference).
2.3	Stock Purchase Agreement, dated as of April 20, 2006, between Santana Holdings, LLC and
	Compression Polymers Holding Corporation (filed as Exhibit 2.3 to the Form S-4 and
	incorporated herein by reference).
2.4	Unit Purchase Agreement, dated as of December 13, 2006, by and among CPG International
	I Inc., as Buyer, and Christopher Bardasian, Kevin Sloan, and Larry Sloan, as Sellers (filed
	as Exhibit 2.1 to the Current Report on Form 8-K filed on December 13, 2006 (the
	“December 13, 2006 Form 8-K”) and incorporated herein by reference).
2.5	Contribution Agreement, dated as of December 13, 2006, by and among CPG International
	Holdings LP and Christopher Bardasian, Kevin Sloan, and Larry Sloan, as Subscribers (filed
	as Exhibit 2.2 to the December 13, 2006 Form 8-K and incorporated herein by reference).
2.6*	Share Purchase Agreement, dated as of February 11, 2008, by and among AZEK Canada,
	as Buyer, and John Scrymgeour, Cheryl Scrymgeour, Paolo Baldassarra, Mary Baldassarra, Kurt
	Gowman, Donna Gowman, Janet Pratt, Knox & Company International, Inc. and Creative
	Composite Products Inc. as Sellers
3.1	Certificate of Incorporation of CPG International Inc. (formerly known as Compression
	Polymers Holding II Corporation) (filed as Exhibit 3.3 to the Form S-4 and
	incorporated herein by reference).
3.2	Certificate of Amendment of Certificate of Incorporation of CPG International Inc. to the
	(formerly known as Compression Polymers Holding II Corporation) (filed as Exhibit 3.3(a)
	Form S-4 and incorporated herein by reference).
3.3	By-laws of CPG International Inc. (formerly known as Compression Polymers Holding II
	Corporation) (filed as Exhibit 3.4 to the Form S-4 and incorporated herein by reference).
4.1	Indenture, dated July 5, 2005, among Compression Polymers Holding Corporation, page
	Compression Polymers Holding II Corporation, the other guarantors listed on the signature
	thereof, and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Form S-4 and
	incorporated herein by reference).
4.2	First Supplemental Indenture, dated as of April 27, 2006, among CPH Sub I Corporation, as
	CPH Sub II Corporation, CPC Sub I Corporation, VC Sub I Corporation, Compression
	Polymers Holding Corporation, Compression Polymers Holding II Corporation, the other
	guarantors listed on the signature page thereof, and Wells Fargo Bank, N.A., as trustee (filed
	Exhibit 4.2 to the Form S-4 and incorporated herein by reference).
4.3	Second Supplemental Indenture, dated as of April 28, 2006, among Santana Holdings Corp.,
	Santana Products, Inc., Compression Polymers Holding Corporation, Compression Polymers
	Holding II Corporation, the other guarantors listed on the signature page thereof, and Wells
	Fargo Bank, N.A., as trustee (filed as Exhibit 4.3 to the Form S-4 and incorporated herein by

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reference).

4.4	Third Supplemental Indenture dated as of January 31, 2007, among CPG International I Inc.,
	a Delaware corporation, CPG International Inc., the other guarantors listed on the signature
	page thereof, and Wells Fargo Bank, N.A., a national banking association, as Trustee (filed
	as Exhibit 4.2 to the Current Report on Form 8-K filed on February 2, 2007 (the “February
	2, 2007 Form 8-K”) and incorporated herein by reference).
4.5	Form of Initial Note and Form of Exchange Note (included within the Indenture filed as
	Exhibit 4.1 to the Form S-4 and incorporated herein by reference).
4.6	The Registration Rights Agreement, dated July 5, 2005, among Compression Polymers listed
	Holding Corporation, Compression Polymers Holding II Corporation, the other guarantors
	on the signature page thereof, and Wachovia Capital Markets, LLC (filed as Exhibit 4.5 to
	the Form S-4 and incorporated herein by reference).
4.7	The Registration Rights Agreement, dated as of April 28, 2006, by and among Compression
	Polymers Holding Corporation, Compression Polymers Holding II Corporation, the other
	guarantors listed on the signature page thereof, and Wachovia Capital Markets, LLC (filed as
	Exhibit 4.6 to the Form S-4 and incorporated herein by reference).
4.8	The Registration Rights Agreement, dated as of January 31, 2007, among CPG International
	I Inc., CPG International Inc., the other guarantors listed on the signature page thereof, and
	AEA Mezzanine Funding LLC and AEA Mezzanine (Unleveraged) Fund LP (filed as
	Exhibit 4.3 to the February 2, 2007 Form 8-K and incorporated herein by reference).
4.9	The Registration Rights Agreement, dated as of January 31, 2007, among CPG International
	I Inc., CPG International Inc., the other guarantors listed on the signature page thereof, and
	Orpheus Funding LLC, Midland National Life Insurance Company, North American
	Company for Life and Health Insurance, Sands Point Funding Ltd., Kennecott Funding Ltd.,
	1888 Fund, Ltd. and Copper River CLO Ltd. (filed as Exhibit 4.4 to the February 2, 2007
	Form 8-K and incorporated herein by reference).
10.1	Second Amended and Restated Credit Agreement, dated as of May 10, 2005, by and among
	Compression Polymers Holding Corporation, Compression Polymers Holding II
	Corporation, the subsidiary guarantors named therein, the several banks, other financial
	institutions and related funds as may from time to time become parties thereto, and
	Wachovia Bank, National Association, as administrative agent (filed as Exhibit 10.1 to the
	Form S-4 and incorporated herein by reference).
10.2	First Amendment to Credit Agreement, dated as of April 24, 2006, by and among signature
	Compression Polymers Holding Corporation, Compression Polymers Holdings II
	Corporation, the subsidiary guarantors named therein, the lenders identified on the
	pages thereto and Wachovia Bank, National Association, as administrative agent (filed as
	Exhibit 10.2 to the Form S-4 and incorporated herein by reference).
10.3	Second Amendment and Waiver to Credit Agreement, dated as of January 17, 2007, by and
	among CPG International I Inc., CPG International Inc., the subsidiary guarantors named
	therein, the lenders identified on the signature pages thereto and Wachovia Bank, National
	Association, as administrative agent (filed as Exhibit 10.1 to the February 2, 2007 Form 8-K
	and incorporated herein by reference).
10.4	Amended and Restated Industrial Lease between North Keyser Partners, LLC and Vycom
	Corp., dated May 10, 2005, re: 888 North Keyser Avenue, Scranton, PA 18504 Lackawanna
	County (filed as Exhibit 10.3 to the Form S-4 and incorporated herein by reference).

67

10.6	Amended and Restated Employment Agreement, as of January 1, 2006, among Compression
	Polymers Holding Corporation, Compression Polymers Corp., Vycom Corp. and John
	Loyack (filed as Exhibit 10.5 to the Form S-4 and incorporated herein by reference).

10.7	Employment Agreement, as of May 10, 2005, among Compression Polymers Holding
	Corporation, Vycom Corp. and Ralph Bruno (filed as Exhibit 10.6 to the Form S-4 and
	incorporated herein by reference).
10.9	Employment Agreement, as of October 4, 2005, among Compression Polymers Holding
	Corporation, Compression Polymers Corp., Vycom Corp. and Scott Harrison (filed as
	Exhibit 10.8 to the Form S-4 and incorporated herein by reference).
10.10	Management Agreement, dated as of May 10, 2005, by and between Compression Polymers
	Holding Corporation and AEA Investors LLC (filed as Exhibit 10.10 to the Form S-4 and
	incorporated herein by reference).
10.11	Amendment No. 1 to Management Agreement, dated as of May 1, 2006, by and between to
	Compression Polymers Holding Corporation and AEA Investors LLC (filed as Exhibit 10.11
	the Form S-4 and incorporated herein by reference).
10.12	Management Rights Letter Agreement, dated as of January 31, 2007, between CPG Fund LP
	International I Inc. and AEA Mezzanine Funding LLC and AEA Mezzanine (Unleveraged)
	(filed as Exhibit 10.2 to the February 2, 2007 Form 8-K and incorporated herein by reference).
10.13*	Loan and Security Agreement, dated as of February 13, 2008, by and among Scranton Products Inc.,
	AZEK Building Products Inc. and Procell Decking Inc., as borrowers, CPG International Inc.,
	CPG International I Inc., Santana Products Inc., CPG Sub I Corporation, Vycom Corp. and Sanatec
	Sub I Corporation, as guarantors the lenders identified on thepages thereto and
	Wachovia Bank, National Association, as administrative agent, and General Electric Capital Corporation, as
	syndication agent.
10.14*	Amendment No. 1 to Loan and Security Agreement dated as of February 29, 2008, by and among CPG
	International I Inc., Scranton Products Inc., AZEK Building Products Inc. and Procell Decking Inc.,
	the guarantors named therein, the lenders identified on the pages thereto and Wachovia Bank,
	as administrative agent.
10.15*	Term Loan and Security Agreement, dated as of February 29, 2008 by and among CPG International I Inc.,
	Scranton Products Inc., AZEK Building Products Inc. and Procell Decking Inc.,
	the guarantors named therein, the lenders identified on the
	pages thereto, Wachovia Bank, National Association, as administrative agent, and Wachovia Capital
	Markets, LLC, as lead arranger and lead bookrunner.
10.16*	Separation Agreement and Release, dated as of November 5, 2007, by and among CPG International I Inc.,
	Scranton Products Inc. and AZEK Building Products Inc., and John R. Loyack.
10.17*	Employment agreement, dated as of March 3, 2008, by and among CPG International Inc., CPG
	International I Inc., Scranton Products Inc., and AZEK Building Products Inc. and Eric Jungbluth.
10.18*	Non-Compete Agreement, dated as of March 3, 2008, by and among CPG International Inc., CPG
	International I Inc., Scranton Products Inc., and AZEK Building Products Inc. and Eric Jungbluth.
10.19*	Employment Agreement, dated as of January 31,2007, by and among CPG International Inc., CPG
	International I Inc., Scranton Products Inc., and AZEK Building Products Inc. and Christopher Bardasian.
10.20*	Employment Agreement, dated as of January 31,2007, by and among CPG International Inc., CPG
	International I Inc., Scranton Products Inc., and AZEK Building Products Inc. and Kevin Sloan.
21.1*	List of Subsidiaries.
31.1*	Rule 13a-14(a)/15d-14(a) Certification of Interim Chief Executive Officer
31.2*	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1*	Section 1350 Certification of the Interim Chief Executive Officer
32.2 *	Section 1350 Certification of Chief Financial Officer

________________________

* Filed herewith.

68

CPG International Inc.

And Subsidiaries

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2007 and December 31, 2006	F-3
Consolidated Statements of Operations for the years ended December 31, 2007, December 31, 2006 and periods May 11 to December 31, 2005 and January 1 to May 10, 2005	F-4
Consolidated Statements of Shareholder’s Equity for the year ended December 31, 2007 and December 31, 2006 and periods May 11 to December 31, 2005 and January 1 to May 10, 2005	F-5
Consolidated Statements of Cash Flows for the year ended December 31, 2007 and December 31, 2006 and periods May 11 to December 31, 2005 and January 1 to May 10, 2005	F-6
Notes to Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

CPG International

Scranton, PA

We have audited the accompanying consolidated balance sheets of CPG International, Inc. and subsidiaries (the “Successor”) as of December 31, 2007 and 2006 and the related consolidated statements of operations, shareholder’s equity, and cash flows of the Successor for the years ended December 31, 2007 and 2006 and for the period May 11, 2005 to December 31, 2005 and of Compression Polymers Holdings LLC (the “Predecessor”) for the period January 1, 2005 to May 10, 2005 (collectively, the “Companies”). These financial statements are the responsibility of the Companies’ management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Companies are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companies' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of CPG International, Inc. and subsidiaries as of December 31, 2007 and 2006, and the results of its operations and cash flows for the years ended December 31, 2007 and 2006 and for the period May 11, 2005 to December 31, 2005, and of Compression Polymers Holdings LLC’s operations and cash flows for the period January 1, 2005 to May 10, 2005, in conformity with accounting principles generally accepted in the United States of America.

/s/DELOITTE & TOUCHE LLP

Philadelphia, PA

March 28, 2008

F-2

CPG International Inc.

And Subsidiaries

Consolidated Balance Sheets

December 31, 2007 and December 31, 2006

(dollars in thousands)

	December 31,			December 31,
		2007			2006
ASSETS:
Current assets:
Cash	$	9,608		$	2,173
Receivables:
Trade, less allowance for doubtful accounts of $1,470 and $997 in 2007 and 2006, respectively		30,712			29,325
Inventories		52,391			45,493
Deferred income taxes—current		8,321			9,192
Prepaid expenses and other		9,314			6,441
Total current assets		110,346			92,624
Property and equipment—net		92,693			79,935
Goodwill		288,084			232,749
Intangible assets —net		100,115			92,408
Deferred financing costs—net		8,605			10,080
Other assets		653			—
Total assets	$	600,496		$	507,796
LIABILITIES AND SHAREHOLDER’S EQUITY:
Current liabilities:
Accounts payable	$	27,474		$	25,680
Current portion of capital lease		1,415			647
Current portion of long-term debt obligations		—			9,508
Accrued interest		15,696			13,887
Accrued costs – Procell Acquisition		18,066			—
Accrued expenses		8,637			7,391
Total current liabilities		71,288			57,113
Deferred income taxes		45,425			43,715
Capital lease obligation—less current portion		5,411			3,010
Long-term debt—less current portion		278,107			245,132
Accrued warranty		3,107			1,854
Other liabilities		664			—
Commitments and contingencies
Shareholder’s equity:
Common shares, $0.01 par value: 1,000 shares authorized; 10 issued and outstanding at December 31, 2007 and December 31, 2006		—			—
Additional paid-in capital		199,961			165,066
Retained deficit		(3,467	)		(8,094	)
Total shareholder’s equity		196,494			156,972
Total liabilities and shareholder’s equity	$	600,496		$	507,796

See notes to consolidated financial statements.

F-3

CPG International Inc.

and Subsidiaries

Consolidated Statements of Operations

December 31, 2007, 2006 and

Periods May 11 to December 31, 2005 and January 1 to May 10, 2005

(dollars in thousands)

		Successor									Predecessor
								Period			Period
								May 11,			January 1,
								2005			2005
		Year Ended			Year Ended			to			to
		December 31,			December 31,			December 31,			May 10,
		2007			2006			2005			2005
Net sales	$	313,703		$	261,790		$	140,672		$	81,931
Cost of sales		(225,436	)		(193,417	)		(113,076	)		(58,854	)
Gross margin		88,267			68,373			27,596			23,077
Selling, general and administrative expenses		(46,844	)		(40,249	)		(18,870	)		(21,905	)
Gain on sale of property		422			—			—			—
Operating income		41,845			28,124			8,726			1,172
Other income (expenses):
Interest expense		(34,445	)		(28,897	)		(21,293	)		(1,906	)
Interest income		747			212			118			46
Miscellaneous – net		240			306			158			(384	)
Total other expenses-net		(33,458	)		(28,379	)		(21,017	)		(2,244	)
Income (loss) before income taxes		8,387			(255	)		(12,291	)		(1,072	)
Income tax (expense) benefit		(3,760	)		(230	)		4,682			(3,060	)
Net income (loss)	$	4,627		$	(485	)	$	(7,609	)	$	(4,132	)

See notes to consolidated financial statements.

F-4

CPG International Inc.

and Subsidiaries

Consolidated Statements of Shareholder’s Equity

Years Ended December 31, 2007, 2006 and

Periods May 11 to December 31, 2005 and January 1 to May 10, 2005

(dollars in thousands)

														Accumulated
														Other
									Additional				Comprehensive
									Paid - in		Deferred			Income
	Common Units			Preferred Units					Capital	Compensation			(Loss)							Total
	Units		.01 Par		Units		No Par										Retained		Shareholder’s
Predecessor	Outstanding		Value		Outstanding		Value										Earnings			Equity
Balance – January 1, 2005	61	$	—		968	$	—	$	28,700		(945	)	$	757		$	2,045		$	30,557
Derivative income, net of deferred tax expense of $80	—		—		—		—		—		—			129			—			129
Realized derivative income	—		—		—		—		—		—			(886	)		—			(886	)
Net loss	—		—		—		—		—		—			—			(4,132	)		(4,132	)
Comprehensive loss	—		—		—		—		—		—			—			—			(4.889	)
Compensation expense recorded on vested restricted units	—		—		—		—		12,800		—			—			—			12,800
Market value adjustment to restricted common units	—		—		—		—		176		(143	)		—			—			33
Balance – May 10, 2005	61	$	—		968	$	—	$	41,676	$	(1,088	)	$	—		$	(2,087	)	$	38,501

								Accumulated
	Common Units				Additional			Other			Retained				Total
	Shares		No Par		Paid—in	Comprehensive					Earnings				Shareholder’s
Successor	Outstanding		Value		Capital		Income			/(Deficit)				Equity
Balance – May 11, 2005	—	$	—	$	—	$		—	$		—		$		—
Initial capital contribution-Transaction	10		—		165,000			—			—				165,000
Additional paid-in capital	—		—		66			—			—				66
Net loss and comprehensive loss	—		—		—			—			(7,609	)			(7,609	)
Balance – December 31, 2005	10	$	—	$	165,066	$		—	$		(7,609	)	$		157,457
Additional paid-in capital	—		—		—			—			—				—
Net loss and comprehensive loss	—		—		—			—			(485	)			(485	)
Balance – December 31, 2006	10		—		165,066			—			(8,094	)			156,972
Additional paid-in capital	—		—		34,895			—			—				34,895
Net income and comprehensive income	—		—		—			—			4,627				4,627
Balance – December 31, 2007	10	$	—	$	199,961	$		—	$		(3,467	)	$		196,494

See notes to consolidated financial statements.

F-5

CPG International Inc.

and Subsidiaries

Consolidated Statements of Cash Flows

Year Ended December 31, 2007, 2006 and

Periods May 11 to December 31, 2005 and January 1 to May 10, 2005

	Successor										Predecessor
								Period			Period
		Year			Year			May 11, 2005			January 1,2005
		Ended			Ended			To			to
		December 31,			December 31,			December 31,			May 10,
(Dollars in thousands)		2007			2006			2005			2005
Cash flows from operating activities:
Net income (loss)	$	4,627		$	(485	)	$	(7,609	)	$	(4,132	)
Adjustments to reconcile net income to net cash flows provided by operating activities:
Interest accretion on capital lease		13			—			—			—
Write-off of deferred financing fees		—			—			5,252			—
Depreciation and amortization		18,157			13,813			7,389			2,171
Amortization of deferred financing fees classified as interest		1,921			1,679			989			—
Amortization of debt premium		(24	)		(21	)		—			—
Deferred income tax provision		3,570			1,283			(4,868	)		(414	)
(Gain) loss on disposition of fixed asset		(422	)		2			—			—
Stock-based compensation from vesting of restricted units		—			—			—			12,800
Changes in certain assets and liabilities:
Trade receivables		1,212			(9,505	)		3,461			(4,687	)
Inventories		(4,512	)		1,483			(886	)		2,398
Prepaid expenses and other currents assets		(2,853	)		273			(3,540	)		1,006
Accounts payable- primarily trade		(1,800	)		(11,300	)		16,214			(720	)
Accrued expenses and interest		106			4,690			6,723			3,538
Other assets and liabilities		1,264			—			—			—
Net cash provided by operating activities		21,259			1,912			23,125			11,960
Cash flows used in investing activities:
Acquisition of equity interest in Predecessor		—			—			(212,756	)		—
Acquisition of Santana, net of cash received		—			(34,980	)		—			—
Acquisition of Procell, net of cash received		(58,183	)		—			—			—
Purchases of property and equipment		(14,386	)		(16,995	)		(17,295	)		(4,489	)
Proceeds from disposition of fixed asset		1,999			9			—			—
Net cash used in investing activities		(70,570	)		(51,966	)		(230,051	)		(4,489	)
Cash flows from financing activities:
Capital contribution		34,895			—			165,066			—
Proceeds from long-term obligation		33,000			30,150			440,000			—
(Repayments) borrowings under revolving credit facility		(9,500	)		9,500			—			—
Payment of Predecessor long-term obligations		—			—			(140,214	)		—
Payments on long-term obligations		(1,203	)		(298	)		(225,034	)		(3,820	)
Payments of financing fees		(446	)		(1,910	)		(24,964	)		—
Preferred unit contributions (distribution)		—			—			—			509
Net cash provided by (used in) financing activities		56,746			37,442			214,854			(3,311	)
Net increase (decrease) in cash and cash equivalents		7,435			(12,612	)		7,928			4,160
Cash and cash equivalents – Beginning of period		2,173			14,785			6,857			2,697
Cash and cash equivalents – End of period	$	9,608		$	2,173		$	14,785		$	6,857
Supplemental disclosures:
Cash paid for interest	$	32,636		$	25,253		$	20,799		$	1,756
Capital expenditures in accounts payable at end of period	$	712		$	287		$	—		$	—
Federal, state and local taxes (refunded) paid	$	(5	)	$	158		$	1,432		$	—
Increase in value of restricted common units	$	—		$	—		$	—		$	176
Property/equipment acquired by execution of a capital lease obligation	$	4,350		$	2,305		$	—		$	—
Accrued costs-- Procell Acquisition	$	18,066		$	—		$	—		$	—

See notes to consolidated financial statements.

F-6

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

1. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (the “SEC”). They include the accounts of CPG International Inc. (formerly known as Compression Polymers Holding II Corporation) and Subsidiaries on a consolidated basis (the “Successor”). All significant intercompany transactions have been eliminated in consolidation.

On May 10, 2005, CPG International Inc., a Delaware corporation consummated the acquisition (the “Transaction”) of all the equity interests of the operating subsidiaries of Compression Polymers Holdings LLC, a Delaware limited liability company (the “Predecessor”). CPG International I Inc., formerly known as Compression Polymers Holding Corporation, a Delaware corporation (“CPG”) and the Successor were each formed by AEA Investors LLC and its affiliates (“AEA Investors”) for the purpose of the Transaction. Compression Polymers Holdings LLC sold all of the equity interests of its operating subsidiaries to the Successor in connection with the Transaction.

All references herein to the “Company” mean (1) the Predecessor for the periods ending on or prior to May 10, 2005, and (2) the Successor for the periods beginning after May 10, 2005.

As a result of the Transaction and resulting change in control and change in historical cost basis of accounting, the Company is required to present separately the operating results for Predecessor periods up to and including the closing date of the Transaction (May 10, 2005) and the Successor periods following the closing date of the Transaction (May 11, 2005 and thereafter). The financial statements and operating results identified as belonging to the Predecessor are those of Compression Polymers Holdings LLC, the parent entity existing for all periods shown prior to the completion of the Transaction. For the periods beginning after the Transaction, the financial statements and operating results presented herein are those of the Successor. The Successor has fully and unconditionally guaranteed debt securities of CPG, and, as a result, although CPG is the issuer of the debt securities, the financial statements included herein for the periods beginning after the Transaction are that of the Successor. The Successor has no independent assets or operations other than through its ownership of 100% of CPG and, accordingly, the financial statements of CPG would be substantially similar to those of the Successor included herein. CPG is a 100% owned finance subsidiary of the Successor and, as of December 31, 2007, all of the Successor’s subsidiaries, other than CPG, have guaranteed the debt securities. All of the guarantees of the debt securities are full and unconditional and joint and several. The indenture governing the debt securities restricts the ability of CPG and its subsidiaries to pay dividends or make loans to the Successor.

Revenue Recognition

Revenue is recognized in accordance with SEC Staff Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), as amended by SAB 101A, SAB 101B and SAB 104. SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the fee is fixed or determinable; and (4) collectibility is reasonably assured. Revenues are recognized at the time product is shipped to the customer and title transfers.

The Company accrues for sales returns, discounts and allowance for doubtful accounts based on a current evaluation of experience based on the stated collection terms. Should actual experience differ from estimates, revisions to the liability recorded would be required.

F-7

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

Advertising Costs

Advertising costs primarily relate to trade publication advertisements, cooperative advertising and product brochures. Such costs are expensed as incurred and included in selling, general and administrative expenses. Total advertising expenses were approximately $6,101,000 and $9,349,000 for the years ended December 31, 2007 and 2006, $3,190,000 for the period of January 1, 2005 through May 10, 2005 and $4,631,000 for the period of May 11, 2005 through December 31, 2005, respectively.

Shipping and Handling Costs

The Company includes all shipping and handling costs as cost of sales. Shipping and handling costs billed to customers is recorded in net sales.

Allowance for Doubtful Accounts

Credit is extended to commercial, institutional, residential and industrial construction customers based on an evaluation of their financial condition and collateral is generally not required. The evaluation of the financial condition is performed to reduce the risk of loss. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Amounts are written-off when they are determined to be uncollectible.

Changes in the Company’s allowance for doubtful accounts are as follows:

		Year			Year
		Ended			Ended
(Dollars in thousands)		December 31, 2007			December 31, 2006
Beginning balance	$	997		$	820
Increase for bad debt expense		537			355
Decrease for accounts written off		(64	)		(178	)
Ending balance	$	1,470		$	997

	Successor				Predecessor
		Period			Period
		May 11, 2005			January 1, 2005
		to			to
(Dollars in thousands)		December 31, 2005			May 10, 2005
Beginning balance	$	630		$	681
Increase for bad debt expense		336			183
Decrease for accounts written off		(146	)		(234	)
Ending balance	$	820		$	630

Cash and Cash Equivalents

All liquid investments with maturities of three months or less at the date of purchase are considered cash equivalents.

F-8

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

Inventories

Inventories (mainly, petrochemical resin) are valued at the lower of cost or market, determined on a first-in, first-out basis (“FIFO”), and reduced for slow-moving and obsolete inventory.

Inventory obsolescence write-downs are recorded for damaged, obsolete, excess and slow-moving inventory. At the end of each quarter, management within each business segment, performs a detailed review of its inventory on an item by item basis and identifies which products are believed to be obsolete or slow-moving. Management assesses the need for, and the amount of, an obsolescence write-down based on customer demand of the item, the quantity of the item on hand and the length of time the item has been in inventory.

Vendor Rebates

Certain vendor rebates and incentives are earned by us only when a specified level of annual purchases are achieved. We account for vendor rebates in accordance with EITF 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. EITF 02-16 states that a rebate or refund of a specified amount of cash consideration that is payable pursuant to a binding arrangement (only if a customer completes a specified cumulative level of purchases), should be recognized on a systematic and rational allocation of the cash consideration offered to each of the underlying transactions that results in progress by the customer toward earning the rebate or refund, provided the amounts are probable and reasonably estimable. We record the incentives as a reduction to the cost of inventory. Upon sale of inventory, the incentive is recognized as a reduction to cost of sales. We record such incentives during interim periods based on actual results achieved on a year-to-date basis and our expectation that purchase levels will be obtained to earn the rebate. The amounts are recorded as a reduction to cost of sales based on the purchase volume and inventory turns during the period.

Product Warranties

The Company provides a 15-year limited warranty on Scranton Products commercial building products, a 25-year limited warranty on AZEK products and a lifetime limited warranty on AZEK Deck products sold for residential use. The warranty period for all other uses of AZEK Deck, including commercial is 25 years. The Scranton Products warranty guarantees against breakage, corrosion and delamination. AZEK products are guaranteed against manufacturing defects that cause the products to rot, corrode, delaminate, or excessively swell from moisture. The AZEK Deck warranty guarantees against manufacturing defects in material and workmanship that result in blistering, peeling, flaking, cracking, splitting, cupping, rotting or structural defects from termites or fungal decay.

Warranty reserves require a high level of judgment as AZEK products have only been on the market for eight years and AZEK Deck has only been on the market for four years, therefore the Company must estimate warranty costs over a considerable length of time without significant historical data on warranty costs for these products. Management assesses warranty reserves based on sales by product as well as historical warranty costs which have been immaterial thus far. Management believes that the warranty reserves at December 31, 2007 are adequate. However, the impact resulting from the aforementioned factors could cause actual results to vary. The Company will continue to monitor this warranty reserve and the claim activity on a regular basis to conclude on the classification of the liability. The Company currently classifies the warranty as a long-term liability.

F-9

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

Components of the reserve for warranty costs are as follows:

		Year			Year
		Ended			Ended
(Dollars in thousands)		December 31, 2007			December 31, 2006
Beginning balance	$	1,854		$	1,786
Additions(1)		1,546			103
Warranty cost incurred		(293	)		(35	)
Ending balance	$	3,107		$	1,854

______________

(1) Includes approximately $1.5 million added as an initial reserve at February 1, 2007 related to the Procell Acquisition (Note 3).

Property and Equipment

Property and equipment are recorded at cost, net of accumulated depreciation. Construction in progress is also recorded at cost and includes capitalized interest and capitalized payroll costs and related costs such as taxes, retirement costs and other fringe benefits. Major additions and betterments are capitalized and depreciated over their estimated useful lives. Items considered repair and/or maintenance are charged to operations in the year incurred. Depreciation for financial reporting purposes is computed using the straight-line method over the estimated useful lives of the assets, as follows:

Land improvements	10 years
Building and improvements	20-40 years
Manufacturing equipment	2-7 years
Office furniture and equipment	3-5 years

The Company regularly assesses the recoverability of its long-lived assets used in operations whenever events or changes in circumstances indicate that the assets may be impaired and the undiscounted future cash flows estimated to be generated by these assets are less than the assets’ net book value. If impairment occurs, the loss is measured by comparing the fair value of the asset to its carrying amount. In 2007, 2006 and 2005, the Company concluded that no impairment to the carrying value of its long-lived assets exists.

Deferred Financing Costs

The Company had recorded deferred financing costs incurred in conjunction with its debt obligations. These costs are capitalized and then amortized over the lives of the associated debt to interest expense. Total deferred financing costs, net of accumulated amortization at December 31, 2007 and 2006 were $8,605,000 and $10,080,000, respectively.

Goodwill and Intangible Assets

In accordance with Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets, goodwill and non-amortizable intangibles are evaluated annually to determine the recoverability of carrying amounts. The evaluation, performed at the reporting unit level, is based on various analyses including cash flow and profitability projections, addresses the impact on the existing Company business. The evaluation necessarily involves significant management judgment. The Company has determined that no impairment of goodwill or other intangibles existed for the years ended December 31, 2007 and 2006 or for the periods January 1, 2005 to May 10, 2005 and May 11, 2005 to December 31, 2005. Amortizable intangibles such as customer relationships, non-compete agreement and proprietary knowledge, will be tested for impairment whenever events or circumstances indicate that

F-10

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

the carrying value may not be recoverable, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company amortizes the following intangible assets: Customer relationships (over 10 years); non-compete agreements (over 5 years) and proprietary knowledge (over 15 years). See Note 6 for more detail regarding goodwill and intangible assets.

Retirement Benefits

The Company offers a 401(k) benefit to all employees after six months of service. The Company does not offer a defined benefit plan (pension plan) nor does the Company offer any other post-retirement benefit. Each participant may contribute up to 100% of his or her salary, within dollar limitations set forth by the ERISA guidelines. Total company contributions to the 401(k) Plan were $455,000 and $150,000 for the year ended December 31, 2007 and 2006, respectively.

Estimated Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued liabilities and debt. The Company estimates the fair value of its debt using current market quotes and the relative maturities and the carrying values approximates fair value at the balance sheet dates.

The carrying amount and fair value of the Company’s financial instruments including current maturities at December 31, 2007 are:

(dollars in thousands)	Carrying Value		Fair Value
Long-term debt	$	278,107	$	264,630

The carrying amount and fair value of the Company’s financial instruments including current maturities at December 31, 2006 are:

(dollars in thousands)	Carrying Value		Fair Value
Long-term debt	$	245,140	$	251,983
Revolving credit facility	$	9,500	$	9,500

All other financial instruments are accounted for on a historical cost basis which, due to the nature of these instruments, approximates fair value at the balance sheet dates.

Income Taxes

The Company accounts for income taxes using the liability method in accordance with SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based upon differences between the financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax assets or liabilities are expected to be realized or settled.

Use of Estimates

The preparation of financial statements in conformity with accounting principals generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Financial Accounting Standards

F-11

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

In June 2006, the FASB issued Interpretation 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”). This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. This interpretation became effective for fiscal years beginning after December 15, 2006 (January 1, 2007 for the Company). The Company adopted the provisions of FIN 48 as of January 1, 2007, and as a result of that adoption, recorded $800,000 of unrecognized tax benefits on the balance sheet, which did not result in a cumulative effect adjustment to retained earnings as the adjustment was recorded to goodwill based on the nature of the tax position involved.  Of the total unrecognized tax benefits, $664,000 is carried at December 31, 2007 as a non-current liability, and $136,000 as an offset to non-current deferred tax assets.  If the unrecognized tax benefits were recognized in the future, there would be no impact to the Company’s effective tax rate.

In February 2006, the FASB issued SFAS 155, Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statement No. 133 and 140 (“SFAS No. 155”). SFAS 155 allows financial instruments that contain an embedded derivative that otherwise would require bifurcation to be accounted for as a whole on a fair value basis. This statement is effective for all financial instruments acquired or issued after the beginning of the first fiscal year that begins after September 15, 2006. The adoption of SFAS 155 did not have a material impact on the Company’s consolidated financial statements.

In September 2006, the FASB issued SFAS 157, Fair Value Measurement. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This statement is effective for fiscal years beginning after November 15, 2007 for financial instruments, and non-financial instruments beginning after November 15, 2008, and interim periods within those fiscal years. The Company does not expect that the adoption of SFAS 157 will have a material impact on its consolidated financial statements.

In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 expands opportunities to use fair value measurement in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company does not expect that the adoption of SFAS 159 will have a material impact on its consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, which establishes principles over the method entities use to recognize and measure assets acquired and liabilities assumed in a business combination and enhances disclosures on business combinations. SFAS No. 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

F-12

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

2. SEGMENT INFORMATION

The Company operates the following two reportable segments: AZEK Building Products, Inc. (“AZEK Building Products”), which includes residential building products such as AZEK Trimboards, Mouldings, and Deck (formerly Procell Decking) and Celtec, as well as other branded highly engineered, metal and wood replacement products; and Scranton Products Inc. (“Scranton Products”), which includes highly engineered commercial building products such as synthetic bathroom and locker systems.

The Company’s chief operating decision makers (which consists of the Company’s Chief Executive Officer and Chief Financial Officer), regularly review financial information about each of these business units in deciding how to allocate resources and evaluate performance. The Company evaluates each segment’s performance based on gross margin and operating income. The accounting policies for the reportable segments are the same as those for the Company. Intersegment sales and transfers are based on resin prices plus an appropriate margin and are reviewed periodically by management. Corporate costs, which include corporate salary and employee benefit costs, information technology and corporate related professional fees (including accounting and legal fees), are not allocated to segments.

The following table sets forth summarized financial information for the Company by business segment for the year ended December 31, 2007: 

	AZEK
		Building			Scranton
		Products			Products			Corporate			Eliminations		Consolidated
Net sales to external customers	$	213,991		$	99,712		$	—		$	—	$	313,703
Intersegment net sales		—			—			—			—		—
Total net sales		213,991			99,712			—			—		313,703
Cost of sales		(151,984	)		(73,452	)		—			—		(225,436	)
Gross margin		62,007			26,260			—			—		88,267
Selling, general and administrative expenses		(24,097	)		(12,138	)		(10,609	)		—		(46,844	)
Gain on sale of property		(21	)		443			—			—		422
Operating income (loss)	$	37,889		$	14,565		$	(10,609	)	$	—	$	41,845
Segmented financial data:
Interest expense	$	(19,212	)	$	(14,861	)	$	(372	)	$	—	$	(34,445	)
Interest income	$	468		$	243		$	36		$	—	$	747
Depreciation and amortization classified as:
Cost of sales	$	8,873		$	3,865		$	—		$	—	$	12,738
Selling, general and administrative expense		3,090			1,291			1,038			—		5,419
Total depreciation and amortization	$	11,963		$	5,156		$	1,038		$	—	$	18,157
Total capital expenditures(1)	$	13,844		$	531		$	723		$	—	$	15,098

______________

(1) Includes capital expenditures in accounts payable

F-13

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

The following table sets forth summarized financial information for the Company by business segment for the year ended December 31, 2006: 

	AZEK
		Building			Scranton
		Products			Products			Corporate			Eliminations			Consolidated
Net sales to external customers	$	162,198		$	99,592		$	—		$	—		$	261,790
Intersegment net sales		1,190			136			—			(1,326	)		—
Total net sales		163,388			99,728			—			(1,326	)		261,790
Cost of sales		(120,111	)		(74,632	)		—			1,326			(193,417	)
Gross margin		43,277			25,096			—			—			68,373
Selling, general and administrative expenses		(21,001	)		(11,206	)		(8,042	)		—			(40,249	)
Operating income (loss)	$	22,276		$	13,890		$	(8,042	)	$	—		$	28,124
Segmented financial data:
Interest expense	$	(15,836	)	$	(11,072	)	$	(1,989	)	$	—		$	(28,897	)
Interest income	$	75		$	94		$	43		$	—		$	212
Depreciation and amortization classified as:
Cost of sales	$	5,905		$	4,925		$	—		$	—		$	10,830
Selling, general and administrative expense		1,327			1,287			369			—			2,983
Total depreciation and amortization	$	7,232		$	6,212		$	369		$	—		$	13,813
Total capital expenditures(1)	$	13,427		$	423		$	3,432		$	—		$	17,282

______________

(1) Includes capital expenditures in accounts payable.

The following table sets forth summarized financial information for the Company by business segment from January 1, 2005 through May 10, 2005:

		AZEK
		Building			Scranton
		Products			Products			Corporate			Eliminations			Consolidated
Net sales to external customers	$	58,385		$	23,546		$	— —		$	— —		$	81,931
Intersegment net sales		779			—			—			(779	)		—
Total net sales		59,164			23,546			—			(779	)		81,931
Cost of sales		(41,920	)		(17,713	)		—			779			(58,854	)
Gross margin		17,244			5,833			—			—			23,077
Selling, general and administrative expenses		(6,314	)		(1,755	)		(13,836	)		—			(21,905	)
Operating income (loss)	$	10,930		$	4,078		$	(13,836	)	$	—		$	1,172
Segmented financial data:
Interest expense	$	(2,029	)	$	123		$	—		$	—		$	(1,906	)
Interest income	$	29		$	17		$	—		$	—		$	46
Depreciation and amortization classified as:
Cost of sales	$	1,133		$	908		$	—		$	—		$	2,041
Selling, general and administrative expenses		31			99			—			—			130
Total depreciation and amortization	$	1,164		$	1,007		$	—		$	—		$	2,171
Total capital expenditures (1)	$	4,264		$	225		$	—		$	—		$	4,489

_________________

(1) Includes capital expenditures in accounts payable.

F-14

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

The following table sets forth summarized financial information for the Company by business segment from May 11, 2005 through December 31, 2005:

		AZEK
		Building			Scranton
		Products			Products			Corporate (2)			Eliminations			Consolidated
Net sales to external customers	$	91,310		$	49,362		$	—		$	—		$	140,672
Intersegment net sales		1,293			—			—			(1,293	)		—
Total net sales		92,603			49,362			—			(1,293	)		140,672
Cost of sales		(69,722	)		(44,647	)		—			1,293			(113,076	)
Gross margin		22,881			4,715			—			—			27,596
Selling, general and administrative expenses		(11,795	)		(4,654	)		(2,421	)		—			(18,870	)
Operating income (loss)	$	11,086		$	61		$	(2,421	)	$	—		$	8,726
Segmented financial data:											—
Interest expense	$	(9,073	)	$	(12,220	)	$	—		$	—		$	(21,293	)
Interest income	$	60		$	58		$	—		$	—		$	118
Depreciation and amortization classified as:
Cost of sales	$	2,597		$	2,914		$	—		$	—		$	5,511
Selling, general and administrative expenses		823			1,055			—			—			1,878
Total depreciation and amortization	$	3,420		$	3,969		$	—		$	—		$	7,389
Total capital expenditures (1)	$	16,699		$	596		$	—		$	—		$	17,295

___________________

(1) Includes capital expenditures in accounts payable.

The following table sets forth summarized financial information regarding assets for the Company by business segment:

(Dollars in thousands)	December 31,		December 31,
	2007		2006
Total assets:
AZEK Building Products	$	402,154	$	292,389
Scranton Products		190,583		208,681
Corporate		7,759		6,726
Total consolidated assets	$	600,496	$	507,796

The following table sets forth the Company’s significant distributor group sales as a percentage of total consolidated net sales, as well as a percentage of AZEK Building Products net sales as each of these distributors are part of the AZEK Building Products segment:

	Year				Year				May 11, 2005				January 1, 2005
	Ended				Ended				to				To
	December 31, 2007				December 31, 2006				December 31, 2005				May 10, 2005
			% of				% of				% of				% of
			AZEK				AZEK				AZEK				AZEK
	% of		Building		% of		Building		% of		Building		% of		Building
	Consolidated		Products		Consolidated		Products		Consolidated		Products		Consolidated		Products
	Sales		Sales		Sales		Sales		Sales		Sales		Sales		Sales
Distributor A	28	%	35	%	22	%	35	%	26	%	42	%	28	%	40	%
Distributor B	7		10		11		17		11		18		10		14
Distributor C	8		12		—		—		—		—		—		—
Total	43	%	57	%	33	%	52	%	37	%	60	%	38	%	54	%

F-15

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

3. ACQUISITION

On December 13, 2006, CPG entered into a unit purchase agreement to acquire all of the outstanding equity of Pro-Cell, LLC (“Procell”), which owned and operated Procell Decking Systems for a purchase price of $77,324,000. The acquisition of Procell (“Procell Acquisition”) closed on January 31, 2007. The Procell Acquisition was accounted for as a purchase business combination in accordance with SFAS 141, Business Combinations.

The purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed based on fair values as of the date of the transaction, including a portion of which was capitalized to the balance sheet as goodwill. The purchase price was subject to final determination, including a cash payment, as well as additional equity in CPG International Holdings, LP (“Holdings”) to the former owners of Procell based upon achievement of certain financial and operating targets for the year ended December 31, 2007. The Company’s management recorded $12,333,000 as the cash payment under the terms of the purchase agreement, and $5,733,000 representing the value of the additional equity in Holdings, both of which are included in other current liabilities at December 31, 2007. A valuation study was performed by an independent third party, which resulted in changes in property and equipment and the recording of intangible assets including customer relationships and proprietary technology amortizable on an accelerated basis over the next ten and fifteen years respectively, and non-compete agreements, amortizable over the next five years. The amount allocated to goodwill is reflective of the future benefit the Company is expecting to realize from the Procell Acquisition, including strategic growth opportunities within AZEK Building Products. Procell’s results of operations, subsequent to January 31, 2007, are reported as part of the AZEK Building Products business unit. The amount allocated to goodwill is expected to be deductible for tax purposes.

The following table summarizes the allocation of fair values of Procell’s assets acquired and liabilities assumed at the date of acquisition, as follows:

				At February
(Dollars in thousands)				1, 2007
Purchase price			$	72,072
Transaction costs				5,252
				77,324
Less:
Cash and cash equivalents	$	1,075
Accounts Receivable		2,593
Inventory		2,248
Other current assets		6
Deferred tax asset		482
Property, plant and equipment		12,465
Intangible assets:
Proprietary technology		7,300
Customer relationships		2,200
Non-compete agreement		2,400
Total assets acquired		30,769
Accounts payable assumed		2,883
Capital lease obligation assumed		3,421
Other liabilities assumed		2,234
Total liabilities assumed		8,538
				(22,231	)
Goodwill (excess purchase price over net asset value)			$	55,093

F-16

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

The following pro forma consolidated financial information for the years ended December 31, 2007 and 2006 are presented as though the Procell Acquisition occurred on January 1, 2007 and 2006. The pro forma consolidated financial information is not indicative of future results of operations or results of operations that would have actually occurred had the Procell Acquisition been consummated as of January 1, 2007 and 2006, due to the fair values assigned to Procell’s assets and liabilities, the changes made in related estimated useful lives of the assets at February 1, 2007, as well as changes in interest and income tax expenses as a result of the Procell Acquisition.

	Pro Forma		Pro Forma
	Year Ended		Year Ended
	December 31,		December 31,
(Dollars in thousands)	2007		2006
Net sales	$	317,115	$	294,869
Net income (loss)	$	3,733	$	(1,725	)

On April 29, 2006, the Company completed the acquisition of Santana Holdings Corporation, the direct parent of Santana Products, Inc. for a purchase price of $36.0 million (the “Santana Acquisition”). Santana Products Inc. was merged into the Scranton Products business unit.

The following pro forma consolidated financial information for the year ended December 31, 2006 is presented as though the Santana Acquisition occurred on January 1, 2006. The pro forma consolidated financial information is not indicative of future results of operations or results of operations that would have actually occurred had the Santana Acquisition been consummated as of January 1, 2006, due to the fair values assigned to Santana’s assets and liabilities, the changes made in related estimated useful lives of the assets at April 29, 2006, as well as changes in interest and income tax expenses as a result of the Santana Acquisition.

	Pro Forma
	Year Ended
	December 31,
(Dollars in thousands)	2006
Net sales	$	271,847
Net loss	$	(4,478	)

4. INVENTORIES

Inventories consisted of the following:

	December 31,		December 31,
(Dollars in thousands)	2007		2006
Raw materials	$	22,664	$	21,640
Work in process		145		133
Finished goods		29,582		23,720
Total inventories	$	52,391	$	45,493

Inventories are valued at the lower of cost or market, determined on a first-in, first-out basis (“FIFO”).

F-17

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

5. PROPERTY AND EQUIPMENT—NET

Property and equipment consisted of the following:

	December 31,			December 31,
(Dollars in thousands)	2007			2006
Land and improvements	$	1,701		$	1,701
Buildings and improvements		20,766			22,414
Capital lease – building		1,500			1,500
Capital lease – manufacturing equipment		6,655			2,305
Manufacturing equipment		84,446			62,684
Office furniture and equipment		4,766			3,829
Total property and equipment		119,834			94,433
Construction in progress		3,805			2,833
		123,639			97,266
Accumulated depreciation		(30,946	)		(17,331	)
Total property and equipment – net	$	92,693		$	79,935

Depreciation expense for the years ended December 31, 2007 and 2006 was approximately $13,964,000 and $11,410,000, respectively. Depreciation expense for the period January 1 to May 10, 2005 and May 11 through December 31, 2005 was approximately $2,156,000 and $5,900,000, respectively.

6. GOODWILL AND INTANGIBLE ASSETS —NET

Goodwill and intangible assets consisted of the following:

	Lives in		December 31,			December 31,
(Dollars in thousands)	Years		2007			2006
Goodwill	—	$	288,084		$	232,749
Non-amortizable intangibles
Trademarks			71,400			71,400
Amortizable intangibles-
Non-compete agreement	5		2,500			100
Accumulated amortization non-compete agreement			(473	)		(13	)
Non-compete agreement- net			2,027			87
Customer relationships	10		25,200			23,000
Accumulated amortization customer relationships			(6,382	)		(3,682	)
Customer relationships-net			18,818			19,318
Proprietary knowledge	15		9,100			1,800
Accumulated amortization proprietary knowledge			(1,230	)		(197	)
Proprietary knowledge-net			7,870			1,603
Total amortizable intangibles-net			28,715			21,008
Intangible assets – net		$	100,115		$	92,408

In accordance with SFAS 142, Goodwill and Other Intangible Assets, goodwill and trademarks are tested for impairment annually at the reporting unit level. The customer relationships, non-compete agreement and proprietary

F-18

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

knowledge, which are amortizable, will be tested for impairment whenever events or circumstances indicate that the carrying value may not be recoverable, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

At December 31, 2007, approximately $195,764,000 represents goodwill attributable to the AZEK Building Products segment and approximately $92,320,000 represents goodwill attributable to the Scranton Products segment.

Amortization expense for the years ended December 31, 2007 and 2006 was approximately $4,193,000 and $2,403,000, respectively. Amortization expense for the period of January 1 to May 10, 2005 and May 11 through December 31, 2005 was approximately $15,000 and $1,489,000, respectively.

The following table presents the future intangible asset amortization expense based on existing intangible assets at December 31, 2007:

	December 31,
(Dollars in thousands)	2007
2008	$	4,132
2009		4,031
2010		3,930
2011		3,816
2012		3,268
Thereafter		9,538
Total		28,715

The following table summarizes the changes in the Company’s goodwill for the period of May 11, 2005 to December 31, 2005 and for the years ended December 31, 2006 and 2007:

(Dollars in thousands)
Goodwill at May 11, 2005	$	—
Purchase goodwill related to the Transaction		213,682
Goodwill at December 31, 2005	$	213,682
Purchase adjustments related to the Transaction for deferred income taxes		(2,371	)
Purchase goodwill related to the Santana Acquisition		21,438
Goodwill at December 31, 2006		232,749
Purchase goodwill related to the Procell Acquisition		55,093
FIN 48 liability adjustment related to Transaction		800
Purchase goodwill related to the Santana Acquisition		39
Purchase adjustments for deferred income taxes		(597	)
Goodwill at December 31, 2007	$	288,084

7. DEFERRED FINANCING COSTS

Deferred financing costs consisted of the following:

		December 31,			December 31,
(Dollars in thousands)		2007			2006
Deferred financing costs	$	13,194		$	12,748
Accumulated amortization		(4,589	)		(2,668	)
Total deferred financing costs, net	$	8,605		$	10,080

F-19

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

Amortization of deferred financing costs for the years ended December 31, 2007 and 2006 were approximately $1,921,000 and $1,679,000, respectively. Amortization of deferred financing costs for the period of January 1, 2005 to May 10, 2005 and May 11, 2005 to December 31, 2005 was approximately $47,000 and $989,000 respectively. Amortization of deferred financing costs is included in interest expense on the consolidated statements of operations.

8. LONG-TERM DEBT

Long-term debt consisted of the following:

	December 31,		December 31,
(Dollars in thousands)	2007		2006
Senior Unsecured Fixed Rate Notes due 2013—10.5%	$	150,000	$	150,000
Senior Unsecured Floating Rate Notes due 2012—LIBOR + 6.75% (12.12% at
December 31, 2007 and 12.33% at December 31, 2006) (includes premium of
$107 at December 31, 2007 and $132 at December 31, 2006)		128,107		95,132
Credit Facility – (8.14% - 9.75% at December 31, 2006)		—		9,500
Notes payable		—		8
Total		278,107		254,640
Less current portion		—		(9,508	)
Long-term debt—less current portion	$	278,107	$	245,132

In connection with the Transaction, CPG issued $215,000,000 of indebtedness on May 10, 2005. On June 29, 2005, CPG priced a refinancing of the Transaction debt with the issuance of $65,000,000 aggregate principal amount of Senior Floating Rate Notes due 2012 (the “Floating Rate Notes”) and $150,000,000 aggregate principal amount of 10½% Senior Notes due 2013 (the “Fixed Rate Notes,” and collectively with the Floating Rate Notes, the “Notes”). The Notes have been guaranteed by the Company and all of the subsidiaries of CPG. The indenture governing the Notes, contains a number of covenants that, among other things, restrict CPG’s ability, and the ability of any subsidiary guarantors, subject to certain exceptions, to sell assets, incur additional debt, repay other debt, pay dividends and distributions on CPG’s capital stock or repurchase CPG’s capital stock, create liens on assets, make investments, loans or advances, make certain acquisitions, engage in mergers or consolidations and engage in certain transactions with affiliates.

On April 28, 2006, in connection with the Santana Acquisition, CPG issued an additional $30,000,000 aggregate principal amount of Floating Rate Notes. These additional notes are governed by the same indenture dated as of July 5, 2005, governing the previously issued Floating Rate Notes.

On January 31, 2007, in connection with the Procell Acquisition, CPG issued an additional $33,000,000 million aggregate principal amount of Senior Unsecured Floating Rate Notes due 2012. These additional notes are governed by the same indenture dated as of July 5, 2005, governing the previously issued Notes.

As of December 31, 2007, the Company has scheduled long term debt payments (excluding interest) of $128,000,000 in 2012 and $150,000,000 in 2013.

Concurrently with the closing of the Transaction, CPG entered into a senior secured revolving credit facility that provides availability of up to $40,000,000. The amount of borrowing capacity available under the Company’s senior secured revolving credit facility is limited to an amount equal to the sum of (a) 85% of accounts receivable and (b) 60% of inventory. The borrowings under the senior secured revolving credit facility are available until its maturity in 2011 to fund the ongoing working capital requirements, capital expenditures and other general

F-20

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

corporate needs. As of December 31, 2007, there was nil outstanding under, and a letter of credit of $1,430,000 held against, the senior secured revolving credit facility, which had an additional $38,570,000 available for borrowing as of such date.

The senior secured revolving credit facility imposes certain restrictions on agreement governing the Company, CPG and the subsidiary guarantors, including restrictions on their ability to incur additional indebtedness or issue guarantees, grant liens, make fundamental changes in their business, corporate structure or capital structure, including, among other things, entering into mergers, acquisitions and other business combinations, make loans and investments, enter into transactions with affiliates, modify or waive material agreements in a manner that is adverse in any material respect to the lenders, or prepay or repurchase subordinated indebtedness. In addition, the senior secured revolving credit facility includes a material financial covenant that requires CPG to maintain at all times a maximum total senior secured leverage ratio (total senior indebtedness on the last day of any fiscal quarter over consolidated earnings before interest, taxes, depreciation and amortization for the preceding twelve-month period) less than or equal to 1.5 to 1.0. Indebtedness under the senior secured revolving credit facility is secured by substantially all of CPG’s present and future assets. In addition, the senior secured credit facility is guaranteed by the Company and all of the subsidiaries of CPG, including Scranton Products Inc. and AZEK Building Products.

The Company was in compliance with the financial covenants imposed by the senior secured revolving credit facility for the year ended December 31, 2007.

For detail regarding financing activities subsequent to year end, see Note 14 below.

9. LEASE COMMITMENTS

On May 11, 2007, CPG sold one of its manufacturing facilities and concurrently entered into an operating lease with the buyer to continue to use a portion of the building through May 2009 at a rate of approximately $14,000 per month for the first year and approximately $12,000 a month for the second year.

The Company leases machinery, computer equipment and a manufacturing facility under various capital leases. The Company also leases office equipment, vehicles, a manufacturing facility and an office under operating leases expiring during the next six years.

Future minimum rental payments at December 31, 2007 for capital and operating leases having non-cancelable lease terms in excess of one year are as follows:

	Capital			Operating
2008	$	2,285		$	1,430
2009		2,276			1,297
2010		1,950			1,112
2011		1,492			929
2012		656			869
Thereafter		6,768			2,265
Total		15,427		$	7,902
Less amount representing interest		(8,601	)
Present value of minimum capital lease payments		6,826
Less current installments of obligations under capital leases		(1,415	)
Obligations under capital leases—excluding current installments	$	5,411

Total rent expense for the year ended December 31, 2007 and was approximately $1,602,000 and $480,000, respectively.

F-21

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

10. INCOME TAXES

Components of the income tax expense for the periods ended:

		Year		Year		May 11, 2005
		Ended		Ended		to
(Dollars in thousands)		December 31,		December 31,		December 31,
		2007		2006		2005
Current:
Federal	$	40	$	—	$	—
State and local		246		13		(185	)
Total current		286		13		(185	)
Deferred:
Federal		2,553		28		3,955
State and local		921		189		912
Total deferred		3,474		217		4,867
Income tax expense	$	3,760	$	230	$	4,682

Income tax provision differed from the amounts computed by applying the US Federal income tax rate of 34% to income before income taxes as a result of the following:

							May 11, 2005
		Year Ended		Year Ended			to
		December 31,		December 31,			December 31,
		2007		2006			2005
Expense (benefit) at federal statutory rate	$	2,852	$	(86	)	$	4,252
State and local tax expense – net of federal benefit		731		134			480
Nondeductible expenses and other		177		182			(50	)
Income tax expense	$	3,760	$	230		$	4,682

The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Accordingly, deferred income taxes have been provided for the temporary differences between the financial reporting and the income tax basis of the Company’s assets and liabilities by applying enacted statutory tax rates applicable to future years to the basis differences. Deferred tax assets (liabilities) consist of the following at December 31:

(Dollars in thousands)		2007			2006
Deferred tax asset:
Federal net operating loss carryforwards and AMT credits	$	6,628		$	6,877
State loss carryforwards and other benefits		1,469			1,654
Inventory reserves		574			1,048
Warranty reserves		1,167			678
Accrued expenses		1,740			1,369
Valuation allowance		(1,555	)		(1,496	)
Total		10,023			10,130
Deferred tax liabilities:
Intangibles- net		(36,172	)		(33,903	)
Prepaid assets		(353	)		(310	)
Property, plant and equipment		(10,602	)		(10,440	)
Total		(47,127	)		(44,653	)
Net deferred tax liability	$	(37,104	)	$	(34,523	)

F-22

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

At December 31, 2007, the Company has approximately $19,778,000 of net operating loss carryfowards for federal income tax purposes which expire between the years 2021 to 2027 and approximately $18,600,000 of net operating loss carryfowards for state tax purposes which expire in varying amounts through 2027. The valuation allowance for deferred tax assets of $1,555,000 and $1,496,000 at December 31, 2007 and December 31, 2006, respectively, relates principally to the uncertainty of the utilization of certain deferred tax assets, primarily the state tax loss carryforwards of certain subsidiaries. The valuation allowance reflects management’s analysis indicating it is “more likely than not” that such deferred tax assets will not be realized. Management has determined that it is more likely than not that the Company will generate sufficient taxable income in the future to realize the benefit related to its federal net operating loss carryfowards.

On January 1, 2007, the Company adopted the provisions of FIN 48, and as a result of that adoption, the Company recorded unrecognized tax benefits of $800,000 on the balance sheet, which did not result in a cumulative effect adjustment to retained earnings as the adjustment was recorded to goodwill based on the nature of the position involved. A reconciliation of the beginning and ending balances for liabilities associated with unrecognized tax benefits is as follows:

(Dollars in thousands)
Balance at January 1, 2007	$	800
Unrecognized tax benefits related to prior years		–
Unrecognized tax benefits related to the current year settlements		–
Reductions in unrecognized tax benefits due to the lapse of
applicable statute of limitations		–
Balance at December 31, 2007	$	800

Of the total unrecognized tax benefits, $664,000 is carried at December 31, 2007 as a non-current liability, and $136,000 as an offset to non-current deferred tax assets. None of the unrecognized tax benefits would have an impact on the Company’s effective tax rate if realized (or remeasured) prior to the adoption of SFAS 141(R), however realization (or remeasurement) would have an impact on the Company’s effective tax rate if such occurred after the adoption of SFAS 141(R). Prior to the adoption of SFAS 141(R), an increase to the FIN 48 reserve is recorded as an increase to goodwill, and any decrease in the FIN 48 liability would decrease goodwill. Subsequent to the adoption of SFAS 141(R) (effective for the Company with its year beginning January 1, 2009) the above rule will no longer apply and any expense or benefit associated with the realization (or remeasurement) of the unrecognized tax benefit will be recorded as part of income tax expense.

When applicable, the Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. No interest or penalty was included in income tax expense for the year 2007. As of December 31, 2007 and January 1, 2007, there was no accrual for interest or penalties recorded on the consolidated balance sheet.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction. Generally, the Company and its subsidiaries’ federal income tax returns for tax years 2004 and beyond are open tax years subject to examination by the Internal Revenue Service (IRS). The IRS recently concluded the examination of a subsidiary’s tax return for a short taxable year ending May 2005. The IRS recently commenced an examination of another subsidiary’s tax return for the year 2004. It is not anticipated that the unrecognized tax benefits for tax positions taken regarding previously filed returns will change significantly over the next twelve months. The Company and its subsidiaries also file income tax returns in various state jurisdictions, as appropriate, with varying statutes of limitation. There are no state income tax examinations in process at this time.

F-23

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

11. COMMITMENTS AND CONTINGENCIES

From time to time, the Company is subject to litigation in the ordinary course of business. Currently, there are no claims or proceedings against the Company that it believes would be expected to have a material adverse effect on the Company’s business or financial condition, results of operations or cash flows.

12. RELATED PARTY TRANSACTIONS

AEA Investors, the general partner of CPG International Holdings LP (CPG Holdings), the Company’s direct parent company, is entitled to a management fee at an annual rate of $1,500,000, payable on a monthly basis pursuant to a management agreement with AEA Investors. Management fees of $1,500,000 and $1,021,000 are included in selling, general and administrative expenses for the years ended December 31, 2007 and 2006, respectively.

The Company leases one of its manufacturing facilities from an affiliate of an equity holder of CPG Holdings. Total lease payments for the year ended December 31, 2007 was $503,000 and $498,000, respectively. The Company also has an option, expiring January 1, 2009, to purchase the land, building and fixtures for $4,000,000.

Upon completion of the Procell Acquisition, the Company entered into an amended lease agreement related to Procell’s office and manufacturing facilities location, with North Alabama Property Leasing, Inc. The lessor of the property is an entity whose sole shareholder is an equity holder in CPG Holdings. Total lease payments for the year ended December 31, 2007 were approximately $464,000.

Tide Transport, Inc., a freight company owned by two equity holders of CPG Holdings, provides certain freight services to our Foley, Alabama facility on a regular basis. These services include shipping finished product and for the transportation of resin purchases. Total freight costs for this arrangement were approximately $802,000 for the year ended December 31, 2007.

The Company also has a long-term receivable in the amount of $653,000 due from CPG Holdings.

13. EQUITY

Common Shares – All of the Company’s issued and outstanding common shares are held by CPG Holdings, its direct parent company. In connection with the Transaction, CPG International Inc. made an initial capital contribution of $165,000,000, all of which was recorded as paid in capital. In connection with the Procell Acquisition, the Company received an additional capital contribution of $34,895,000. The Company had 1,000 shares authorized and 10 shares issued and outstanding at December 31, 2007.

14. SUBSEQUENT EVENT

On February 11, 2008, the Company entered into a purchase and sale agreement to acquire 100% of the outstanding stock of Compos-A-Tron Manufacturing Inc. (“Composatron”) for CAD $30.0 million. If certain financial targets are met in 2008, that purchase price may increase by approximately CAD $4.0 million in cash. The acquisition closed on February 29, 2008. Composatron is a privately held manufacturer of Premier and Trademark Railing Systems, leading composite railing solutions for the residential housing market. The Premier and Trademark branded railing systems are manufactured using a PVC / wood flour composite and a co-extruded PVC capstock. The products have the subtle texture of painted wood and are ICC code listed. The product lines offered by Composatron are highly complimentary to the Company’s AZEK Deck products and already offer a successful rail system that matches the AZEK Deck color palette.

On February 13, 2008, the Company and its subsidiaries entered into a Loan and Security Agreement with Wachovia Bank, National Association (the “Loan Agreement”), as administrative agent, and General Electric Capital

F-24

CPG International Inc.

and Subsidiaries

Notes to Consolidated Financial Statements.

Corporation, as syndication agent.  The Loan Agreement provides subsidiaries of the Company with up to $65.0 million in borrowing capacity, with the actual borrowing base limited to a percentage of eligible receivables and inventory, subject to reserves established by the administrative agent in its permitted discretion.  The Loan Agreement requires subsidiaries of the Company to repay the outstanding principal on any loans thereunder at the maturity date as defined therein, but in any case no later than February 13, 2013. Borrowings under the Loan Agreement bear interest, at the Company’s option, at the base rate (prime rate) plus a spread of up to 0.5% or adjusted LIBOR plus a spread of 1.5% to 2.25%, or a combination thereof. The Loan Agreement also provides for a fee ranging between 0.25% and 0.5% of unused commitments. Substantially all of the Company’s and its subsidiaries’ assets (excluding real property) are pledged as collateral for any borrowings under the Loan Agreement.

The Loan Agreement contains various covenants, including a financial covenant which requires the Company and its subsidiaries to maintain, in certain circumstances and as defined, minimum ratios or levels of consolidated EBITDA to consolidated fixed charges.  The Loan Agreement also imposes certain restrictions on the Company, and its subsidiaries, including restrictions on the ability to issue guarantees, grant liens, make fundamental changes in their business, corporate structure or capital structure, make loans and investments, enter into transactions with affiliates, modify or waive material agreements, or prepay or repurchase indebtedness.

On February 13, 2008, concurrently with the execution of the Loan Agreement, the Company and its subsidiaries terminated its senior secured revolving credit facility.

On February 29, 2008, the Company and its subsidiaries, entered into a Term Loan and Security Agreement (“Term Loan Agreement”). Subsidiaries of the Company borrowed approximately $25.0 million under the term loan as part of the financing for the Composatron Acquisition. The Term Loan Agreement requires the borrowers thereunder to repay the outstanding principal of the Term Loan in quarterly installments of $62,500 from March 31, 2008 through December 31, 2010, with the remaining outstanding principal balance of the Term Loan due no later than February 28, 2011. The Term Loan Agreement contains various covenants, including a financial covenant which requires the Company and its subsidiaries to maintain, as defined, a maximum ratio of consolidated senior secured indebtedness to consolidated EBITDA. The Term Loan Agreement also imposes certain restrictions on the Company and its subsidiaries, including restrictions on the ability to issue guarantees, grant liens, make fundamental changes in their business, corporate structure or capital structure, make loans and investments, enter into transactions with affiliates, modify or waive material agreements, or prepay or repurchase indebtedness.

15. QUARTERLY INFORMATION (UNAUDITED)

		Quarter Ended
		March 31,		June 30,		September 30,		December 31,
(Dollars in thousands)		2007		2007		2007		2007 (1)			Total
Net sales	$	94,447	$	77,054	$	82,552	$	59,650		$	313,703
Gross margin	$	27,553	$	21,686	$	23,520	$	15,508		$	88,267
Operating income	$	16,915	$	10,116	$	10,261	$	4,553		$	41,845
Net income (loss)	$	5,210	$	1,033	$	342	$	(1,958	)	$	4,627

_________

(1) In the fourth quarter of 2007 we incurred approximately $0.6 million in severance costs related to the resignation of our former chief executive officer.

		Quarter Ended
		March 31,		June 30,			September 30,			December 31,
(Dollars in thousands)		2006		2006			2006			2006			Total
Net sales	$	78,066	$	66,695		$	65,754		$	51,275		$	261,790
Gross margin	$	20,960	$	16,515		$	17,087		$	13,811		$	68,373
Operating income	$	12,190	$	6,534		$	6,400		$	3,000		$	28,124
Net income (loss)	$	3,637	$	(280	)	$	(756	)	$	(3,086	)	$	(485	)

F-25

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CPG International Inc.

Date: March 28, 2008	By:	/s/ SCOTT HARRISON
		Scott Harrison
		Executive Vice President and
		Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ GLENN M. FISCHER	Interim Chief Executive Officer
Glenn M. Fischer	and Director (principal executive officer)	March 28, 2008
/s/SCOTT HARRISON	Executive Vice President and Chief
Scott Harrison	Financial Officer (principal financial	March 28, 2008
	officer and principal accounting officer)
/s/ JAMES ANDERSEN
James Andersen	Director	March 28, 2008
/s/ VINCENT A. CALARCO
Vincent A. Calarco	Director	March 28, 2008
/s/ SHIVANANDAN A. DALVIE
Shivanandan A. Dalvie	Director	March 28, 2008
/s/BRIAN R. HOESTEREY
Brian R. Hoesterey	Director	March 28, 2008
/s/ JAMES KEISLING
James Keisling	Chairman of the Board	March 28, 2008
/s/ CHRISTOPHER P. MAHAN
Christopher P. Mahan	Director	March 28, 2008
/s/ SCOTT B. PERPER
Scott B. Perper	Director	March 28, 2008
/s/ VINCENT A. SARNI
Vincent A. Sarni	Director	March 28, 2008
/s/ JULIAN M. STEINBERG
Julian M. Steinberg	Director	March 28, 2008

Exhibit Index

Exhibit Number	Description
2.1	Stock Purchase Agreement, dated as of March 12, 2005, by and among Compression LLC
	Polymers Holdings LLC, Compression Polymers Holding II Corporation, Vycom Corp.,
	Compression Polymers Corp. and CPCapitol Acquisition Corp. and North Keyser Partners,
	(filed as Exhibit 2.1 to the Registration Statement on Form S-4 filed on May 12, 2006 (the
	“Form S-4”) and incorporated herein by reference).
2.2	First Amendment to the Stock Purchase Agreement, dated as of May 5, 2005, by and among
	Compression Polymers Holdings LLC, Compression Polymers Holding II Corporation,
	Compression Polymers Corp., Vycom Corp. and CPCapitol Acquisition Corp. (filed as
	Exhibit 2.2 to the Form S-4 and incorporated herein by reference).
2.3	Stock Purchase Agreement, dated as of April 20, 2006, between Santana Holdings, LLC and
	Compression Polymers Holding Corporation (filed as Exhibit 2.3 to the Form S-4 and
	incorporated herein by reference).
2.4	Unit Purchase Agreement, dated as of December 13, 2006, by and among CPG International
	I Inc., as Buyer, and Christopher Bardasian, Kevin Sloan, and Larry Sloan, as Sellers (filed
	as Exhibit 2.1 to the Current Report on Form 8-K filed on December 13, 2006 (the
	“December 13, 2006 Form 8-K”) and incorporated herein by reference).
2.5	Contribution Agreement, dated as of December 13, 2006, by and among CPG International
	Holdings LP and Christopher Bardasian, Kevin Sloan, and Larry Sloan, as Subscribers (filed
	as Exhibit 2.2 to the December 13, 2006 Form 8-K and incorporated herein by reference).
2.6*	Share Purchase Agreement, dated as of February 11, 2008, by and among AZEK Canada,
	as Buyer, and John Scrymgeour, Cheryl Scrymgeour, Paolo Baldassarra, Mary Baldassarra, Kurt
	Gowman, Donna Gowman, Janet Pratt, Knox & Company International, Inc. and Creative
	Composite Products Inc. as Sellers
3.1	Certificate of Incorporation of CPG International Inc. (formerly known as Compression
	Polymers Holding II Corporation) (filed as Exhibit 3.3 to the Form S-4 and
	incorporated herein by reference).
3.2	Certificate of Amendment of Certificate of Incorporation of CPG International Inc. to the
	(formerly known as Compression Polymers Holding II Corporation) (filed as Exhibit 3.3(a)
	Form S-4 and incorporated herein by reference).
3.3	By-laws of CPG International Inc. (formerly known as Compression Polymers Holding II
	Corporation) (filed as Exhibit 3.4 to the Form S-4 and incorporated herein by reference).
4.1	Indenture, dated July 5, 2005, among Compression Polymers Holding Corporation, page
	Compression Polymers Holding II Corporation, the other guarantors listed on the signature
	thereof, and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Form S-4 and
	incorporated herein by reference).
4.2	First Supplemental Indenture, dated as of April 27, 2006, among CPH Sub I Corporation, as
	CPH Sub II Corporation, CPC Sub I Corporation, VC Sub I Corporation, Compression
	Polymers Holding Corporation, Compression Polymers Holding II Corporation, the other

	guarantors listed on the signature page thereof, and Wells Fargo Bank, N.A., as trustee (filed
	Exhibit 4.2 to the Form S-4 and incorporated herein by reference).
4.3	Second Supplemental Indenture, dated as of April 28, 2006, among Santana Holdings Corp.,
	Santana Products, Inc., Compression Polymers Holding Corporation, Compression Polymers
	Holding II Corporation, the other guarantors listed on the signature page thereof, and Wells
	Fargo Bank, N.A., as trustee (filed as Exhibit 4.3 to the Form S-4 and incorporated herein by
	reference).
4.4	Third Supplemental Indenture dated as of January 31, 2007, among CPG International I Inc.,
	a Delaware corporation, CPG International Inc., the other guarantors listed on the signature
	page thereof, and Wells Fargo Bank, N.A., a national banking association, as Trustee (filed
	as Exhibit 4.2 to the Current Report on Form 8-K filed on February 2, 2007 (the “February
	2, 2007 Form 8-K”) and incorporated herein by reference).
4.5	Form of Initial Note and Form of Exchange Note (included within the Indenture filed as
	Exhibit 4.1 to the Form S-4 and incorporated herein by reference).
4.6	The Registration Rights Agreement, dated July 5, 2005, among Compression Polymers listed
	Holding Corporation, Compression Polymers Holding II Corporation, the other guarantors
	on the signature page thereof, and Wachovia Capital Markets, LLC (filed as Exhibit 4.5 to
	the Form S-4 and incorporated herein by reference).
4.7	The Registration Rights Agreement, dated as of April 28, 2006, by and among Compression
	Polymers Holding Corporation, Compression Polymers Holding II Corporation, the other
	guarantors listed on the signature page thereof, and Wachovia Capital Markets, LLC (filed as
	Exhibit 4.6 to the Form S-4 and incorporated herein by reference).
4.8	The Registration Rights Agreement, dated as of January 31, 2007, among CPG International
	I Inc., CPG International Inc., the other guarantors listed on the signature page thereof, and
	AEA Mezzanine Funding LLC and AEA Mezzanine (Unleveraged) Fund LP (filed as
	Exhibit 4.3 to the February 2, 2007 Form 8-K and incorporated herein by reference).
4.9	The Registration Rights Agreement, dated as of January 31, 2007, among CPG International
	I Inc., CPG International Inc., the other guarantors listed on the signature page thereof, and
	Orpheus Funding LLC, Midland National Life Insurance Company, North American
	Company for Life and Health Insurance, Sands Point Funding Ltd., Kennecott Funding Ltd.,
	1888 Fund, Ltd. and Copper River CLO Ltd. (filed as Exhibit 4.4 to the February 2, 2007
	Form 8-K and incorporated herein by reference).
10.1	Second Amended and Restated Credit Agreement, dated as of May 10, 2005, by and among
	Compression Polymers Holding Corporation, Compression Polymers Holding II
	Corporation, the subsidiary guarantors named therein, the several banks, other financial
	institutions and related funds as may from time to time become parties thereto, and
	Wachovia Bank, National Association, as administrative agent (filed as Exhibit 10.1 to the
	Form S-4 and incorporated herein by reference).
10.2	First Amendment to Credit Agreement, dated as of April 24, 2006, by and among signature
	Compression Polymers Holding Corporation, Compression Polymers Holdings II
	Corporation, the subsidiary guarantors named therein, the lenders identified on the
	pages thereto and Wachovia Bank, National Association, as administrative agent (filed as
	Exhibit 10.2 to the Form S-4 and incorporated herein by reference).

10.3	Second Amendment and Waiver to Credit Agreement, dated as of January 17, 2007, by and
	among CPG International I Inc., CPG International Inc., the subsidiary guarantors named
	therein, the lenders identified on the signature pages thereto and Wachovia Bank, National
	Association, as administrative agent (filed as Exhibit 10.1 to the February 2, 2007 Form 8-K
	and incorporated herein by reference).
10.4	Amended and Restated Industrial Lease between North Keyser Partners, LLC and Vycom
	Corp., dated May 10, 2005, re: 888 North Keyser Avenue, Scranton, PA 18504 Lackawanna
	County (filed as Exhibit 10.3 to the Form S-4 and incorporated herein by reference).
10.5	Amended and Restated Employment Agreement, as of January 1, 2006, among Compression
	Polymers Holding Corporation, Compression Polymers Corp., Vycom Corp. and James
	Keisling (filed as Exhibit 10.4 to the Form S-4 and incorporated herein by reference).
10.6	Amended and Restated Employment Agreement, as of January 1, 2006, among Compression
	Polymers Holding Corporation, Compression Polymers Corp., Vycom Corp. and John
	Loyack (filed as Exhibit 10.5 to the Form S-4 and incorporated herein by reference).
10.7	Employment Agreement, as of May 10, 2005, among Compression Polymers Holding
	Corporation, Vycom Corp. and Ralph Bruno (filed as Exhibit 10.6 to the Form S-4 and
	incorporated herein by reference).
10.8	Employment Agreement, as of May 10, 2005, among Compression Polymers Holding the
	Corporation, Compression Polymers Corp. and Mike Kapuscinski (filed as Exhibit 10.7 to
	Form S-4 and incorporated herein by reference).
10.9	Employment Agreement, as of October 4, 2005, among Compression Polymers Holding
	Corporation, Compression Polymers Corp., Vycom Corp. and Scott Harrison (filed as
	Exhibit 10.8 to the Form S-4 and incorporated herein by reference).
10.10	Management Agreement, dated as of May 10, 2005, by and between Compression Polymers
	Holding Corporation and AEA Investors LLC (filed as Exhibit 10.10 to the Form S-4 and
	incorporated herein by reference).
10.11	Amendment No. 1 to Management Agreement, dated as of May 1, 2006, by and between to
	Compression Polymers Holding Corporation and AEA Investors LLC (filed as Exhibit 10.11
	the Form S-4 and incorporated herein by reference).
10.12	Management Rights Letter Agreement, dated as of January 31, 2007, between CPG Fund LP
	International I Inc. and AEA Mezzanine Funding LLC and AEA Mezzanine (Unleveraged)
	(filed as Exhibit 10.2 to the February 2, 2007 Form 8-K and incorporated herein by reference).
10.13*	Loan and Security Agreement, dated as of February 13, 2008, by and among Scranton Products Inc.,
	AZEK Building Products Inc. and Procell Decking Inc., as borrowers, CPG International Inc.,
	CPG International I Inc., Santana Products Inc., CPG Sub I Corporation, Vycom Corp. and Sanatec
	Sub I Corporation, as guarantors the lenders identified on thepages thereto and
	Wachovia Bank, National Association, as administrative agent, and General Electric Capital Corporation, as
	syndication agent.
10.14*	Amendment No. 1 to Loan and Security Agreement dated as of February 29, 2008, by and among CPG
	International I Inc., Scranton Products Inc., AZEK Building Products Inc. and Procell Decking Inc.,
	the guarantors named therein, the lenders identified on the pages thereto and Wachovia Bank,
	as administrative agent.

10.15*	Term Loan and Security Agreement, dated as of February 29, 2008 by and among CPG International I Inc.,
	Scranton Products Inc., AZEK Building Products Inc. and Procell Decking Inc.,
	the guarantors named therein, the lenders identified on the
	pages thereto, Wachovia Bank, National Association, as administrative agent and Wachovia Capital
	Markets, LLC, as lead arranger and lead bookrunner.
10.16*	Separation Agreement and Release, dated as of November 5, 2007, by and among CPG International I Inc.,
	Scranton Products Inc. and AZEK Building Products Inc., and John R. Loyack.
10.17*	Employment agreement, dated as of March 3, 2008, by and among CPG International Inc., CPG
	International I Inc., Scranton Products Inc., and AZEK Building Products Inc. and Eric Jungbluth.
10.18*	Non-Compete Agreement, dated as of March 3, 2008, by and among CPG International Inc., CPG
	International I Inc., Scranton Products Inc., and AZEK Building Products Inc. and Eric Jungbluth.
10.19*	Employment Agreement, dated as of January 31,2007, by and among CPG International Inc., CPG
	International I Inc., Scranton Products Inc., and AZEK Building Products Inc. and Christopher Bardasian.
10.20*	Employment Agreement, dated as of January 31,2007, by and among CPG International Inc., CPG
	International I Inc., Scranton Products Inc., and AZEK Building Products Inc. and Kevin Sloan.
21.1*	List of Subsidiaries.
31.1*	Rule 13a-14(a)/15d-14(a) Certification of Interim Chief Executive Officer
31.2*	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1*	Section 1350 Certification of the Interim Chief Executive Officer
32.2 *	Section 1350 Certification of Chief Financial Officer

EX-2

Exhibit 2.6

SHARE PURCHASE AGREEMENT

dated as of February 8, 2008

among

2162771 Ontario Inc.

and

JOHN SCRYMGEOUR,

CHERYL SCRYMGEOUR,

PAOLO BALDASSARRA,

MARY BALDASSARRA,

KURT GOWMAN,

DONNA GOWMAN,

JANET PRATT,

KNOX & COMPANY INTERNATIONAL INC.

and

CREATIVE COMPOSITE PRODUCTS INC.

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TABLE OF CONTENTS

PAGE

ARTICLE 1 DEFINITIONS 1

1.1 Definitions 1

1.2 Interpretive Provisions 7

ARTICLE 2 PURCHASE PRICE AND EARN OUT CONSIDERATION 8

2.1 Purchase and Sale of the Shares. 8

2.2 Escrow Amount. 11

2.3 Transactions to be Effected at the Closing 12

ARTICLE 3 THE CLOSING 12

3.1 Closing; Closing Date 12

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLERS 13

4.1 Binding Obligation 13

4.2 No Defaults or Conflicts 13

4.3 No Authorization or Consents Required 13

4.4 The Shares 13

4.5 Litigation 13

4.6 Residency 14

4.7 No Rights of Others 14

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE SELLERS ON BEHALF OF THE COMPANIES 14

5.1 Organization and Corporate Power 14

5.2 Non-Contravention 14

5.3 Capitalization; Ownership of Shares. 14

5.4 Financial Statements. 15

5.5 Absence of Certain Developments 16

5.6 Real Property and Certain Assets 17

5.7 Taxes 17

5.8 Certain Contracts and Arrangements 19

5.9 Intellectual Property Rights. 20

5.10 Litigation 21

5.11 Employee Benefit Plans. 21

5.12 Environmental Matters. 23

5.13 Permits; Compliance with Laws 24

5.14 Insurance 24

5.15 Transactions with Affiliates 24

5.16 Customers 25

5.17 Suppliers 25

5.18 Corporate Records 25

5.19 Solvency 25

5.20 Products; Warranties; Claims 25

5.21 Inventory 25

5.22 Competition Act 25

5.23 Investment Canada Act 25

ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE BUYER 26

6.1 Organization 26

6.2 Binding Obligation 26

6.3 No Defaults or Conflicts 26

6.4 No Authorization or Consents Required 26

6.5 Brokers 26

6.6 Sufficient Funds 27

6.7 Litigation 27

6.8 No Authorization or Consents Required 27

ARTICLE 7 COVENANTS 27

7.1 Conduct of Business of the Companies 27

7.2 Access to Information; Confidentiality; Public Announcements. 29

7.3 Filings and Authorizations; Consummation. 30

7.4 Further Assurances 30

7.5 Exclusivity 31

7.6 Employee Matters 31

7.7 Transfer to James Richard Pratt 31

7.8 Resignation of Sellers 31

ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER 31

8.1 Representations and Warranties Accurate. 32

8.2 No Material Adverse Effect 32

8.3 Amalgamation 32

8.4 Performance 32

8.5 Sellers’ Certificate 32

8.6 Legal Prohibition. 32

8.7 Payoff Letters 32

8.8 Consents 32

8.9 Employment Agreements 32

8.10 Financing 32

8.11 Non-Compete Agreements 33

8.12 Other Deliverables 33

ARTICLE 9 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS 33

9.1 Representations and Warranties Accurate 33

9.2 Performance 33

9.3 Officer Certificate 33

9.4 Other Agreements 33

9.5 Legal Prohibition 34

ARTICLE 10 TERMINATION 34

10.1 Termination 34

10.2 Survival After Termination 34

ARTICLE 11 INDEMNIFICATION AND RELEASE 34

11.1 Survival 34

11.2 Indemnification by the Sellers; Indemnification by the Buyer. 35

11.3 Limitations on Indemnification. 35

11.4 Indemnification Claim Process. 36

11.5 Indemnification Procedures for Non-Third Party Claims 37

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11.6 Exclusive Remedy 37

11.7 Insurance; Other Indemnification 37

11.8 Entitlement to Claim 37

11.9 Release. 38

11.10 Calculation of Damages 38

ARTICLE 12 MISCELLANEOUS 38

12.1 Expenses 38

12.2 Amendment 39

12.3 Entire Agreement 39

12.4 Headings 39

12.5 Notices 39

12.6 Exhibits and Schedules. 40

12.7 Waiver 40

12.8 Binding Effect: Assignment 40

12.9 No Third Party Beneficiary 41

12.10 Counterparts 41

12.11 Governing Law and Jurisdiction 41

12.12 Consent to Jurisdiction and Service of Process 41

12.13 WAIVER OF JURY TRIAL 41

12.14 Specific Performance 41

12.15 Severability 41

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ANNEXES AND EXHIBITS

Exhibit A Non-Compete Agreement

SCHEDULES

Schedule 1.1	Permitted Encumbrances
Schedule 2.1(c)(i)	Example Preliminary Closing Statement
Schedule 4.2	Sellers’ Defaults or Conflicts
Schedule 4.3	Sellers’ Governmental Authorizations or Consents Required
Schedule 4.4-A	Sellers’ Ownership of Company
Schedule 4.4-B	Encumbrances of the Company’s Shares
Schedule 4.7	Third Party Rights with respect to Shares
Schedule 5.1	Foreign Qualifications
Schedule 5.2	Companies’ Defaults or Conflicts
Schedule 5.3(a)	Company’s Ownership of Compos-A-Tron Mfg
Schedule 5.3(b)	Company’s Ownership of Compos-A-Tron H O
Schedule 5.4(a)	Applicable Accounting Method
Schedule 5.4(b)	Undisclosed Liabilities
Schedule 5.5	Certain Developments
Schedule 5.6	Leased Properties
Schedule 5.7	Tax Liabilities
Schedule 5.8	Certain Contracts and Agreements
Schedule 5.9	Intellectual Property Rights
Schedule 5.10	Litigation
Schedule 5.11(a)	Company Benefit Plans
Schedule 5.12(a)	Hazardous Materials
Schedule 5.12(b)	Material Liabilities under Environmental Law
Schedule 5.12(c)	Asbestos
Schedule 5.13	Permits
Schedule 5.14	Material Insurance Policies
Schedule 5.15	Transactions with Affiliates
Schedule 5.16	Customers
Schedule 5.17	Suppliers
Schedule 5.20	Warranty Claims
Schedule 5.21	Inventory
Schedule 6.3	Buyer Defaults or Conflicts
Schedule 6.4	Authorizations and Consents Required by Buyer
Schedule 7.1	Conduct of Business of the Company
Schedule 7.1(1)	Affiliate Transactions
Schedule 7.1(o)	Capex
Schedule 8.7	Payoff Letters
Schedule 8.8	Consents

iv

SHARE PURCHASE AGREEMENT

This SHARE PURCHASE AGREEMENT is dated as of February 8, 2008 (this “Agreement”) among 2162771 Ontario Inc., a corporation incorporated under the laws of the Province of Ontario (the “Buyer”) and Knox & Company International Inc., a corporation incorporated under the laws of the Province of Ontario (“KnoxCo”), John Scrymgeour, Cheryl Scrymgeour, Paolo Baldassarra, Mary Baldassarra, Kurt Gowman, Donna Gowman and Janet Pratt (each a “Seller” and together, the “Sellers”) and Creative Composite Products Inc., a corporation incorporated under the laws of the Province of Ontario (the “Company”).

RECITALS

WHEREAS, the Sellers own all of the issued and outstanding shares (the “Shares”) of the Company, in the case of KnoxCo, directly and, in the case of the other Sellers, indirectly through certain holding corporations;

WHEREAS, the Company owns all of the issued and outstanding shares of Compos-A-Tron Mfg. Inc., a corporation incorporated under the laws of the Province of Ontario (“Compos-A-Tron Mfg”) and of Compos-A-Tron (H O) Corp., a corporation incorporated under the laws of the Province of Ontario (“Compos-A-Tron H O”; together with Compos-A-Tron Mfg and the Company, the “Companies”);

WHEREAS, the Sellers desire to sell all of the Shares to the Buyer, and the Buyer desires to purchase the Shares from the Sellers, upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing, the representations, warranties, covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1

DEFINITIONS

1.1 Definitions. The following terms, whenever used herein, shall have the following meanings for all purposes of this Agreement.

“Adjustment Amount” shall have the meaning set forth in Section 2.1(c)(i).

“Affiliate” means as to any Person (a) any Person which directly or indirectly controls, is controlled by, or is under common control with such Person, and (b) any Person who is a director, officer, partner or principal of such Person or of any Person which directly or indirectly controls, is controlled by, or is under common control with such Person. For purposes of this definition, (i) “control” of a Person shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by ownership of voting shares, by contract or otherwise and (ii) an “Affiliate” of an individual will be his spouse, children, parents and siblings and his spouse’s parents and siblings.

“Amalgamation” shall have the meaning set forth in Section 8.3.

“Assumed Indebtedness” means all Indebtedness of the Companies existing as of the Closing.

“Base Balance Sheet” shall have the meaning set forth in Section 5.4(b).

“Basket Amount” shall have the meaning set forth in Section 11.3(b).

“Benefit Plan” means all bonus, deferred compensation, incentive compensation, share purchase, share option, share appreciation, phantom share, savings, profit sharing, severance or termination pay, health, dental or other medical, life, disability or other insurance (whether insured or self-insured), mortgage insurance, employee loan, employee assistance, supplementary unemployment benefit, pension, retirement, supplementary retirement, plan, program and every other benefit plan, program, agreement, arrangement or practice (whether written or unwritten) maintained or contributed to for the benefit of any of the Companies’ employees, former employees or their respective dependent or beneficiaries, but excluding the Canada Pension Plan, the Quebec Pension Plan, any health or drug plan established and administered by a Province and workers’ compensation insurance provided by federal or provincial legislation or a comparable program established and administered outside Canada.

“Business Day” means any day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York and Toronto, Ontario are authorized or required by law or executive order to close.

“Buyer Indemnitee” shall have the meaning set forth in Section 11.2(a).

“Buyer’s Representations” shall have the meaning set forth in Section 11.1.

“Cap” shall have the meaning set forth in Section 11.3(a).

“Cash and Cash Equivalents” means the sum of the fair market value (expressed in Canadian dollars) of all cash and cash equivalents (including marketable securities and short term investments) held by any of the Companies in accordance with GAAP at the Closing.

“Cash Earn Out Consideration” shall mean the amount set forth in Section 2.1(d).

“Cash Paid Equipment Amount” shall have the meaning set forth in Section 2.1(a).

“Cash Purchase Price” shall have the meaning set forth in Section 2.1(a).

“Claim Notice” shall have the meaning set forth in Section 11.4(b).

“Closing” shall have the meaning set forth in Section 3.1.

“Closing Date” shall have the meaning set forth in Section 3.1.

“Closing Cash and Cash Equivalents” shall have the meaning set forth in Section 2.1(c)(i).

“Closing Cash Paid Equipment Amount” shall have the meaning set forth in Section 2.1(c)(i).

“Closing Indebtedness” shall have the meaning set forth in Section 2.1(c)(i).

“Closing Net Working Capital” shall have the meaning set forth in Section 2.1(c)(i).

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“Code” means the Internal Revenue Code of 1986, as amended.

“Companies” shall have the meaning set forth in the recitals.

“Company Benefit Plans” shall have the meaning set forth in Section 5.11(a).

“Company Copyrights” shall have the meaning set forth in Section 5.9(a).

“Company Expenses” shall have the meaning set forth in Section 12.1.

“Company Intellectual Property Assets” shall have the meaning set forth in Section 5.9(c).

“Company Marks” shall have the meaning set forth in Section 5.9(a).

“Company Patents” shall have the meaning set forth in Section 5.9(a).

“Company Trade Secrets” shall have the meaning set forth in Section 5.9(b).

“Compos-A-Tron H O” shall have the meaning set forth in the recitals.

“Compos-A-Tron H O Shares” shall have the meaning set forth in Section 5.3(a).

“Compos-A-Tron Mfg” shall have the meaning set forth in the recitals.

“Compos-A-Tron Mfg Shares” shall have the meaning set forth in Section 5.3(b).

“Customers” shall have the meaning set forth in Section 5.16.

“Cut-Off Date” shall have the meaning set forth in Section 11.1.

“date hereof” and “date of this Agreement” means the date first written above.

“Distribution Basket Amount” shall have the meaning set forth in Section 11.3(b).

“Encumbrance” means any and all liens, encumbrances, charges, mortgages, options, pledges, restrictions on transfer, security interests, hypothecations, easements, rights-of-way or encroachments of any nature whatsoever, whether voluntarily incurred or arising by operation of law.

“Equipment Acquisition Amount” means the actual cost of all capital equipment purchased by the Companies and the out of pocket associated costs of installation from and after October 1, 2007 to the Closing Date.

“Escrow Agent” shall have the meaning set forth in Section 2.2(a).

“Escrow Agreement” shall have the meaning set forth in Section 2.2(a).

“Escrow Amount” shall have the meaning set forth in Section 2.2(a).

“Estimated Cash and Cash Equivalents” shall have the meaning set forth in Section 2.1(b)(ii).

3

“Estimated Net Working Capital” shall have the meaning set forth in Section 2.1(b)(i).

“Extraordinary Receipts” shall mean receipts by the Companies after Closing of: (i) $400,000 received from Dow Chemical Canada Inc. on account of payment for development costs incurred prior to Closing; (ii) tax refunds actually received in cash on account of refundable research and development credits in relation to research and development conducted prior to Closing; and (iii) tax refunds actually received in cash arising from the fiscal year 2007 losses carried back to prior years.

“Expiration Date” shall have the meaning set forth in Section 2.2(b).

“Final Net Revenues Statement” shall have the meaning set forth in Section 2.1(e).

“Financial Statements” means (i) the audited consolidated balance sheet of the Companies for the fiscal years ended September 30, 2006 and September 30, 2007 including the notes thereto, and the audited statements of income and retained earnings, stockholders’ equity and cash flow for the period ended September 30, 2006 and September 30, 2007, and (ii) the unaudited consolidated balance sheet of the Companies as of December 31, 2007 (the “Interim Balance Sheet”) and the related unaudited consolidated statements of income, shareholders’ equity and cash flows of the Companies for the three (3) months ended December 31, 2007 (the “Interim Financial Statements”).

“GAAP” means generally accepted accounting principles from time to time approved by the Canadian Institute of Chartered Accountants, or any successor institute, applicable as at the date on which such calculation or action is made or taken or required to be made or taken.

“Governmental Authority” means any nation or government, any state, province or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administration functions of or pertaining to government, or any government authority, agency, department, board, tribunal, commission or instrumentality of Canada, any foreign government, any province of Canada, or any municipality or other political subdivision thereof, and any court, tribunal or arbitrator(s) of competent jurisdiction, and governmental or non-governmental self-regulatory organization, agency or authority and any taxing authority.

“Hazardous Material” shall have the meaning set forth in Section 5.12(e).

“Intellectual Property Assets” shall have the meaning set forth in Section 5.9(c).

“Indebtedness” means, of any Person, without duplication, (i) indebtedness for borrowed money or indebtedness issued or incurred in substitution or exchange for indebtedness for borrowed money, (ii) indebtedness evidenced by any note, bond, debenture, mortgage or other debt instrument or debt security, (iii) obligations under any interest rate, currency or other currency hedging agreement, (iv) obligations under any performance bond or letter of credit, but only to the extent drawn or called prior to the Closing, (v) all capitalized lease obligations as determined under GAAP, (vi) all obligations in respect of purchase money obligations for the acquisition of equipment and fixed assets, but in no event including trade payables in the ordinary course of business, (vii) all obligations secured by an Encumbrance on any property or asset owned by such Person regardless of whether the obligations secured thereby shall have been assumed by that Person or are non-recourse to the credit of that Person, (viii) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person, (ix) all guarantees with respect to any indebtedness of any other Person of a type described in clauses (i) through (viii) above, and (x) for clauses (i) through (ix) above, all accrued interest thereon, if any, and any termination fees, prepayment penalties, “breakage” cost or similar payments or

4

contractual charges associated with the repayments of such Indebtedness on the Closing Date. For the avoidance of doubt, Indebtedness shall not include any amounts included in Net Working Capital.

“Indemnitee” shall have the meaning set forth in Section 11.2(a).

“Indemnitor” means any party hereto from which any Indemnitee is seeking indemnification pursuant to the provisions of this Agreement.

“Independent Accountant” shall have the meaning set forth in Section 2.1(c)(ii).`

“Insurance Policies” shall have the meaning set forth in Section 5.14.

“Interim Balance Sheet” shall have the meaning as set forth in the definition of Financial Statements.

“Interim Financial Statements” shall have the meaning as set forth in the definition of Financial Statements.

“knowledge of the Company” or “knowledge of the Sellers” or any similar phrase means the actual knowledge of each of the Sellers after reasonable inquiry.

“Leased Real Property” shall have the meaning set forth in Section 5.6.

“Leases” shall have the meaning set forth in Section 5.6.

“Losses” shall have the meaning set forth in Section 11.2(a).

“Material Adverse Effect” means a material adverse effect on the business, results of operations, properties or assets of the Companies taken as a whole; provided, however, that “Material Adverse Effect” shall not include the impact on such business, results of operations, properties or assets arising out of or attributable to (except, in the case of clauses (i), (ii), or (iii) below to the extent disproportionately affecting the Companies relative to all other Persons operating in the same industries as the Companies taken as a whole): (i) conditions or effects that generally affect the industries in which the Companies operate, (ii) general economic conditions affecting the United States and Canada, (iii) effects arising from changes in laws or GAAP after the date hereof, (iv) effects relating to the announcement of the execution of this Agreement or the transactions contemplated hereby, (v) effects related to the Companies’ compliance with and performance of the terms and conditions of this Agreement or any other agreement entered into in connection herewith, or (vi) any acts of war, other hostilities or terrorism involving the United States and Canada..

“Negative Adjustment Amount” shall have the meaning set forth in Section 2.1(c)(i).

“Net Revenues” means the sales of the Buyer and its controlled Affiliates (including the Companies) from and after January 1, 2008 to and including December 31, 2008 of composite rail products and related components, deck board to a maximum of $1,000,000.00 and such other products as may be mutually agreed upon, sold, directly or indirectly, by or through the manufacturing facilities in Canada, including products subcontracted to others all calculated in accordance with GAAP consistently applied.

“Net Working Capital” shall have the meaning set forth in Section 2.1(b).

5

“Permits” shall have the meaning set forth in Section 5.13.

“Permitted Encumbrances” means, (i) Encumbrances for Taxes, assessments and other government charges not yet due and payable or which are being contested in good faith by appropriate proceedings and for which an adequate reserve has been reflected on the Companies’ Financial Statements, (ii) mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other like Encumbrances arising in the ordinary course of business of the Companies, (iii) Encumbrances to be removed prior to or at Closing, (iv) the Encumbrances set forth on Schedule 1.1; (v) other Encumbrances which are not, individually or in the aggregate, material in character, amount or extent and which do not materially detract from the value or materially interfere with the present use of the assets subject thereto or affected thereby and (vi) any Encumbrances incurred in connection with any Indebtedness that the Buyer elects not to pay-off at Closing.

“Person” means any individual, corporation (including any not for profit corporation), general or limited partnership, limited liability partnership, joint venture, estate, trust, firm, company (including any limited liability company or joint stock company), association, organization, entity or Governmental Authority.

“Preliminary Net Revenues Statement” shall have the meaning set forth in Section 2.1(e).

“Positive Adjustment Amount” shall have the meaning set forth in Section 2.1(c)(i).

“Post-Closing Tax Period” means any tax period (or the portion of any Straddle Period) beginning after the Closing Date.

“Pre-Closing Tax Period” means any tax period (or the portion of any Straddle Period) ending on or prior to the Closing Date.

“Preliminary Closing Statement” shall have the meaning set forth in Section 2.1(c)(i).

“Proceeding” means any action, suit, litigation, arbitration, proceeding, hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Authority.

“Product Warranty Basket Amount” shall have the meaning set forth in Section 11.3(b).

“Representatives” means any director, officer, agent, employee, general partner, member, stockholder, advisor or representative of such Person.

“Seller Indemnitee” shall have the meaning set forth in Section 11.2(a).

“Sellers’ Representations” shall have the meaning set forth in Section 11.1.

“Specified Representations” shall have the meaning set forth in Section 11.1.

“Straddle Periods” means any taxable period that includes (but does not end on) the Closing Date.

“Standard Warranty” shall have the meaning set forth in Section 5.20.

“Suppliers” shall have the meaning set forth in Section 5.17.

6

“Target Net Working Capital” shall have the meaning set forth in Section 2.1(b).

“Tax Act” means the Income Tax Act (Canada), as amended.

“Tax Returns” means any report, declaration, return, information return, claim for refund, election, disclosure, estimate or statement supplied or required to be supplied to a taxing authority in connection with Taxes, including any schedule or attachment thereto, and including any amendments thereof.

“Tax” or “Taxes” means taxes of any kind, levies or other like assessments, customs, duties, imposts, charges or fees, including, without limitation, income, gross receipts, ad valorem, value added, excise, real or personal property, asset, sales, use, license, payroll, transaction, capital, net worth and franchise taxes, estimated taxes, withholding, employment, social security, pension plan contributions, workers compensation, utility, severance, production, unemployment compensation, occupation, premium, windfall profits, unclaimed or abandoned property, transfer and gains taxes or other governmental taxes imposed or payable to any local or foreign Governmental Authority (including the United States), or any state, provincial, county or local government or subdivision or agency thereof, and, in each instance, such term shall include any interest, penalties or additions to tax attributable to any such Tax or requirement to report information with respect thereto and in each instance shall include any liability for Taxes of any other Person in respect of any items described by contract, as a transferee or successor to another Person, under U.S. Treasury Reg. Section 1.1502-6 or analogous state, provincial, local or foreign provisions or otherwise.

“Terminated Indebtedness” shall have the meaning set forth in Section 2.3(b).

“Third Party Claim” means any claim or demand for which an Indemnitor may be liable to an Indemnitee hereunder which is asserted by a third party.

“Third Party Rights” shall have the meaning set forth in Section 5.10(b).

“Trustee” shall have the meaning set forth in Section 2.1(d).

1.2 Interpretive Provisions. Unless the express context otherwise requires:

(a)        the words “hereof,” “herein,” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement;

(b)       terms defined in the singular shall have a comparable meaning when used in the plural, and vice versa;

(c) the terms “dollars” and “$” mean Canadian Dollars;

(d)       references herein to a specific Section, Subsection, Recital, Schedule or Exhibit shall refer, respectively, to Sections, Subsections, Recitals, Schedules or Exhibits of this Agreement;

(e)        wherever the word “include,” “includes,” or “including” is used in this Agreement, it shall be deemed to be followed by the words “without limitation”;

(f) references herein to any gender shall include each other gender;

7

(g)       references herein to any Person shall include such Person’s heirs, executors, personal representatives, administrators, successors and assigns; provided, however, that nothing contained in this clause (g) is intended to authorize any assignment or transfer not otherwise permitted by this Agreement;

(h)       references herein to a Person in a particular capacity or capacities shall exclude such Person in any other capacity;

(i)        references herein to any contract or agreement (including this Agreement) mean such contract or agreement as amended, supplemented or modified from time to time in accordance with the terms thereof;

(j)        with respect to the determination of any period of time, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”;

(k)       references herein to any law or any license mean such law or license as amended, modified, codified, reenacted, supplemented or superseded in whole or in part, and in effect from time to time;

(l)        references herein to any law shall be deemed also to refer to all rules and regulations promulgated thereunder; and

(m)      whenever the last day for the exercise of any privilege or the discharge of any duty hereunder shall fall upon a day that is not a Business Day, the party having such privilege or duty may exercise such privilege or discharge such duty on the next succeeding day which is a Business Day.

ARTICLE 2

PURCHASE PRICE AND EARN OUT CONSIDERATION

2.1 Purchase and Sale of the Shares.

(a)        Purchase Price. Upon the terms and subject to the conditions herein, at the Closing, the Sellers shall sell, transfer and deliver (or cause to be sold, transferred and delivered) to the Buyer, and the Buyer shall purchase the Shares, for an aggregate purchase price of (i) $30,000,000 less the Company Expenses, less the Indebtedness plus Cash and Cash Equivalents, subject to adjustments pursuant to Section 2.1(b) and (c) below, plus the Equipment Acquisition Amount to the extent paid in cash prior to January 31, 2008 (the “Cash Paid Equipment Amount”), (the “Cash Purchase Price”) payable as described in Section 2.3 below plus (ii) the Cash Earn Out Consideration (if any) payable as described in Section 2.1(b) below.

(b)       Pre-Closing Estimates. Not less than three (3) Business Days prior to the Closing, the Sellers shall prepare, or cause to be prepared, and deliver to Buyer a certificate signed by each of the Sellers or an authorized officer thereof setting forth the Sellers’ good faith estimate of (i) the Net Working Capital of the Companies (the “Estimated Net Working Capital”), (ii) the amount of Cash and Cash Equivalents of the Companies (the “Estimated Cash and Cash Equivalents”), (iii) the Indebtedness of the Companies (the “Estimated Indebtedness”) and (iv) the amount of the Cash Paid Equipment Amount (the “Estimated Cash Paid Equipment Amount”), in each case (x) as of the close of business on the Closing Date and (y) in the case of Net Working Capital of the Companies, without giving effect to the transactions contemplated by this Agreement to be consummated at Closing. Based

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thereon, the Cash Purchase Price shall be increased (or decreased) by the positive (or negative) difference between $6,600,000.00 (the “Target Net Working Capital”) and the Estimated Net Working Capital. The Sellers shall produce such good faith estimates in consultation with Buyer and shall provide Buyer with such supporting documentation for such estimates as Buyer shall reasonably request. As used herein, “Net Working Capital” shall mean the total current assets (net of reserves) minus total current liabilities of each of the Companies, calculated in accordance with GAAP as applied to the Companies consolidated audited financial statements for the fiscal year ended September 30, 2007 (excluding (i) Cash and Cash Equivalents, (ii) the current portion of long-term debt or any other Indebtedness, and (iii) any deferred Tax assets or deferred Tax liabilities or any current Tax assets; it being understood and agreed that for purposes of calculating Net Working Capital, all work in progress, finished good inventory and raw materials relating to any decking products will be valued at the lower of fair market value and 75% of cost).

(c) Post Closing Working Capital and Debt Adjustments.

(i)        No later than ninety (90) days after the Closing, the Buyer shall prepare, or cause to be prepared, and deliver to the Sellers a statement (the “Preliminary Closing Statement”) setting forth the actual amount of the Companies’ Net Working Capital, Cash and Cash Equivalents, Indebtedness and the Cash Paid Equipment Amount as of the close of business on the Closing Date (the “Closing Net Working Capital,” the “Closing Cash and Cash Equivalents,” the “Closing Indebtedness” and the “Closing Cash Paid Equipment Amount”, respectively), along with such supporting documentation as the Sellers shall reasonably request, that is reasonably sufficient in detail to evidence the calculations. The Preliminary Closing Statement shall be prepared (i) in the case of Net Working Capital of the Companies, without giving effect to the transactions contemplated by this Agreement to be consummated at Closing, which shall be determined after giving effect to such transactions and (ii) in accordance with GAAP as applied to the Companies consolidated audited financial statements for the fiscal year ended September 30, 2007 (except as otherwise specified in the definition of Net Working Capital). For greater certainty, an example of a preliminary closing statement is attached as Schedule 2.1(c)(i). Upon the determination of the Final Closing Statement in accordance with Section 2.1(c)(ii) below, the Sellers shall be paid by Buyer any Positive Adjustment Amount or Buyer shall be paid by the Sellers any Negative Adjustment Amount, as applicable. “Adjustment Amount” means the sum of (expressed as a positive or a negative) (i) the difference (expressed as a positive or a negative) between the Closing Net Working Capital as reflected on the Final Closing Statement and the Estimated Net Working Capital, (ii) the difference (expressed as a positive or a negative) between the Closing Cash and Cash Equivalents as reflected on the Final Closing Statement and the Estimated Cash and Cash Equivalents, (iii) the difference (expressed as a positive or a negative) between the Closing Indebtedness as reflected on the Final Closing Statement and the Estimated Indebtedness and (iv) the difference (expressed as a positive or a negative) between the Closing Cash Paid Equipment Amount as reflected on the Final Closing Statement and the Estimated Cash Paid Equipment Amount. “Positive Adjustment Amount” means the amount, if any, by which the Adjustment Amount exceeds zero. “Negative Adjustment Amount” means the amount, if any, by which the Adjustment Amount is less than zero. Payment of a Positive Adjustment Amount, as applicable, shall be made by Buyer within five (5) days following delivery of the Final Closing Statement by wire transfer of immediately available funds to the Sellers. Payment of any Negative Adjustment Amount owing from the Sellers (i) shall first be made available from the Escrow Amount to the extent of available funds therein, (ii) thereafter, shall be offset against the Cash Earn Out Consideration to the extent that such Cash Earn Out Consideration is payable pursuant to Section 2.1(d), and (iii) thereafter, shall be funded directly by the Sellers.

(ii)       In the event the Sellers agree to the amounts shown on the Preliminary Closing Statement, or fail to object to such amounts by notifying Buyer in writing of such objection within the twenty (20) day period following the delivery thereof, then the Preliminary Closing

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Statement shall become the “Final Closing Statement” for purposes of Section 2.1(c)(i) above, and shall be binding and conclusive on the parties and not subject to appeal. From and after the Closing until resolution of any dispute with respect to the Preliminary Closing Statement, the Sellers, through a Representative, shall have access to all books and records of the Companies together with the Buyer’s calculations and supporting documents to confirm the amounts shown on the Preliminary Closing Statement. In the event the Sellers object to any amounts shown on the Preliminary Closing Statement, the Sellers shall notify Buyer in writing of such objection within the twenty (20) day period following the delivery thereof, stating in such written objection the reasons therefor and setting forth the Sellers’ calculation of the Closing Net Working Capital, the Closing Cash and Cash Equivalents, the Closing Indebtedness and the Closing Equipment Acquisition Amount. Upon receipt by Buyer of such written objection, the parties shall attempt to resolve the disagreement through negotiation. Buyer agrees to promptly provide the Sellers, as the Sellers shall reasonably request, with supporting documentation for Buyer’s calculations with respect to the Preliminary Closing Statement. If Buyer and the Sellers cannot resolve such disagreement within twenty (20) days following the end of the foregoing twenty (20) day period, the parties shall submit the matter for resolution to a jointly selected nationally recognized independent firm of certified public accountants not affiliated with either Buyer or the Sellers (the “Independent Accountant”). The fees and expenses of the Independent Accountant will be borne by the party whose calculation is further from the amount determined by the Independent Accountant. The Independent Accountant shall deliver a statement setting forth its own calculation of any items in dispute that are raised in the Sellers’ objection to the Preliminary Closing Statement, and shall re-calculate the Closing Net Working Capital, the Closing Cash and Cash Equivalents, the Closing Indebtedness and the Closing Equipment Acquisition Amount, as applicable, based on its own calculations for such disputed items and in accordance with the terms and provisions of this Agreement; provided that in any event the calculations of Net Working Capital shall be made by the Independent Accountant in accordance with GAAP as applied to the Companies’ consolidated audited financial statements as at September 30, 2007. Such statement shall be delivered by the Independent Accountant to the parties within thirty (30) days of the submission of the matter to such firm, which statement, absent manifest error, shall become the Final Closing Statement for purposes of Section 2.1(c)(i) above, and shall be binding and conclusive on the parties and not subject to appeal.

(d)       Cash Earn Out Consideration. “Cash Earn Out Consideration” means a one-time cash payment to Michael Di Paolo Professional Corporation, as trustee for the Sellers (the “Trustee”), payable on the later of five (5) Business Days after the completion of the CPG International, Inc. audit for the year ending December 31, 2008 and the resolution of any dispute between the parties as to the calculation of Net Revenues, calculated as follows (subject to adjustments made in accordance with Section 2.2(b) to the extent that any amount owing to the Buyer is greater than the amount in the escrow account established pursuant to Section 2.2(a) on the date on which the Cash Earn Out Consideration is payable):

If the Net Revenues for the year commencing January 1, 2008 and ending December 31, 2008 set forth in the Final Net Revenues Statement (as defined below) are:

(i)        at least $21,000,000 and less than $25,700,000, then the Sellers shall receive an additional $1,000,000;

(ii)       at least $25,700,000 and less than $30,300,000, then the Sellers shall receive an additional $2,000,000;

(iii)      at least $30,300,000 and less than $35,000,000, then the Sellers shall receive an additional $3,000,000; or

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(iv)      at least $35,000,000, then the Sellers shall receive an additional $4,000,000.

For greater certainty, if the adjustments pursuant to Section 2.2(b) are less than or equal to the balance in the escrow account on the date on which the Cash Earn Out Consideration is payable, the Cash Earn Out Consideration shall be paid to the Trustee for the benefit of the Sellers without deduction, provided that there are no pending claims that could reasonably be expected to exceed the balance in the escrow account.

(e)        Calculation of Net Revenues. No later than February 29, 2009, the Buyer shall prepare, or cause to be prepared, and deliver to the Sellers a statement (the “Preliminary Net Revenues Statement”) setting forth its calculations of Net Revenues for the year ending December 31, 2008 plus reasonable supporting documentation. From and after the Closing until resolution of any dispute with respect to the Preliminary Closing Statement, the Sellers, through a Representative, shall have access to all books and records of the Companies together with the Buyer’s calculations and supporting documents to confirm the amounts shown on the Preliminary Net Revenues Statement. In the event the Sellers agree to the amounts shown on the Preliminary Net Revenues Statement, or fail to object to such amounts by notifying Buyer in writing of such objection within the twenty (20) day period following the delivery thereof, then the Preliminary Net Revenues Statement shall become the “Final Net Revenues Statement” for purposes of Section 2.1(d) above, and shall be binding and conclusive on the parties and not subject to appeal. In the event the Sellers object to any amounts shown on the Preliminary Net Revenues Statement, the Sellers shall notify Buyer in writing of such objection within the twenty (20) day period following the delivery thereof, stating in such written objection the reasons therefor and their alternative calculations. Upon receipt by the Buyer of such written objection, the parties shall attempt to resolve the disagreement through negotiation. The Buyer agrees to promptly provide the Sellers, as the Sellers shall reasonably request, with further supporting documentation for the Buyer’s calculations with respect to the Preliminary Net Revenues Statement. If the Buyer and the Sellers cannot resolve such disagreement within ten (10) days following the end of the foregoing twenty (20) day period, the parties shall submit the matter for resolution to an Independent Accountant. The Independent Accountant shall deliver a statement to the effect that either the Buyer’s calculations or the Sellers’ calculations should be deemed the Net Revenues for the purposes of this Agreement. Such statement shall be delivered by the Independent Accountant to the parties within thirty (30) days of the submission of the matter to such firm, which statement, absent manifest error, shall become the Final Net Revenues Statement for purposes of Section 2.1(d) above, and shall be binding and conclusive on the parties and not subject to appeal. The fees and expenses of the Independent Accountant will be borne by the party whose calculation is not chosen.

(f)        Extraordinary Receipts. The parties hereto acknowledge that all Extraordinary Receipts are due and payable to the Sellers. The Buyer will cause the Companies to make a cash payment equal to the amount of any Extraordinary Receipts to the Trustee within ten (10) Business Days of receipt of such Extraordinary Receipts, net of any reasonable costs of collection incurred in connection with the receipt of such Extraordinary Receipts.

(g)       Purchase Price Direction. All amounts to be paid to the Sellers under this Agreement will, unless otherwise agreed, be paid to the Trustee, and the Sellers irrevocably direct the Buyer to do so.

2.2 Escrow Amount.

(a)        The parties hereto acknowledge and agree that notwithstanding anything contained herein to the contrary, the Buyer shall hold back from delivery to the Sellers at the Closing

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Date, to be used for the purposes described herein, an amount of four million dollars ($4,000,000) (such amount, the “Escrow Amount”), which amounts shall be deposited into an escrow account with Equity Transfer & Trust Company (the “Escrow Agent”), under the terms of an escrow agreement in a form mutually agreeable to Buyer and the Sellers (the “Escrow Agreement”).

(b)       The parties hereto acknowledge and agree that the Escrow Amount shall be used to satisfy any right the Buyer may have to receive (A) an indemnification payment as provided in Section 11 and (B) a payment pursuant to Sections 2.1(c)(i), if any. On the date which is two (2) years from the Closing Date (such date, the “Expiration Date”), all amounts remaining as part of the Escrow Amount, if any, shall be released and transferred to the Sellers, and all rights of the Buyer with respect to such distributed portion of the Escrow Amount shall terminate. Notwithstanding any of the foregoing, if on the Expiration Date there exists any unresolved claims by the Buyer hereunder, then a portion of the Escrow Amount in an amount which the Buyer acting in good faith determines to be sufficient for the payment of all such unresolved claims shall be retained by the Escrow Agent holding such applicable portion until full and final resolution thereof. The Cash Earn Out Consideration and the Escrow Amount shall be treated as deferred Cash Purchase Price for all Tax purposes.

2.3 Transactions to be Effected at the Closing. At the Closing, the following transactions shall be effected by the parties, and shall be deemed to occur in a Pre-Closing Tax Period:

(a)        the Buyer shall pay to the Trustee by wire transfer of immediately available funds to a bank account designated in writing by the Sellers (such designation to be made at least two (2) Business Days prior to the Closing Date), the Cash Purchase Price less the Escrow Amount;

(b)       the Buyer shall pay to the Escrow Agent by wire transfer of immediately available funds to an account designated in writing by the Escrow Agent (such designation to be made at least two (2) Business Days prior to the Closing Date), the Escrow Amount;

(c)        the Buyer shall deliver to the Company by wire transfer of immediately available funds to such bank account of the Company designated in writing by the Company (such designation to be made at least two (2) Business Days prior to the Closing Date) an amount sufficient to pay the Company Expenses (as defined in Section 12.1), plus an amount equal to the Indebtedness of the Company being paid off at Closing (the “Terminated Indebtedness”), each as specified under Section 2.1(b);

(d)       the Buyer shall cause the Company to pay the Company Expenses as specified under Section 2.1(b); and

(e)        the Buyer shall cause the Company to pay Terminated Indebtedness as specified under Section 2.1(b).

ARTICLE 3

THE CLOSING

3.1 Closing; Closing Date. The closing of the sale and purchase of the Shares contemplated hereby (the “Closing”) shall take place at the offices of McCarthy Tétrault LLP, at 10:00 a.m. local time, on the second (2^nd) Business Day after the date that all of the conditions to the Closing set forth in Articles 8 and 9 (other than those conditions which, by their terms, are to be satisfied or waived at the Closing) shall have been satisfied or waived by the party entitled to waive the same, or at such other

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time, place and date as the Sellers and the Buyer may agree in writing. The date upon which the Closing occurs is referred to herein as the “Closing Date.”

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

Each Seller represents and warrants, for himself only, to the Buyer, as follows:

4.1 Binding Obligation. The Seller has full power, right and authority or legal capacity, as applicable, to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller, and assuming that this Agreement constitutes the legal, valid and binding obligations of the Buyer, constitutes the legal, valid and binding obligations of the Seller, enforceable against the Seller in accordance with its terms, except to the extent that the enforceability thereof may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws from time to time in effect affecting generally the enforcement of creditors’ rights and remedies, and (ii) general principles of equity.

4.2 No Defaults or Conflicts. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Seller and performance by such Seller of his obligations hereunder (i) except as set forth on Schedule 4.2, do not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under any material agreement or instrument to which the Seller is a party or by which he is bound or to which his properties are subject, and (ii) do not violate any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Authority having jurisdiction over the Seller or any of his properties.

4.3 No Authorization or Consents Required. Except as set forth in Schedule 4.3, no consent, authorization or approval or other action by, and no notice to or filing with, any Person or Governmental Authority will be required to be obtained or made by the Seller in connection with the due execution, delivery and performance by the Seller of this Agreement and the consummation by the Seller of the transactions contemplated hereby.

4.4 The Shares. The total authorized capital of the Company comprises (i) an unlimited number of non-cumulative, non-participating, voting, redeemable, retractable Class A preference shares without par value, (ii) an unlimited number of non-cumulative, non-participating, non-voting, redeemable, retractable Class B preference shares without par value, and (iii) an unlimited number of common shares without par value. There are no Class A preference shares or Class B preference shares outstanding. The Seller is the registered and beneficial owner of the Shares set forth opposite the Seller’s name on Schedule 4.4-A with good and valid title to such Shares, free and clear of all Encumbrances. Assuming the Buyer has the requisite power and authority to be the lawful owner of such Shares, upon delivery to the Buyer at the Closing of certificates representing the Shares, duly endorsed by the Seller for transfer to the Buyer, and upon receipt of the Cash Purchase Price by the Seller, good and valid title to the Shares will pass to the Buyer, free and clear of any Encumbrances, other than those arising from acts of the Buyer or its Affiliates. Except as set forth in the Company’s organizational documents and Schedule 4.4-B, the Shares are not subject to any contract restricting or otherwise relating to the voting, dividend rights, transfer or other disposition of such Shares, including any shareholder agreement, voting trust or voting agreement.

4.5 Litigation. There is no claim, action, suit, investigation or legal proceeding pending or, to the knowledge of the Seller, threatened against the Seller, before any Governmental Authority

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which seeks to prevent, enjoin, alter or delay the Seller from consummating the transactions contemplated by this Agreement.

4.6 Residency. The Seller is not a non-resident of Canada within the meaning of the Tax Act.

4.7 No Rights of Others. Except as set forth in Schedule 4.7, there is no contract, option or any other right of another binding upon or which at any time in the future may become binding upon the Seller to sell, transfer, assign, pledge, charge, mortgage or in any other way dispose of or encumber any of the Shares to be sold by such Seller hereunder other than pursuant to the terms of this Agreement.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE SELLERS ON BEHALF OF

THE COMPANIES

The Sellers jointly and severally represent and warrant to the Buyer as follows:

5.1 Organization and Corporate Power. Each of the Companies is a corporation duly organized, validly existing and in good standing under the laws of the Province of Ontario. Each of the Companies is duly qualified to do business as a foreign corporation in each jurisdiction listed in Schedule 5.1, except where the failure to be so qualified would not, or would not reasonably be expected to, individually or in the aggregate have a Material Adverse Effect. Each of the Companies has all requisite corporate power and authority to own or lease its assets and properties and to carry on its business as presently conducted and has made all necessary filings under all applicable corporate, securities, Tax laws and other applicable laws. The copies of the Articles of Incorporation and Bylaws of each of the Companies previously delivered to Buyer or its representatives are those that are currently in force and effect, and are correct in all respects as of the date hereof, no amendments thereto are pending other than the Amalgamation, and no Seller is in violation of any term of its Articles of Incorporation or Bylaws.

5.2 Non-Contravention. Except as set forth on Schedule 5.2, the execution, delivery and performance by the Sellers of this Agreement and each of the other agreements, documents and instruments to be executed and delivered by the Sellers as contemplated hereby and the issuance and delivery thereof do not and will not: (a) violate, conflict with, or result in a default (whether after the giving of notice, lapse of time or both) or loss of benefit under, (i) any contract or obligation to which any of the Companies is a party or by which it is bound or (ii) any provision contained in their respective Articles of Incorporation or Bylaws, (b) violate or result in a violation of, or constitute a default under, any provision of any law, regulation or rule, or any order of, or any restriction imposed by, any court or Governmental Authority applicable to any of the Companies; (c) require any of the Companies to provide any notice to, make any declaration or filing with, or obtain the consent or approval of, any Governmental Authority or any other Person, or (d) accelerate any obligation under or give rise to a right of termination of or result in a loss of any benefit under any indenture or loan or credit agreement or any other material agreement, contract, instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction, decree, determination or arbitration award to which any of the Companies is a party or affected, or result in the creation or imposition of any Lien on any of the material assets or properties of any of the Companies or contract to which any of the Companies is bound, except, with respect to Sections 5.2(a)(i), 5.2(b), 5.2(c) and 5.2(d) as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.3 Capitalization; Ownership of Shares.

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(a)        The total authorized capital of Compos-A-Tron Mfg consists of (i) an unlimited number of non-cumulative, non-participating, voting, redeemable, retractable “Class A” preferred shares without par value; (ii) an unlimited number of non-cumulative, non-participating, non-voting, retractable “Class B” preferred shares without par value; and (iii) an unlimited number of shares of common stock without par value (collectively, the “Compos-A-Tron Mfg Shares”). Schedule 5.3(a) sets forth the Company’s record and beneficial percentage interest and shares of the Compos-A-Tron Mfg Shares. All of the issued and outstanding shares of Compos-A-Tron Mfg Shares are owned beneficially and of record by the Company, free and clear of any Encumbrances. All of the issued and outstanding shares of Compos-A-Tron Mfg Shares are duly and validly issued, fully paid and nonassessable. There are no outstanding subscriptions, options, warrants, commitments, preemptive rights, rights of first refusal, agreements, arrangements or commitments of any kind or nature for or relating to the issuance, sale, registration or voting of, or outstanding securities convertible into or exchangeable for, any shares of any class or other equity interests of the Compos-A-Tron Mfg.

(b)       The total authorized capital of Compos-A-Tron H O consists of (i) an unlimited number of non-cumulative, non-participating, voting, redeemable, retractable “Class A” preferred shares without par value; (ii) an unlimited number of non-cumulative, non-participating, non-voting, retractable “Class B” preferred shares without par value; and (iii) an unlimited number of shares of common stock without par value (collectively, the “Compos-A-Tron H O Shares”). Schedule 5.3(b) sets forth the Company’s record and beneficial percentage interest and shares of the Compos-A-Tron H O Shares. All of the issued and outstanding shares of Compos-A-Tron H O Shares are owned beneficially and of record by the Company, free and clear of any Encumbrances. All of the issued and outstanding shares of Compos-A-Tron H O Shares are duly and validly issued, fully paid and nonassessable. There are no outstanding subscriptions, options, warrants, commitments, preemptive rights, rights of first refusal, agreements, arrangements or commitments of any kind or nature for or relating to the issuance, sale, registration or voting of, or outstanding securities convertible into or exchangeable for, any shares of any class or other equity interests of Compos-A-Tron H O.

(c)        The Company holds no equity interests in any Person (directly or indirectly) other than Compos-A-Tron Mfg. and Compos-A-Tron H O.

5.4 Financial Statements.

(a)        The Sellers have previously furnished to Buyer copies of the Financial Statements. Except as otherwise disclosed on Schedule 5.4(a), such financial statements were prepared in accordance with GAAP, applied on a consistent basis in conformity with the Companies’ past practices, and such financial statements are complete, correct and consistent in all material respects with the books and records of the Companies and fairly and accurately present in all material respects the financial position of the Companies as of the dates thereof and the results of operations and cash flows of the Companies for the periods shown therein.

(b)       Absence of Undisclosed Liabilities. Except as and to the extent reflected or reserved against in the Companies’ unaudited consolidated balance sheet for the three (3) month period ending December 31, 2007 (the “Base Balance Sheet”) and in the Financial Statements as of September 30, 2007, incurred in the ordinary course of business since the date of the Base Balance Sheet, or as set forth in Schedule 5.4(b), the Companies do not have and are not subject to any material liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, asserted or unasserted, (including, without limitation, liabilities as guarantor or otherwise with respect to obligations of others, or liabilities for Taxes (as defined in Section 5.8 below), due or accrued or to become due.

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5.5      Absence of Certain Developments. Since September 30, 2007, the Companies have conducted the Business only in the ordinary course consistent with their past practices and, except as set forth in Schedule 5.5 and except as contemplated by this Agreement, there has not been any:

(a)        change in the assets, liabilities, financial condition, properties, business or operations of any of the Companies, which change by itself or in conjunction with all other such changes, whether or not arising in the ordinary course of business, has had or would reasonably be expected to have a Material Adverse Effect;

(b)       declaration, setting aside or payment of any dividend or other distribution (whether of cash, in kind or securities) with respect to, or any direct or indirect redemption, purchase or acquisition of, any of the shares of any of the Companies, or any issuance or sale by the Companies of any shares, including, without limitation, any in kind distribution of accounts receivable, inventory or other assets of any of the Companies;

(c)        waiver or release of any material right of any of the Companies or cancellation or discharge of any material debt or claim held by any of the Companies, excluding any write-off or other compromise of accounts receivable, in each case, other than in the ordinary course of business consistent with past practice;

(d)       loss, destruction or damage to any property which would, or would reasonably be expected to, have a Material Adverse Effect, whether or not covered by insurance;

(e)        acquisition or disposition, or any agreement or other arrangement for the acquisition or disposition of, any material assets or properties of the any of the Companies, excluding the sale of inventory in the ordinary course of business consistent with past practice;

(f)        material increase, direct or indirect, or other change in the compensation or benefits paid or payable to, or pay any bonus to, any officer, director, employee, independent contractor or agent of any of the Companies (other than salary, wage and/or commission increases in the ordinary course of business consistent with the Companies’ past practices) or any establishment or creation of any employment, deferred compensation, change in control, or severance agreement or employee benefit plan with respect to such Persons or the amendment to, or modification or termination of, any of the foregoing;

(g)       loss of key personnel of any of the Companies, or material change in the terms and conditions of the employment of the key personnel of any of the Companies;

(h)       incurrence or refinancing of any indebtedness, mortgage, encumbrance or placement of any Encumbrance on any properties or assets of any of the Companies, other than Encumbrances for Taxes not yet due and payable or being contested in good faith;

(i)        change in accounting methods or practices, collection or credit policies, pricing policies, reserve policies, revenue recognition policies or payment policies;

(j)        payment or discharge of a lien or material liability of any of the Companies outside the ordinary course of business;

(k)       entering into, amendment or termination of any material contract or agreement to which any Company is a party or by which it is bound;

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(l)        amendment to the Articles of Incorporation or Bylaws of any of the Companies, other than in compliance with Section 8.3 hereof;

(m)      incurrence of capital expenditures, other than in the ordinary course of business consistent with the Companies’ past practices; or

(n)       any agreement or understanding, whether in writing or otherwise, by any of the Companies or any other Person that would result in any of the foregoing transactions or events or require any of the Companies to take any of the foregoing actions.

5.6      Real Property and Certain Assets. None of the Companies owns any real property. The Companies have valid leasehold interests in the real property specified on Schedule 5.6 under the heading “Leased Properties” (the “Leased Real Property”) subjected only to Permitted Encumbrances. Schedule 5.6 contains a complete and accurate list as of the date hereof of all real property leased as lessee, including all subleases and other arrangements relating to the use or occupancy of real property (collectively, the “Leases”) by each of the Companies. Schedule 5.6 contains an accurate and complete list as of the date hereof of all Leases, as the same may have been amended, supplemented or otherwise modified from time to time, including the address of the property, the lessor, the lessee and the date of all such Leases. None of the Companies is in breach in any material respects under the Leases to which each such entity is a party and all such Leases are in full force and effect. The Company has made available to the Buyer a true and complete copy of each Lease.

5.7 Taxes. Except as set forth on Schedule 5.7:

(a)        each of the Companies has timely and properly filed all Tax Returns required to be filed by it through the date hereof, and all such Tax Returns are correct and complete in all material respects;

(b)       each of the Companies has withheld (from its employees, non-residents and any other Person), and will continue until the Closing Date to withhold, any Taxes which are required by applicable law to be withheld and has timely paid or remitted, and will continue until the Closing Date to pay and remit, on a timely basis, the full amount of any Taxes which have been or will be withheld, to the applicable Governmental Authority;

(c)        each of the Companies has paid and will continue until the Closing Date to pay all Taxes, including any amount due on or before the Closing Date, including installments or prepayments of Taxes, which are required to have been paid to any Governmental Authority pursuant to applicable law (whether disputed or not and whether shown on the Tax Returns or not), and no deficiency with respect to the payment of any Taxes or Tax installments has been asserted against it by any Governmental Authority. None of the Companies has incurred any liability, whether actual or contingent, for Taxes or engaged in any transaction or event which would result in any liability, whether actual or contingent, for Taxes or realized any income or gain for Tax purposes otherwise than in the ordinary course of its business. Other than Taxes not yet due and provided for as a current liability in the Financial Statements or the Closing Net Working Capital on the Final Closing Statement, none of the Companies has any liability or obligation in respect of any Taxes for any Pre-Closing Tax Periods;

(d)       there are no Encumbrances on any of the assets of a Company that arose in connection with any failure (or alleged failure) to pay any Tax;

(e)        none of the Companies is currently the subject of a Tax audit, examination, claim or administrative or judicial proceeding with respect to Taxes, nor has any such audit,

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examination, claim or proceeding been proposed or threatened in writing or otherwise to the knowledge of the Sellers;

(f)        none of the Companies has consented to a waiver or to extend the time, or is the beneficiary of any extension of time, in which any Tax may be assessed, reassessed or collected by any Governmental Authority or in which any Tax Return may be filed;

(g)       none of the Companies has ever been required to file any Tax Return with, nor has ever been liable to pay any Taxes to, any Governmental Authority outside Canada and no Governmental Authority with which a Company does not file Tax Returns has asserted that the Company is or may be required to pay Taxes to or file Tax Returns with that Governmental Authority;

(h)       none of the Companies has (A) been a party to or bound by any tax sharing, tax indemnity, or tax allocation agreement or arrangement or (B) requested or received any Tax ruling, transfer pricing agreements, closing agreement or similar agreements, in either case that would have continuing effect after the Closing Date;

(i)        none of the Companies will be required to recognize for tax purposes in a tax period ending after the Closing Date any income or gain as a result of (A) using the installment method of accounting or (B) making or being required to make any change in method of accounting;

(j)        each of the Companies has complied in all respects with all Tax information reporting provisions of all applicable laws;

(k)       each of the Companies has made available to the Buyer true, correct and complete copies of all income Tax Returns and related notices of assessment and reassessment, examination reports and statements of deficiency for all taxable periods for which the applicable statutory periods of limitations have not expired;

(l)        the income Tax liability of each of the Companies has been assessed by the relevant Governmental Authority in respect of the taxation years of each such company ending before the date hereof;

(m)      none of the Companies has made any elections in respect of Taxes pursuant to applicable law;

(n)       no circumstances exist or have existed which have resulted in or may result in the application of any of sections 79 to 80.04 of the Tax Act (relating to debt forgiveness) to any of the Companies;

(o)       none of the Companies is subject to liability for Taxes of any other person. None of the Companies has acquired property from any person in circumstances where the relevant Company did or could become liable for any Taxes of such person. The value of the consideration paid or received by any such Company for the acquisition, sale, transfer or provision of property (including intangibles) or the provision of services (including financial transactions) from or to a non-arm’s length person was equal to the estimated fair market value of such property acquired, provided or sold or services purchased or provided. None of the Companies has entered into any agreement with, or provided any undertaking to, any person pursuant to which it has assumed liability for the payment of income Taxes owing by such person;

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(p)       each of the Companies is duly registered with the Canada Revenue Agency under the Excise Tax Act (Canada) for purposes of the goods and services tax (“GST”). All input tax credits claimed by any such company for GST purposes were calculated in accordance with applicable law. Each of the Companies has complied with all registration, reporting, payment, collection and remittance requirements in respect of GST and provincial sales tax or harmonized tax legislation;

(q)       none of the Companies has claimed any reserves for purposes of the Tax Act (or analogous provincial or similar provisions) for the most recent taxation year ending prior to the date hereof;

(r)        none of the Companies has made any payment, nor is obligated to make any payment, and is not a party to any agreement under which it could be obligated to make any payment, that may not be deductible by virtue of section 67 or 78 of the Tax Act or any analogous provincial or similar provision; and

(s)        For purposes of this Agreement, in the case of any Straddle Period (1) the amount of any Taxes of the Company based on or measured by income or receipts for the Pre-Closing Tax Period shall be computed in accordance with relevant Tax law as if such taxable period ended as of the close of business on the Closing Date, provided that exemptions, allowances, credits or deductions that are calculated on an annual basis (including, but not limited to, depreciation and amortization deductions) shall be allocated between the period ending on the Closing Date and the period after the Closing Date in proportion to the number of days in each period and (2) the amount of other Taxes of the Company for the Pre-Closing Period shall be deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the taxable period prior to and including the Closing Date and the denominator of which is the number of days in the Straddle Period.

5.8      Certain Contracts and Arrangements. Except as set forth in Schedule 5.8 (with true and correct copies heretofore delivered to Buyer), none of the Companies are a party or subject to or bound by or a beneficiary of:

(a)        any contract, lease or agreement (including any distribution agreement or arrangement) which is not cancelable by any of the Companies without penalty upon sixty (60) days’ notice or less;

(b)       any contract containing covenants that limit the freedom of any of the Companies to compete in any line of business or with any Person or entity;

(c)        any material contract or agreement for the purchase of any real property, leasehold improvements, equipment or fixed assets which (A) provides for annual payments by any of the Companies of $50,000 or more, (B) has a residual term as of the date hereof of more than three (3) months and (C) is not terminable by such Company by notice of not more than sixty (60) calendar days without penalty;

(d)       any material contract or agreement for the sale of materials, supplies, goods, services, equipment or other assets, which (A) provides for annual payments by any of the Companies of $50,000 or more, (B) has a residual term as of the date hereof of more than three (3) months and (C) is not terminable by such Company by notice of not more than sixty (60) calendar days without penalty;

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(e)        any indenture, mortgage, promissory note, loan agreement, guaranty or other agreement or commitment for borrowing or any pledge or security arrangement;

(f)        any joint venture or partnership agreement or other agreement which involves a sharing of revenues, profits, losses, costs or liabilities of any of the Companies with any other Person;

(g)       any agreement, option or commitment to acquire the securities of any corporation;

(h)       any agreement that imposes any confidentiality, standstill or similar obligation on any of the Companies;

(i) any acquisition, merger or similar agreement;

(j) any contract with any Governmental Authority;

(k) any outstanding power of attorney;

(l)        any management service agreements or arrangements with any affiliated or unaffiliated Persons or entities;

(m)      any other agreement not executed in the ordinary course of business; or

(n)       any agreement that commits any of the Companies to enter into any of the foregoing.

All of such contracts and agreements of any of the Companies are in full force and effect and neither the Companies, nor, to the knowledge of the Sellers, any other party is in default thereunder with respect to any material provisions of said contracts and agreements (nor, to the knowledge of the Sellers has any event occurred which with notice, lapse of time or both would constitute a default thereunder with respect to any material provisions of said contracts and agreements) and neither the Sellers nor any of the Companies have received any written notice of any such default under any such contracts or agreements.

5.9 Intellectual Property Rights.

(a)        Schedule 5.9 contains a complete and accurate list of all Patents (as defined below) owned by any of the Companies or otherwise used in the business of the Companies (the “Company Patents”); all registered Marks (as defined below), material unregistered Marks and any applications for registration of a trademark or service mark, that are owned by any of the Companies or otherwise used or held for use in the business of the Companies (the “Company Marks”); and all registered Copyrights (as defined below), material unregistered Copyrights and any applications for registration of a copyright, that are owned by any of the Companies or otherwise used in the business of the Companies (“Company Copyrights”).

(b)       Except as set forth on Schedule 5.9 or Schedule 5.10: (i) each of the Companies exclusively owns or possesses adequate and enforceable rights to use, without payment to a third Person, all of the Intellectual Property Assets (as defined below) necessary for the operation of the business of the Companies, free and clear of all liens, except the Permitted Encumbrances; (ii) all

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Company Patents, Company Marks and Company Copyrights which are issued by or registered with and pending applications for issuance or registration with, as applicable, the U.S. Patent and Trademark Office, the U.S. Copyright Office or in any similar office or agency anywhere in the world are currently in compliance with all formal legal requirements (including without limitation, as applicable, payment of filing, examination and maintenance fees, proofs of working or use, timely post-registration filing of affidavits of use and incontestability and renewal applications) and are valid and enforceable; (iii) there are no pending, or threatened actions, suits, proceedings, hearings, investigations, charges, complaints, demands or claims against any Company or any of their respective employees alleging that the use of any of the Company Intellectual Property Assets (as defined below) or the conduct of the business of the Companies, infringes, misappropriates, violates or conflicts with the rights of any third-party under any Intellectual Property Assets (“Third Party Rights”); (iv) to the best of the Companies’ knowledge, neither the conduct of the business of the Companies nor the use of any Company Intellectual Property Asset infringes, misappropriates, violates or conflicts with any Third Party Rights; (v) none of the Companies has received any written communications alleging that any Company has infringed, misappropriated or violated or, by conducting the business of the Companies, would infringe, misappropriate or violate any Third Party Rights (including any claim that any Company must license or refrain from using any Third Party Rights), or that any of the Company Intellectual Property Assets is invalid or unenforceable and no action, suit, proceeding, hearing, investigation, charge, complaint, demand or claim is pending or threatened against any Company or any of its respective licensees that challenges the legality, validity, enforceability, or ownership of any Company Intellectual Property Assets; (vi) no current or former employee or consultant of any Company owns any rights in or to any of the Company Intellectual Property Assets; (vii) Seller is not aware of any violation or infringement by a third Person of any of the Company Intellectual Property Assets; and (viii) each Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all Trade Secrets (as defined below) used or held for use in the business of the Companies (the “Company Trade Secrets”).

(c)        For purposes of this Agreement, (i) “Company Intellectual Property Assets” means all Intellectual Property Assets owned by any of the Companies or used in the business of the Companies, including, without limitation, the Company Patents, Company Marks, Company Copyrights and Company Trade Secrets, and (ii) “Intellectual Property Assets” means: (A) utility and design patents, utility and design patent applications, patent rights, inventions and discoveries, invention disclosures (whether or not patented), designs (whether or not patented), and industrial designs and registrations and applications for registration therefor (collectively, “Patents”); (B) trade names, trade dress, logos, packaging design, slogans, Internet domain names, registered and unregistered trademarks and service marks, and related registrations and applications for registration, together with all goodwill associated therewith (collectively, “Marks”); (C) copyrights in both published and unpublished works, including, without limitation, all compilations, databases and computer programs and software, manuals and other documentation and all copyright registrations and applications, and all derivatives, translations, adaptations and combinations of the above (collectively, “Copyrights”); (D) know-how, trade secrets, confidential or proprietary information, research in progress, algorithms, data, designs, processes, formulae, drawings, schematics, blueprints, flow charts, models, strategies, prototypes, techniques, beta testing procedures and beta testing results (collectively, “Trade Secrets”); and (E) goodwill, franchises, licenses, settlements, permits, consents, approvals, and claims of infringement against third Persons.

5.10     Litigation. Except as set forth in Schedule 5.10, there is no material litigation, action, suit, claim, proceeding or investigation pending or, to the knowledge of the Sellers, threatened (i) against any of the Companies or adversely affecting, or which could adversely affect, any material proportion of any of their properties or assets, or (ii) against any officer, director or key employee of any of the Companies in his or her capacity as an officer, director or employee.

5.11 Employee Benefit Plans.

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(a)        Schedule 5.11(a) includes a true and complete list of all Benefit Plans maintained or contributed to by any of the Companies and pursuant to which any of the Companies have or may have any liability, contingent or otherwise (collectively, the “Company Benefit Plans”). The Sellers have delivered to the Buyer true, complete and up-to-date copies thereof and all amendments thereto together with, as applicable, all funding agreements, all summary descriptions of the Benefit Plans provided to past or present participants therein and all contracts relating to Benefit Plans with respect to which the Companies may have any liability, including insurance contracts, investment management contracts, subscription and participation agreements, record keeping agreements and other services agreements.

(b)       The Buyer has no knowledge of any fact, condition or circumstance since the date of the documents provided in accordance with (a) above which would materially affect the information contained therein and, in particular, and without limiting the generality of the foregoing, no promises or commitments have been made to amend any Benefit Plan or to provide increased benefits thereunder to any of the Companies’ employees, except as required by applicable legislation.

(c)        All of the Benefit Plans are, and have been since their establishment, duly registered where required by applicable legislation and are in good standing thereunder (including registration with the relevant tax authorities where such registration is required to qualify for tax exemption or other beneficial tax status), and have been administered in compliance with their terms and all applicable legislation and administrative guidelines issued by the regulatory authorities.

(d)       All contracts in respect of the Benefit Plans are valid and they can be enforced by one or more of the Companies or one or more of the Companies can cause such contracts to be enforced.

(e)        All employer and employee obligations in respect of the Benefit Plans, including payments, contributions and premiums required under applicable legislation and their terms have been satisfied and there are no outstanding defaults or violations in respect thereof.

(f)        There are no actions, suits, claims, trials, demands, investigations, arbitrations or other proceedings pending or, to the knowledge of the Sellers, threatened with respect to the Benefit Plans against any of the Companies, the funding agent, the insurers or the fund of such Benefit Plans, other than claims for benefits in the ordinary course.

(g)       No order has been made or notice given pursuant to any applicable legislation requiring (or proposing to require) any of the Companies to take (or refrain from taking) any action in respect of any Benefit Plan, and no event has occurred and no condition or circumstance exists that has resulted or could reasonably result in any Benefit Plan (i) being ordered or required to be terminated or wound-up in whole or in part, (ii) have its registration under any applicable legislation refused or revoked, (iii) being placed under the administration of any trustee or any regulatory authority or (iv) being required to pay any material taxes or penalties under any applicable legislation.

(h)       Except as disclosed in Schedule 5.11(a), all of the Benefit Plans are fully funded in accordance with their terms and all applicable legislation and generally accepted actuarial principles and practices.

(i)        No event has occurred and there has been no failure to act on the part of any of the Companies, any funding agent or any administrator of any of the Benefit Plans that could subject the Sellers or the fund of any Benefit Plan to the imposition of any tax, penalty or other disability with respect to any Benefit Plans, whether by way of indemnity or otherwise.

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(j)        None of the Companies has any obligation in respect of any Benefit Plans that are multi-employer pension plans or multi-employer benefit plans except contribution obligations as are set out in the collective agreements provided to the Buyer. No employer formerly participating in such a multi-employer pension plan has withdrawn its participation from the plan without ensuring full payment of the benefits of the members or beneficiaries of the plan affected by its withdrawal.

(k)       Neither the execution, delivery or performance of this Agreement, nor the consummation of any of the other the transactions contemplated by this Agreement, will result in any bonus, golden parachute, severance or other payment or obligation to any current or former employee or director of any of the Companies (whether or not under any Benefit Plan), materially increase the benefits payable or provided under any Benefit Plan, result in any acceleration of the time of payment or vesting of any such benefit, or increase or accelerate employer contributions thereunder.

(l)        None of the Benefit Plans require or permit a retroactive increase in premiums or payments, and the level of insurance reserves, if any, under any self-insured Benefit Plan is reasonable and sufficient to provide for all incurred but unreported claims.

5.12 Environmental Matters.

(a)        None of the Companies has generated, transported, used, handled, processed, stored, treated, disposed of, or managed any Hazardous Material (as defined below) other than in material compliance with all Environmental Laws (as defined below). Except as set forth on Schedule 5.12(a), no Hazardous Material has been spilled, released, discharged, or disposed of at any site presently owned, operated, leased, or used by any of the Companies, nor is present in the soil, sediment, water or groundwater at any such site, in quantities or concentrations that violate or require any response action pursuant to any applicable Environmental Law. No Hazardous Material has been transported from any site presently or formerly owned, operated, leased, or used by any of the Companies for treatment, storage, or disposal at any other place, other than in material compliance with all Environmental Laws (as defined below). Except as set forth on Schedule 5.12(a), none of the Companies presently owns, operates, leases, or uses any site on which underground storage tanks are or were located, nor, to the knowledge of the Companies, has any of the Companies previously owned, operated, leased or used, any site on which underground storage tanks are or were located. No lien has been imposed by any governmental agency on any property, facility, machinery, or equipment owned, operated, leased, or used by Sellers in connection with the presence of any Hazardous Material.

(b)       Except as set forth on Schedule 5.12(b), (i) none of the Companies have any liability under any Environmental Law; (ii) each of the Companies and any property presently owned, operated, leased or used by any of the Companies, and any facilities and operations thereon, are presently in compliance in all material respects with all applicable Environmental Laws; (iii) none of the Companies are currently subject to any judgment, consent decree, compliance order, or administrative order or received any request for information, notice, demand letter, administrative inquiry, complaint or claim relating to any Environmental Law; and (iv) none of the Companies reasonably expect that any of the items enumerated in this subsection will be forthcoming.

(c)        Except as set forth on Schedule 5.12(c), to the knowledge of the Companies, no site currently owned, operated, leased, or used by any of the Companies contains any asbestos or asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment containing PCBs, or any urea formaldehyde foam insulation.

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(d)       Each of the Companies has filed with the relevant Governmental Authority all material records and reports required under all Environmental Laws and has provided to Buyer copies of all material non-privileged documents and records in the custody or control of any of the Companies concerning any environmental or health and safety matter relevant to any of the Companies, whether generated by any of the Companies, including without limitation, environmental audits, environmental risk assessments, site assessments, documentation regarding off-site disposal of Hazardous Materials, and reports, correspondence, and Permits related to compliance with applicable Environmental Laws issued by any Governmental Authority. For purposes of this Section 5.12(d), the term “material” with respect to any document or report shall mean any such document or report which, if not recorded, timely reported, filed or otherwise duly maintained, would be reasonably expected to result in a loss of $50,000 or more.

(e)        For purposes of this Section 5.12, (i) “Hazardous Material” shall mean any substance or material that is prohibited, controlled or regulated pursuant to any Environmental Law, including pollutants, contaminants, dangerous goods or substances, wastes (including solid non-hazardous wastes and subject wastes), hazardous materials and substances, petroleum products and their derivatives and by-products and other hydrocarbons, oil, asbestos and toxic substances, all as defined in or pursuant to any Environmental Law; and (ii) “Environmental Law” shall mean any environmental or health and safety-related law, regulation, rule, ordinance, by-law, Permit or binding decision of any Governmental Authority at the foreign, federal, state, provincial, or local level, whether existing as of the date hereof, previously enforced, or subsequently enacted, including those pertaining to (x) reporting, licensing, permitting, remediating and cleaning up in connection with the presence or release of any Hazardous Material or threat or same and (y) the manufacture, processing, distribution, use, treatment, storage, disposal, transport, handling, and the like of any Hazardous Material, including those pertaining to occupational health and safety.

5.13 Permits; Compliance with Laws. Each of the Companies has all necessary franchises, permits, licenses and other rights and privileges (collectively “Permits”) to permit it to own its property and to conduct its business as it is presently conducted and their assets to be owned, leased and operated, and all such Permits are valid and in full force and effect, except where the failure to obtain such a Permit would not, or would not reasonably be expected to, have a Material Adverse Effect. Schedule 5.13 sets forth a complete and correct list of such Permits. No Permit is subject to termination as a result of the execution of this Agreement or the consummation of the transactions contemplated hereby. Each of the Companies is currently and has heretofore been in compliance in all material respects with all applicable federal, state, provincial and local and foreign laws and regulations.

5.14 Insurance. Schedule 5.14 sets forth a list of (a) all material insurance policies (the “Insurance Policies”) with respect to the properties, assets or business of any of the Companies, (b) all claims made under such insurance policies since January 1, 2006, and (c) all letters of credit, surety bonds and performance bonds required to be obtained in connection with the business of the Companies. All Insurance Policies are in full force and effect and all premiums due and payable thereon have been paid in full and none of Companies is in default with respect to its obligations under any Insurance Policy.

5.15 Transactions with Affiliates. Except as set forth in Schedule 5.15, there are no loans, leases, contracts or other continuing transactions between the Sellers (or any officer, director or five percent (5%) shareholder thereof or any family member or Affiliate of the foregoing Persons) and the Companies and there have been no such transactions from January l, 2006 through the date hereof. Except as set forth in Schedule 5.15, no shareholder, director or officer of Sellers or the Companies, any of their respective family members or any Affiliate of the foregoing Persons owns directly or indirectly on an individual or joint basis any interest in, or serves as an officer or director or in another similar capacity of,

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any competitor, customer or supplier of the Sellers or the Companies, or any organization which has a material contract or arrangement with the Sellers or the Companies.

5.16 Customers. Schedule 5.16 sets forth a list of the top ten (10) customers of the Companies based on the amount of revenue generated from such customers for the twelve (12) calendar months ended September 30, 2007 (each a “Customer” and collectively, the “Customers”). Except as set forth on Schedule 5.16, no Customer has cancelled or otherwise terminated its relationship with any of the Companies, other than those Customers who have moved some or all of their business to Buyer or any Affiliate thereof following the date of this Agreement. No Customer has given formal written or verbal notice to terminate its purchase of the products of any of the Companies or of its intention to do so.

5.17 Suppliers. Schedule 5.17 sets forth a list of the top ten (10) suppliers of the Companies measured by dollar value for the twelve (12) calendar months ended September 30, 2007 (each a “Supplier” and collectively, the “Suppliers”). Except as set forth on Schedule 5.17, no Supplier has formally cancelled or otherwise terminated its relationship with any of the Companies, other than those Suppliers who have moved some or all of their business to Buyer or any Affiliate thereof following the date of this Agreement. No Supplier has given formal written or verbal notice to terminate its supply of products or services to any of the Companies.

5.18     Corporate Records. The corporate record books of each of the Companies accurately record in all material respects all corporate action taken by its stockholders, board of directors, governing bodies and committees with respect to all matters referenced therein. The copies of the corporate records of each of the Companies provided to Buyer for review are true and complete copies of the originals of such documents.

5.19     Solvency. None of the Companies have: (a) made a general assignment for the benefit of creditors; (b) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by its creditors; (c) suffered the appointment of a receiver to take possession of all, or substantially all, of its assets; (d) suffered the attachment or other judicial seizure of all, or substantially all, of its assets; (e) admitted in writing its inability to pay its debts as they come due; or (f) made an offer of settlement, extension or composition to its creditors generally.

5.20 Products; Warranties; Claims. Attached to Schedule 5.20 is a copy of the Companies’ standard product warranty (the “Standard Warranty”). None of the Companies has sold any products with a warranty other than the Standard Warranty. Except as set forth in Schedule 5.20, there are no claims under the Standard Warranty and, to the Sellers’ knowledge, no Person has threatened to make a claim under the Standard Warranty.

5.21 Inventory. Except as set forth on Schedule 5.21, the inventories of the Companies are in good and marketable condition and are saleable in the ordinary course of business. Except as set forth on Schedule 5.21, since the date of the Base Balance Sheet, each of the Companies has maintained inventory at levels consistent with their past practice in the ordinary course of their business.

5.22 Competition Act. The aggregate value of all assets in Canada owned by the Company and its subsidiaries does not exceed $50 million, and the gross annual revenues generated from those assets do not exceed $50 million, both as determined pursuant to section 110(3) of the Competition Act (Canada).”

5.23 Investment Canada Act. The Company and its subsidiaries do not provide any transportation service within the meaning of the Investment Canada Act (Canada).

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Disclosure of any matter in any of the Schedules hereto shall constitute disclosure for all purposes with respect to any other part of this Agreement (including any other Schedule or document ancillary to the Agreement) to the extent that the relevance of such Schedule to the other part of this Agreement is reasonably apparent on its face.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer represents and warrants to the Sellers as follows:

6.1 Organization. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the Province of Ontario, with full corporate power, right and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, except where the failure to be so organized, existing and in good standing or to have such power or authority would not reasonably be expected, individually or in the aggregate, to materially impair the Buyer’s ability to effect the transactions contemplated hereby.

6.2 Binding Obligation. This Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Buyer and no other corporate proceedings on the part of the Buyer are necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by the Buyer. This Agreement has been duly executed and delivered by the Buyer and, assuming that this Agreement constitutes the legal, valid and binding obligations of the Sellers and the Company, constitutes the legal, valid and binding obligations of the Buyer, enforceable against the Buyer in accordance with its terms, except to the extent that the enforceability thereof may be limited by (i) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws from time to time in effect affecting generally the enforcement of creditors’ rights and remedies, and (ii) general principles of equity.

6.3 No Defaults or Conflicts. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Buyer and performance by the Buyer of its obligations hereunder (i) do not result in any violation of the charter or by-laws or other constituent documents of the Buyer, and (ii) except as set forth on Schedule 6.3, do not conflict with, or result in a breach of any of the terms or provisions of, or constitute a default under any indenture, mortgage or loan or any other agreement or instrument to which the Buyer is a party or by which it is bound or to which its properties may be subject, and (iii) do not violate any existing applicable law, rule, regulation, judgment, order or decree or any Governmental Authority having jurisdiction over the Buyer or any of its properties.

6.4 No Authorization or Consents Required. Except as otherwise listed in Schedule 6.4, no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or any other Person will be required to be obtained or made by the Buyer in connection with the due execution, delivery and performance by the Buyer of this Agreement and the consummation by the Buyer of the transactions contemplated hereby; provided, however, that no representation and warranty is made with respect to authorizations, approvals, notices or filings with any Governmental Authority that, if not obtained or made, would not reasonably be expected, individually or in the aggregate, to materially impair Buyer’s ability to effect the transactions contemplated hereby.

6.5 Brokers. Other than AEA Investors, LLC, no broker, finder or similar intermediary has acted for or on behalf of the Buyer in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker’s,

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finder’s or similar fee or other commission in connection therewith based on any agreement with the Buyer or any action taken by the Buyer.

6.6 Sufficient Funds. As of the Closing Date, assuming that the conditions precedent to the Buyer’s credit facility (the “Debt Financing”) have been satisfied, the Buyer will have, sufficient cash in immediately available funds to pay the amounts set forth in Section 2.2 hereof which are required to be paid by Buyer and all of its fees and expenses in order to consummate the transactions contemplated by this Agreement.

6.7 Litigation. There is no claim, action, investigation or legal proceeding pending or threatened against the Buyer or any material portion of its properties or assets before any Governmental Authority or involving the Buyer that, individually or in the aggregate, would reasonably be expected to materially impair the Buyer’s ability to effect the transactions contemplated hereby.

6.8 No Authorization or Consents Required. No consent, authorization or approval or other action by, and no notice to or filing with, any Person or Governmental Authority will be required to be obtained or made by the Buyer in connection with the due execution, delivery and performance by the Buyer of this Agreement and the consummation by the Buyer of the transactions contemplated hereby.

ARTICLE 7

COVENANTS

The parties hereto covenant and agree as follows:

7.1 Conduct of Business of the Companies. Except as set forth in Schedule 7.1, during the period from the date of this Agreement to the earlier of the Closing Date and the termination of this Agreement in accordance with ARTICLE 10, (i) (x) the Sellers will cause each of the Companies to conduct its respective business and operations in the ordinary course consistent with past practice (including, without limitation, maintaining normal inventory levels), and (y) the Sellers will cause each of the Companies respectively to use its reasonable best efforts to maintain its corporate existence, preserve intact its material business relationships and goodwill with customers, suppliers and distributors, and keep available the services of its officers and key employees and (ii) without the prior written consent of the Buyer (which consent shall not be unreasonably delayed or withheld), none of the Companies shall undertake any of the following actions:

(a)        issue, sell or pledge or otherwise encumber, or authorize or propose the issuance, sale, pledge or encumbrance of any securities in respect of, in lieu of, or in substitution for shares of such Company;

(b)       adopt any amendment to such Company’s articles of incorporation or by laws;

(c)        incur any Indebtedness other than pursuant to its existing debt instruments or repay, prepay or otherwise reduce the amount of its Indebtedness outstanding on the date hereof, except as required by the terms thereof as in effect on the date of this Agreement;

(d)       (i) increase the rate or terms of compensation or benefits of any of its directors, officers or other employees, or pay any bonus or other amount to any director, officer or employee, except as may be required under existing employment agreements or such merit raises or increases in benefits, in each case (x) in the ordinary course of business consistent with past practice to

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the base salary or wages of employees of such Company who are not officers, senior managers or directors, or (y) as required by applicable law, (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not contemplated by any Company Benefit Plan to any director, officer or employee, whether past or present, (iii) enter into, adopt or amend (except to comply with applicable law) any employment, bonus, severance or retirement contract or adopt any employee benefit plan, or (iv) hire any officer or director;

(e)        sell, lease, license, transfer, abandon or otherwise dispose of, any of its property or assets other than the sale of inventory in the ordinary course of business or any transfer made pursuant to Section 7.7 below;

(f)        make any loans, advances or capital contributions, except advances for travel and other normal business expenses, to officers and employees;

(g)       materially amend, terminate or enter into any material contract or any Lease (other than (i) bidding for and entering into contracts with customers or suppliers in the ordinary course of business consistent with past practice in an amount not exceeding $50,000 and (ii) terminations of contracts and Leases as a result of the expiration of the term of such contracts or Leases);

(h)       acquire any business or Person, by merger or consolidation, purchase of substantial assets or equity interests, or by any other manner, in a single transaction or a series of related transactions;

(i)        make any change in any method of accounting other than those required by GAAP;

(j)        make or revoke any Tax election, settle or compromise any audit, examination or other Tax claim, change any method of Tax accounting, file any amended Tax Return or enter into any closing agreement with any tax authority, file any Tax Return other than in a manner consistent with past practice, or file any ruling request, or closing agreement or similar agreement with respect to Taxes;

(k)       plan, announce, implement or effect any reduction in force, lay-off, early retirement program, severance program or other program or effort concerning the termination of employment of employees of such Company or enter into negotiations for the purpose of making any amendments to any collective bargaining agreement;

(l)        enter into any transaction with any of the Sellers, any Affiliate of any of the Sellers or any other Affiliate of such Company except as set forth in Schedule 7.1(1) or in the ordinary course of business;

(m)      fail to keep in force, cancel or reduce any insurance coverage other than with respect to any Company Benefit Plan in the ordinary course of business consistent with past practice;

(n)       compromise, settle or agree to settle any material suit, action, claim, proceeding or investigation (including any material suit, action, claim, proceeding or investigation relating to this Agreement or the transactions contemplated hereby) or pay, discharge or satisfy or agree to pay, discharge or satisfy any claim, liability or obligation (absolute or accrued, asserted or unasserted, contingent or otherwise);

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(o)       (i) make or agree to make any capital expenditure or expenditures, or enter into any agreements or arrangements providing for capital expenditures, in each case other than those included in the Companies’ capital expenditure plans set forth in Schedule 7.1(o), or (ii) enter into any new line of business outside of its existing business segments;

(p)       cancel or waive any material claim or right pursuant to any Material Contract or Lease, or any other claim or rights that is individually in excess of $50,000;

(q) cancel or reduce any of the Companies’ insurance coverage; or

(r) authorize, commit or agree to take any of the foregoing actions.

7.2 Access to Information; Confidentiality; Public Announcements.

(a)        During the period from the date of this Agreement to the earlier of (i) the Closing Date and (ii) the termination of the Agreement in accordance with ARTICLE 10, the Company, upon reasonable notice, shall give the Buyer and its authorized representatives reasonable access during normal business hours to all books, records, offices and other facilities and properties of the Companies as the Buyer, or its authorized representatives, may from time to time reasonably request; provided, however, that any such access shall be conducted in a manner not to materially interfere with the businesses or operations of the Companies. Notwithstanding the foregoing, neither the Buyer, nor any of its Representatives, may contact any customer or supplier of the Companies without the prior consent of the Sellers, such consent not to be unreasonably withheld, and the Sellers shall have a right to participate in any conversations with any such customer or supplier.

(b)       Any information provided to or obtained by the Buyer or its authorized representatives pursuant to paragraph (a) above shall be “Evaluation Materials” (herein referred to as “Evaluation Material”), and shall be treated confidentially by Buyer; provided that such Evaluation Material does not include information which: (1) is or becomes generally available to the public other than as a result of a disclosure by the Sellers or their affiliates, or their respective directors, officers, employees, agents or representatives (collectively, “representatives”), or (2) was or becomes available to Buyer on a non-confidential basis from a source other than the Sellers or their representatives, provided that such source is not bound by a confidentiality agreement with the Sellers or their affiliates or representatives or otherwise prohibited from transmitting the information by a contractual, legal or fiduciary obligation; providedfurther that the Buyer may disclose such confidential information to its representatives or if, but only to the extent, required by law. The obligations contained in this paragraph (b) shall terminate on the Closing Date; provided that if the Closing does not occur, the obligations contained in this Section 7.2(b) shall survive for a period of two (2) years from the date hereof. The rights of the Sellers pursuant to this Section 7.2(b) shall be in addition to and not in substitution of any other rights the Sellers may have.

(c)        From and after the Closing, the Sellers and Sellers’ Affiliates and representatives shall hold any information relating to the Buyer, the Company and their respective Affiliates which is non-public in confidence, and shall not, directly or indirectly, disclose, publish, or otherwise make available any of such confidential information to the public or to any Person or use any of such confidential information for its own benefit or for the benefit of any other Person, other than the Buyer and its Affiliates; provided that the Sellers may disclose such confidential information if, but only to the extent, required by law; provided, however, that in such case, such Sellers will provide the Buyer with prompt written notice thereof so that the Buyer may seek an appropriate protective order and/or waive the Sellers’ compliance with the provisions of this Agreement in respect thereof. Notwithstanding the foregoing, the Sellers may disclose and/or otherwise use such information (i) in connection with any

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litigation with the Buyer or any of its Affiliates and/or (ii) once such information is in the public domain through no fault of the Sellers.

(d)       No party will issue or cause the publication of any press release or other public announcement with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other parties hereto; provided, however, that nothing herein will prohibit any party from issuing or causing publication of any such press release or public announcement to the extent that such disclosure is upon advice of counsel required by law, in which case the party making such determination will, if practicable in the circumstances, use reasonable efforts to allow the other parties reasonable time to comment on such release or announcement in advance of its issuance.

7.3 Filings and Authorizations; Consummation.

(a)        Upon the terms and subject to the conditions hereof, each of the Buyer and the Sellers shall use its or his commercially reasonable efforts to take or cause to be taken all actions, and to do or cause to be done all other things, necessary, proper or advisable to consummate the transactions contemplated hereby as promptly as practicable.

(b)       Each of the parties hereto, as promptly as practicable, shall make, or cause to be made, all other filings and submissions under laws, rules and regulations applicable to it, or to its Affiliates, as may be required for it to consummate the transactions contemplated herein and use its commercially reasonable efforts to obtain, or cause to be obtained, all other authorizations, approvals, consents and waivers from all Persons and Governmental Authorities necessary to be obtained by it, or its subsidiaries or Affiliates, in order for it to consummate such transactions.

(c)        The parties hereto shall coordinate and cooperate with one another in exchanging and providing such information to each other and in making the filings and requests referred to in paragraph (b) above. The parties hereto shall supply such reasonable assistance as may be reasonably requested by any other party hereto in connection with the foregoing.

(d)       Each party hereto shall promptly inform the other parties of any material communication from any Governmental Authority regarding any of the transactions contemplated by this Agreement.

(e)        The parties hereto will not take any action that will have the effect of delaying, impairing or impeding the receipt of any required approvals and shall promptly respond to any requests for additional information from any Governmental Authority or other third party in respect thereof.

7.4 Further Assurances. From the date hereof until the earlier of the Closing Date and the termination of this Agreement in accordance with ARTICLE 10, each of the parties hereto shall execute such documents and perform such further acts as may be reasonably required to carry out the provisions hereof and the actions contemplated hereby. Prior to the Closing, the Sellers shall, and shall cause the Companies to, use their respective commercially reasonable efforts to assist Buyer in connection with Buyer’s efforts to obtain the Debt Financing, including (i) upon reasonable notice, participation in meetings, presentations, due diligence sessions and sessions with rating agencies, (ii) assisting with the preparation of materials for rating agency presentations, offering documents, private placement memoranda, bank information memoranda, prospectuses and similar documents required in connection with the Debt Financing, (iii) as promptly as practical, furnishing Buyer and its Debt Financing sources with financial and other information regarding the Companies as may be reasonably requested by Buyer (all such information, the “Required Information”), (iv) using commercially reasonable efforts to obtain

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accountants’ comfort letters, legal opinions, surveys and title insurance as reasonably requested by Buyer, in each case at Buyer’s sole cost and expense and (v) executing and delivering, as of the Closing, any pledge and security documents, other definitive financing documents, or other certificates, legal opinions or documents as may be reasonably requested by Buyer and otherwise reasonably facilitating the pledging of collateral. The Companies will periodically update any such Required Information as reasonably requested to do so by the Buyer.

7.5 Exclusivity. Until the earlier of the Closing and such time as this Agreement is terminated in accordance with ARTICLE 10, except for the transactions contemplated by this Agreement, the Sellers will not, and will cause the Companies and their respective Representatives not to, directly or indirectly, solicit, encourage or enter into any negotiation, discussion, contract, agreement, instrument, arrangement or understanding with any party, with respect to the sale of the shares or all or substantially all the assets of the Companies, or any merger, recapitalization or similar transaction with respect to the Companies or their respective businesses. In the event of a failure by a party to perform its obligations under this Section 7.5, the non-breaching party shall be entitled to specific performance through injunctive relief to prevent breaches of this Section 7.5 and to enforce specifically the provisions of this Section 7.5 in addition to any other remedy to which such party may be entitled, at law or in equity.

7.6 Employee Matters. Except as otherwise set forth in any “change in control” or similar agreement or instrument in effect as of the date hereof or as set forth in the Employment Agreements (as defined herein):

(a)        from and after the Closing until the first (1^st) anniversary thereof, the Buyer shall, or shall cause the Companies to, provide pension and welfare benefits (but not equity-based compensation) in the aggregate that are no less favorable to the employees of the Companies than the benefits provided to the employees pursuant to the Benefits Plan immediately prior to the Closing, provided, however, that except as otherwise set forth in any agreement (other than this Agreement) with any employee of the Companies or applicable law, nothing herein shall preclude the Buyer or the Companies from terminating the employment of any employee at any time on or after the Closing.

(b)       Notwithstanding anything to the contrary, employees of the Companies shall not be considered third-party beneficiaries under this Agreement.

(c)        Notwithstanding anything to the contrary, employees of the Companies shall not be considered third-party beneficiaries under this Agreement.

7.7 Transfer to James Richard Pratt. Prior to the Closing, the Sellers shall cause the Companies to transfer to James Richard Pratt the automobile previously identified to the Buyer.

7.8 Resignation of Sellers. Each of the Sellers other than KnoxCo severally agrees and covenants to resign from his or her position as a director, officer or employee of the Companies, as applicable, without compensation.

ARTICLE 8

CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER

The obligations of the Buyer under this Agreement shall be subject to the satisfaction, at or prior to the Closing Date, of all of the following conditions, any one or more of which may be waived by the Buyer:

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8.1 Representations and Warranties Accurate.

Each of the representations and warranties of the Sellers set forth in this Agreement (other than those referred to in Section 8.1(b) below) shall be true and correct in all material respects as of the date hereof and as of the Closing Date as though made as of such date (except to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties shall be true and correct in all material respects on and as of such earlier date).

(a)        Each of the representations and warranties contained in Sections 4.1 and 4.4 shall be true and correct in all respects.

8.2 No Material Adverse Effect. No event, change, development, effect, circumstance or occurrence shall have occurred since September 30, 2007 that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

8.3 Amalgamation. The amalgamation of 2002942 Ontario Inc., 2002943 Ontario Inc., 2002944 Ontario Inc., 2002945 Ontario Inc., Compos-A-Tron Mfg, Compos-A-Tron H O and the Company (the “Amalgamation”) shall have been duly effected in accordance with the Business Corporations Act (Ontario) in a manner and on terms satisfactory to the Buyer, and a copy of the articles of amalgamation with respect thereto shall have been delivered to the Buyer.

8.4 Performance. The Sellers shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed and complied with by them prior to or on the Closing Date.

8.5 Sellers’ Certificate. The Sellers shall have delivered to the Buyer a certificate dated as of the Closing Date, certifying the matters set forth in Sections 8.1 and 8.2.

8.6 Legal Prohibition.

On the Closing Date, there shall exist no injunction or other order issued by any Governmental Authority or court of competent jurisdiction which prohibits the consummation of the transactions contemplated under this Agreement and no proceeding or lawsuit shall have been commenced by any Governmental Authority or other Person for the purpose of obtaining any such injunction or order and no written notice shall have been received from any such Governmental Authority indicating an intent to restrain, prevent, materially delay or restructure the transactions contemplated hereby.

8.7 Payoff Letters. The Buyer shall have received payoff letters reasonably acceptable to it with respect to the payment of all Indebtedness set forth in Schedule 8.7 and all Company Expenses, and the release of any Encumbrance related thereto.

8.8 Consents. The Companies shall have obtained a consent/waiver under the agreements referenced in Schedule 8.8, such consent/waiver to be on terms reasonably satisfactory to Buyer.

8.9 Employment Agreements. John Scrymgeour shall have executed and delivered an employment agreement satisfactory to the Buyer and John Scrymgeour (the “Employment Agreement”).

8.10 Financing. The funds contemplated to be provided pursuant to the Debt Financing shall have been made available to Buyer substantially on the terms set forth in the Commitment Letters.

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8.11 Non-Compete Agreements. Each of the Sellers, James Richard Pratt and Drew Knox shall have executed and delivered a non-compete agreement in the form attached hereto as Exhibit A (collectively, the “Non-Compete Agreements”), given to maintain and preserve the value of the acquired Shares.

8.12 Other Deliverables. The following deliverables shall have been delivered to the Buyer:

(a)        satisfactory evidence of the termination of the Employment Agreement effective as of June 30, 2001 between Mfg, the Company, C.C.P. Holdings Inc. and Compos-A-Tron Research & Development Inc. and James Richard Pratt, together with mutual releases;

(b)       an executed copy of the Amendment to the Proceeds of Sale Agreement effective as of September 1, 2007 between 2002942 Ontario Inc., John Scrymgeour, Cheryl Scrymgeour, 2002943 Ontario Inc., Paolo Baldassarra, Mary Baldassarra, 2002944 Ontario Inc., Kurt Gowman, Donna Gowman, 2002945 Ontario Inc., James Richard Pratt, Janet Pratt, KnoxCo, Drew Knox, Jennifer McAvoy and Sharon Knox;

(c)        Stock certificates representing 100% of the Shares, duly endorsed in blank or accompanied by stock transfer powers; and

(d)       Copies of such certificates of good standing, board resolutions, officers’ and secretaries’ certificates and other related documents with respect to the Companies as the Buyer or its counsel reasonably requests.

ARTICLE 9

CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS

The obligation of the Sellers to effect the transactions contemplated by this Agreement shall be subject to the satisfaction, at or prior to the Closing Date, of all of the following conditions, any one or more of which may be waived by the Sellers:

9.1 Representations and Warranties Accurate. The representations and warranties of the Buyer contained in this Agreement shall have been true and correct in all material respects as of the date hereof and shall be true and correct in all material respects on and as of the Closing Date as though made on and as of the Closing Date (except for representations and warranties expressly stated to relate to a specific date, in which case such representations and warranties shall be true and correct in all material respects on such earlier date).

9.2 Performance. The Buyer shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed and complied with by it prior to or on the Closing Date.

9.3 Officer Certificate. The Buyer shall have delivered to the Company a certificate, signed by an executive officer of the Buyer, dated as of the Closing Date, certifying the matters set forth in Sections 9.1 and 9.2.

9.4 Other Agreements. The Buyer and/or the Companies, as applicable, shall have executed and delivered the Employment Agreement.

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9.5 Legal Prohibition. On the Closing Date, there shall exist no injunction or other order issued by any Governmental Authority or court of competent jurisdiction which prohibits the consummation of the transactions contemplated under this Agreement and no proceeding or lawsuit shall have been commenced by any Governmental Authority or other Person for the purpose of obtaining any such injunction or order and no written notice shall have been received from any such Governmental Authority indicating an intent to restrain, prevent, materially delay or restructure the transactions contemplated hereby.

ARTICLE 10

TERMINATION

10.1 Termination. This Agreement may be terminated on or prior to the Closing Date as follows:

(a) by the mutual consent of the Buyer and the Sellers;

(b)       at the election of the Buyer or the Sellers, if the Closing Date shall not have occurred on or before February 29, 2008;

(c)        at the election of the Buyer or the Sellers if a court of competent jurisdiction or other Governmental Authority shall have issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated under this Agreement and such order or action shall have become final and nonappealable.

10.2 Survival After Termination. If this Agreement is terminated by the parties in accordance with Section 10.1 hereof, this Agreement shall become void and of no further force and effect; provided, however, that none of the parties hereto shall have any liability in respect of a termination of this Agreement, except that the provisions of Section 7.2(b) (Confidential Information), Section 7.2(d) (Public Announcements), ARTICLE 12, and all related definitions shall survive the termination of this Agreement; provided, that nothing herein shall relieve any party from any liability for any willful breach of the provisions of this Agreement prior to the termination of this Agreement.

ARTICLE 11

INDEMNIFICATION AND RELEASE

11.1 Survival. Each of the representations and warranties of the Sellers contained in this Agreement (the “Sellers’ Representations”) and of the Buyer contained in this Agreement (the “Buyer’s Representations”) shall survive until the twelve (12) month anniversary of the Closing Date; provided, that the representations and warranties set forth in Sections 4.1 (Binding Obligations), 4.4 (The Shares), 5.1 (Organization and Corporate Power), 5.3 (Capitalization; Ownership of Shares), 5.4(b) (Absence of Undisclosed Liabilities) and Section 5.8 (Taxes) (collectively, the “Specified Representations”) shall survive until the two (2) year anniversary of the Closing. The Buyer shall be entitled to make a claim under Section 11.2(a)(iii) at any time on or before the second anniversary of Closing for third party claims for which the Companies have received written notification prior to the expiry of the second anniversary of Closing. For greater certainty, on the expiry of two years after Closing, the Buyer’s right to claim a Loss pursuant to Section 11.2(a)(iii) shall terminate subject to the last sentence hereof. Each of the covenants and agreements of the parties under this Agreement shall survive the Closing for a period of three (3) years unless otherwise specified. If any Claims Notice (as defined below) is given in good faith in accordance with the terms of Section 11.4 within the applicable survival period provided above (as

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applicable, the “Cut-Off Date”), the claims specifically set forth in the Claims Notice shall survive until such time as such claim is finally resolved.

11.2 Indemnification by the Sellers; Indemnification by the Buyer.

(a)        Subject to Section 11.1, from and after the Closing, the Sellers jointly and severally agree to indemnify and hold harmless the Buyer, its Affiliates and their respective officers, directors, employees, shareholders, partners and members (each, a “Buyer Indemnitee”) from and against any and all losses, liabilities, expenses (including reasonable attorneys’ fees), claims, Taxes, suits, actions and damages (collectively, “Losses”) arising from, or in connection with, any (i) breach of the Sellers’ Representations, (ii) breach of any covenant or agreement made hereunder by the Sellers, (iii) any product liability or product warranty claim made by third parties in writing to the Companies prior to the expiry of the second anniversary of Closing with respect to any products manufactured or sold by any of the Companies prior to the Closing, (iv) any Taxes of or relating to the Companies for all Pre-Closing Tax Periods or (v) any claim made by a third party with respect to the termination of any distribution agreement or arrangement, whether written or oral, to which any of the Companies is a party at the date of this Agreement, provided that the Buyer shall have: (A) given reasonable notice of termination of such distribution agreement, it being agreed that any notice of termination expiring on October 31, 2008 shall be deemed reasonable for the purposes of this Agreement, and (B) acted reasonably in conjunction with the Sellers to attempt to resolve any such claim or dispute amicably. and (B) acted reasonably in conjunction with the Sellers to attempt to resolve any such claim or dispute amicably.

(b)       The Buyer hereby agrees to indemnify and hold harmless the Sellers (each a “Seller Indemnitee,” and together with the Buyer Indemnitee, the “Indemnitees” and each an “Indemnitee”), from and against any Losses arising from or in connection with (i) breach of the Buyer’s representations, (ii) breach of any covenant or agreement made hereunder by the Buyer, or (iii) any Taxes of or relating to the Companies for all Post-Closing Tax Periods.

(c)        Any determination of whether the breach of a representation or warranty has occurred or the amount of Losses attributable to a breach of any representation or warranty contained in this Agreement shall be made without giving effect to the words “material”, “materiality”, “Material Adverse Effect” and other similar qualifications as they appear in such representation or warranty.

(d)       Notwithstanding the foregoing, the representations, warranties, covenants and agreements contained in this Agreement that relate specifically and solely to a particular Seller are the obligations of that particular Seller only, the other Sellers shall not be responsible therefor, and the particular Seller making any such representation, warranty, covenant or agreement contained in this Agreement shall be solely responsible for any Losses an Indemnitee suffers as a result of any breach of any such representations, warranties, covenants and agreements by such Seller.

11.3 Limitations on Indemnification.

(a)        Notwithstanding anything in this Agreement to the contrary, in no event shall the cumulative indemnification obligations of the Sellers under Sections 11.2(a)(i), (iii) and (v), on the one hand, and the Buyer under Section 11.2(b)(i) on the other hand, in the aggregate exceed an amount equal to $8,000,000 (the “Cap”).

(b)       Notwithstanding anything in this Agreement to the contrary, the Sellers shall not be liable for any Losses under Sections 11.2(a)(i), (iii) or (v), unless the aggregate amount of Losses that would otherwise be payable under (A) Section 11.2(a)(i) exceeds an amount equal to $350,000 (the “Basket Amount”), (B) Section 11.2(a)(iii) exceeds an amount equal to $250,000 (the

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“Product Warranty Basket Amount”) or (C) Section 11.2(a)(iv) exceeds an amount of $350,000 (the “Distribution Basket Amount”), whereupon the Buyer Indemnitee shall be entitled to receive amounts for Losses in excess of the Basket Amount, the Product Warranty Basket Amount or the Distribution Basket Amount (as the case may be); provided, however, that any and all breaches of the Specified Representations shall not be subject to the Basket Amount but shall instead be recoverable from “dollar one.” For clarity, any Loss that is included in one basket shall not be included in any other basket.

11.4 Indemnification Claim Process.

(a)        All claims for indemnification by either a Seller Indemnitee or the Buyer Indemnitee under Section 11.2 shall be asserted and resolved in accordance with Sections 11.4 and 11.5.

(b)       If an Indemnitee intends to seek indemnification pursuant to Section 11.2, the Indemnitee shall notify the Indemnitor or Indemnitors, as applicable, in writing of such claim within 30 days of first learning of such claim (provided that any delay in notice shall not relieve any person of its obligations under this Agreement except to the extent prejudiced by this delay), describing such claim in reasonable detail and the amount or estimated amount of such Losses (the “Claims Notice”).

(c)        The Indemnitee shall have 60 calendar days from the date on which the Indemnitor received the Claims Notice to notify the Indemnitee that the Indemnitor desires to assume the defense or prosecution of any Third Party Claim and any litigation resulting therefrom with counsel of its choice. If the Indemnitor assumes the defense of a Third Party Claim in accordance herewith, (i) the Indemnitee may retain separate co-counsel at its sole cost an expense and participate in the defense of such Third Party Claim, but the Indemnitor shall control the investigation, defense and settlement thereof, (ii) the Indemnitee shall not file any papers or consent to the entry of any judgment or enter into any settlement with respect to such Third Party Claim without the prior written consent of the Indemnitor (which shall not be unreasonably withheld or delayed), and (iii) the Indemnitor shall not consent to the entry of any judgment or enter into any settlement with respect to such Third Party Claim without the prior written consent of the Indemnitee (which shall not be unreasonably withheld or delayed) unless the judgment or settlement provides solely for the payment of money, the Indemnitor makes such payment (subject to the applicable limitations contained herein) and the Indemnitee receives an unconditional release. The parties shall act in good faith in responding to, defending against, settling or otherwise dealing with Third Party Claims, and reasonably cooperate in any such defense and give each other reasonable access to all information relevant thereto. Whether or not the Indemnitor has assumed the defense of such Third Party Claim or the Buyer Indemnitee has maintained control pursuant to this Section of such Third Party Claim under Section 11.2(a)(iii), the Indemnitor will not be obligated to indemnify the Indemnitee hereunder with respect to any settlement entered into or any judgment consented to without the Indemnitor’s prior written consent (which shall not be unreasonably withheld or delayed). Notwithstanding the foregoing, in the case of any Third Party Claim related to Taxes (x) to the extent such claim relates to Straddle Periods, Buyer shall be entitled to control the investigation, defense and settlement thereof , provided that Sellers shall be entitled to participate in such investigation, defense and settlement thereof and (b) Sellers shall not be entitled to settle such claim if such settlement could reasonably expected to have an adverse effect on Buyer or the Company for any Post-Closing Tax Period without the consent of Buyer (such consent not to be unreasonably withheld).

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(d)       If the Indemnitor does not assume the defense of such Third Party Claim within 60 calendar days of receipt of the Claims Notice, the Indemnitee will be entitled to assume such defense, at it sole cost and expense (or, if the Indemnitee incurs a Loss with respect to the matter in question for which the Indemnitee is entitled to indemnification pursuant to Section 11.2, at the expense of the Indemnitor), upon delivery of notice to such effect to the Indemnitor; provided, however, that the Indemnitor (i) shall have the right to participate in the defense of the Third Party Claim at its sole cost and expense, (ii) may at any time thereafter assume defense of the Third Party Claim, in which event he Indemnitor shall bear the reasonable fees, costs and expenses of the Indemnitee’s counsel incurred prior to the assumption by the Indemnitor of defense of the Third Party Claim, and (iii) shall not be obligated to indemnify the Indemnitee hereunder for any settlement entered into or any judgment consented to without the Indemnitor’s prior written consent (which shall not be unreasonably withheld or delayed).

(e)        The Buyer Indemnitee shall, and shall cause each of the Companies to, provide reasonable cooperation with the Sellers in all aspects of any investigation,, defense, pretrial activities, trial, compromise, settlement or discharge of any claim in respect of which a Buyer Indemnitee is seeking indemnification pursuant to this Section 11.2 that the Sellers have elected to control, including, but not limited to, by providing the Sellers with reasonable access to books, records, employees and officers (including as witnesses) of any of the Companies.

11.5 Indemnification Procedures for Non-Third Party Claims. The Indemnitee will deliver a Claims Notice to the Indemnitor promptly upon its discovery of any matter for which the Indemnitor may be liable to the Indemnitee hereunder that does not involve a Third Party Claim, which Claims Notice shall state the basis for such claim. The Indemnitee shall reasonably cooperate and assist the Indemnitor in determining the validity of any claim for indemnity and in otherwise resolving such matters. Such assistance and cooperation shall include providing reasonable access to and copies of information, records and documents relating to such matters, furnishing employees to assist in the investigation, defense and resolution of such matters and providing legal and business assistance with respect to such matters.

11.6 Exclusive Remedy. Notwithstanding anything to the contrary herein, except in the case of fraud or intentional misrepresentation(i) the indemnification provisions of ARTICLE 11 shall be the sole and exclusive remedy of the parties following the Closing for any and all breaches or alleged breaches of any representations, warranties, covenants or agreements of the parties, or any other provision of this Agreement or the transactions contemplated hereby, (ii) any amounts conclusively determined to be owing from the Sellers pursuant to ARTICLE 11 shall first be made available from the Escrow Amount to the extent of available funds therein and (iii) thereafter, any amounts conclusively determined to be owing from the Sellers pursuant to ARTICLE 11 shall be offset against the Cash Earn Out Consideration to the extent such Cash Earn Out Consideration is payable pursuant to Section 2.1(d).

11.7 Insurance; Other Indemnification. The amount of any Losses suffered by an Indemnitee shall be reduced by any insurance or other benefits which such party or its representative actually receive in respect of or as a result of such Losses or the facts or circumstances relating thereto. Each Indemnitee shall use reasonable efforts to seek full recovery under all insurance policies and other sources covering any Loss to the same extent as such party would if such Loss was not subject to indemnification hereunder. In the event that an insurance or other recovery is made by any Indemnitee with respect to any Loss for which any such Indemnitee has been indemnified hereunder, then a refund equal to the aggregate amount of the recovery shall be made promptly to the Person or Person that provided such indemnity payments to such Indemnitee.

11.8 Entitlement to Claim. The Buyer shall not be entitled to make a claim pursuant to this ARTICLE 11 if (i) the Buyer has been advised in writing or otherwise has actual knowledge prior to

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the date hereof of the inaccuracy, non-performance, non-fulfillment or breach which is the basis of such claim or (ii) the subject matter of the claim relates to a condition precedent for the benefit of the Buyer as set forth in ARTICLE 8 which the Buyer has waived.

11.9 Release.

(a)        Notwithstanding anything to the contrary in this Agreement, each of the Sellers (each, a “Seller Releasor”), for itself and any of its beneficiaries, any entity controlled by such Seller Releasor (other than the Companies), and the respective successors and assigns of each of the foregoing, hereby releases and forever discharges (i) the Companies, (ii) all of the Companies’ past, present and future affiliates, and (iii) all past, present and future officers, directors, shareholders, employees, agents and representatives of the entities listed in (i) and (ii) (each, a “Buyer Released Party”) from all claims, liabilities, demands and causes of action, known and unknown, in law and equity, that such Seller Releasor had, has or may have, in any capacity, arising from any matter or thing arising prior to the Closing Date other than the performance by the Buyer Released Parties of their obligations under this Agreement (“Seller Released Claims”).

(b)       Notwithstanding anything to the contrary in this Agreement, the Company (the “Buyer Releasor”), for itself and any of its beneficiaries, any entity controlled by such Buyer Releasor, and the respective successors and assigns of each of the foregoing, hereby releases and forever discharges (i) the Sellers, (ii) all of the Sellers’ past, present and future affiliates, and (iii) all past, present and future officers, directors, shareholders, employees, agents and representatives of the entities listed in (i) and (ii), as applicable (each, a “Seller Released Party”), from the Closing Date from all claims, liabilities, demands and causes of action, known and unknown, in law and equity, that the Buyer Releasor had, has or may have, arising from any matter or thing arising prior to the Closing Date other than the performance by the Seller Released Parties of their obligations under this Agreement and any documents, arrangements or agreements ancillary thereto or entered into in connection with this Agreement (“Buyer Released Claims”).

11.10 Calculation of Damages. Any indemnity payment made pursuant to this Agreement shall be treated as an adjustment to the purchase price for all tax purposes to the extent permitted by law. Notwithstanding the forgoing, the amount of any damages which may be claimed by the Buyer pursuant to this ARTICLE 11 shall be calculated to be the cost or loss to the Buyer after giving effect to the value of any related, determinable tax benefits realized by the Companies or the Buyer in relation to the matter which is the subject of the claim, and shall be increased to take account of any tax liability realized by the Companies or the Buyer in connection with the receipt of any indemnity payment.

ARTICLE 12

MISCELLANEOUS

12.1 Expenses. Except as expressly provided herein, all fees, costs, liabilities and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses; provided, that (i) all fees, costs, liabilities and expenses of the Companies, the Sellers or any of their Affiliates related to the transactions contemplated by this Agreement and (ii) any transaction bonus, discretionary bonus, “stay-put” or other compensatory payments to be made to employees of the Companies at Closing as a result of the execution of this Agreement or consummation of the transactions contemplated hereby or at the discretion of the Companies (other than any payments due as a result of any, direct or indirect, action taken by the Buyer or any of its Affiliates from and after the Closing) shall be “Company Expenses” to the extent not paid prior to Closing.

38

12.2 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

12.3 Entire Agreement. This Agreement including the Schedules and Exhibits attached hereto which are deemed for all purposes to be part of this Agreement, and the other documents, delivered pursuant to this Agreement, contain all of the terms, conditions and representations and warranties agreed upon or made by the parties relating to the subject matter of this Agreement and the businesses and operations of the Company and supersede all prior and contemporaneous agreements, negotiations, correspondence, undertakings and communications of the parties or their representatives, oral or written, respecting such subject matter.

12.4 Headings. The headings contained in this Agreement are intended solely for convenience and shall not affect the rights of the parties to this Agreement.

12.5 Notices. Any notice or other communication required or permitted under this Agreement shall be deemed to have been duly given and made if (i) in writing and served by personal delivery upon the party for whom it is intended, (ii) if delivered by telecopier with receipt confirmed, or (iii) if delivered by certified mail, registered mail, courier service, return-receipt received to the party at the address set forth below, with copies sent to the Persons indicated:

If to the Sellers or, prior to the Closing, the Company:

30 Melford Drive

Toronto, Ontario

Canada

M1B 1Z4

Attn: John Scrymgeour

Fax: (416) 335-8500

With a copy to:

Michael Di Paolo Professional Corporation

Barrister & Solicitor

Suite 400

7050 Weston Road

Woodbridge, Ontario

Fax: (905) 850-7575

If to the Buyer or, after the Closing, to the Company:

CPG International

801 Corey Street

Scranton, PA 18505

Attn: Scott Harrison

Fax: (570) 558-8202

Fax: (905) 850-7575

39

With a copy to:

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, New York 10004

Attn: Christopher Ewan, Esq.

Fax: (212) 859-4000

Such addresses may be changed, from time to time, by means of a notice given in the manner provided in this Section 12.5.

12.6 Exhibits and Schedules.

(a)        No reference to or disclosure of any item or other matter in the schedules to this Agreement (the “Schedules”) shall be construed as an admission or indication that such item or other matter is material or that such item or other matter is required to be referred to or disclosed in the Schedules. Certain agreements and other matters are listed in the Schedules for informational purposes only, notwithstanding the fact that, because they do not rise above applicable materiality thresholds or otherwise, they are not required to be listed by the terms of this Agreement. Reference to any document in the Schedules includes any amendment to such document, and does not purport to be complete and is qualified in its entirety by the document itself. The Schedules and the information and disclosures contained therein are intended only to qualify and limit the representations and warranties contained in this Agreement and shall not in any way be deemed to expand the scope or effect of any such representations and warranties contained herein. Notwithstanding anything to the contrary contained in the Schedules or in this Agreement, the information and disclosures contained in each Schedule shall be deemed to be disclosed and incorporated by reference in each of the other Schedule as though fully set forth in such other Schedule (whether or not specific cross-references are made) on its face the significance of the disclosure is reasonably apparent on its face.

(b)       The Schedules and Exhibits hereto are hereby incorporated into this Agreement and are hereby made a part hereof as if set out in full in this Agreement.

12.7 Waiver. Waiver of any term or condition of this Agreement by any party shall only be effective if in writing and shall not be construed as a waiver of any subsequent breach or failure of the same term or condition, or a waiver of any other term or condition of this Agreement.

12.8 Binding Effect: Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their permitted successors and assigns. No party to this Agreement may assign or delegate, by operation of law or otherwise, all or any portion of its rights, obligations or liabilities under this Agreement without the prior written consent of the other parties to this Agreement, which any such party may withhold in its absolute discretion. Any purported assignment without such prior written consents shall be void. Notwithstanding the foregoing, the Buyer may, without the consent of the Sellers: (a) assign any or all of its rights and interests hereunder to one or more of its Affiliates, (b) designate one or more of its Affiliates to perform its obligations hereunder and (c) assign its rights, but not its obligations, under this Agreement to any of its or its Affiliate’s financing sources (in any or all of such cases described in (a), (b) or (c), the Buyer shall remain responsible for the performance of all of its obligations hereunder).

40

12.9 No Third Party Beneficiary. Nothing in this Agreement shall confer any rights, remedies or claims upon any Person or entity not a party or a permitted assignee of a party to this Agreement.

12.10 Counterparts. This Agreement may be signed in any number of counterparts with the same effect as if the signatures to each counterpart were upon a single instrument, and all such counterparts together shall be deemed an original of this Agreement.

12.11 Governing Law and Jurisdiction. This Agreement and any claim or controversy hereunder shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein without giving effect to the principles of conflict of laws thereof.

12.12 Consent to Jurisdiction and Service of Process. Any legal action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby may only be instituted in the City of Toronto, Ontario, and each party waives any objection which such party may now or hereafter have to the laying of the venue of any such action, suit or proceeding, and irrevocably submits to the jurisdiction of any such court in any such action, suit or proceeding.

12.13 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.13.

12.14 Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by them in accordance with the terms hereof or were otherwise breached and that each party hereto shall be entitled to an injunction or injunctions to prevent breaches of the provisions hereof and to specific performance of the terms hereof, in addition to any other remedy at law or equity.

12.15 Severability. If any term, provision, agreement, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, agreements, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a reasonably acceptable manner so that the transactions contemplated hereby may be consummated as originally contemplated to the fullest extent possible.

[Remainder of page intentionally left blank]

41

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.

		2162771 ONTARIO INC.
By:
	Name:
	Title:

By:		/s/ JOHN SCRYMGEOUR
	Name:	John Scrymgeour

By:		/s/ CHERYL SCRYMGEOUR
	Name:	Cheryl Scrymgeour

By:		/s/ PAOLO BALDASSARRA
	Name:	Paolo Baldassarra

By:		/s/ MARY BALDASSARRA
	Name:	Mary Baldassarra

By:		/s/ KURT GOWMAN
	Name:	Kurt Gowman

By:		/s/ DONNA GOWMAN
	Name:	Donna Gowman

By:		/s/ JANET PRATT
	Name:	Janet Pratt

		KNOX & COMPANY INTERNATIONAL INC.
By:
	Name:
	Title:

EX-10

Exhibit 10-13

LOAN AND SECURITY AGREEMENT

by and among

SCRANTON PRODUCTS INC.

AZEK BUILDING PRODUCTS, INC.

PROCELL DECKING INC.

as Borrowers

CPG INTERNATIONAL INC.

CPG INTERNATIONAL I INC.

SANTANA PRODUCTS INC.

CPG SUB I CORPORATION

VYCOM CORP.

SANATEC SUB I CORPORATION

as Guarantors

THE LENDERS AND ISSUING BANK FROM TIME TO TIME PARTY HERETO

WACHOVIA BANK, NATIONAL ASSOCIATION

as Administrative Agent

GENERAL ELECTRIC CAPITAL CORPORATION

as Syndication Agent

WACHOVIA CAPITAL MARKETS, LLC

as Lead Arranger and Lead Bookrunner

Dated: February 13, 2008

953600.10

TABLE OF CONTENTS

SECTION 1. DEFINITIONS 1

SECTION 2. CREDIT FACILITIES 43

2.1 Revolving Loans. 43

2.2 Swing Line Loans. 44

2.3 Letters of Credit. 44

2.4 Requests for Borrowings. 49

2.5 Increase in Maximum Credit. 49

2.6 Decrease in Maximum Credit. 51

2.7 Prepayments. 51

2.8 Joint and Several Liability of Borrowers. 52

2.9 Commitments. 54

SECTION 3. INTEREST AND FEES 54

3.1 Interest... 54

3.2 Fees..... 55

3.3 Inability to Determine Applicable Interest Rate. 56

3.4 Illegality. 56

3.5 Increased Costs. 57

3.6 Capital Requirements. 57

3.7 Certificates for Reimbursement. 57

3.8 Delay in Requests. 57

3.9 Mitigation; Replacement of Lenders. 58

3.10 Funding Losses. 58

3.11 Maximum Interest. 59

3.12 No Requirement of Match Funding. 59

SECTION 4. CONDITIONS PRECEDENT 59

4.1       Conditions Precedent to Effectiveness of Agreement to Make Initial Loans and Letters of Credit.... 60

4.2 Conditions Precedent to All Loans and Letters of Credit. 61

SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST 62

5.1 Grant of Security Interest. 62

5.2 Exclusions from Collateral. 63

5.3 Perfection of Security Interests. 63

SECTION 6. COLLECTION AND ADMINISTRATION 66

6.1 Borrowers’ Loan Accounts. 66

6.2 Statements. 66

6.3 Lenders’ Evidence of Debt. 67

6.4 Register. 67

6.5 Promissory Notes. 67

6.6 Cash Management; Collection of Proceeds of Collateral. 68

6.7 Payments. 69

953600.10 i

6.8 Taxes.... 70

6.9 Use of Proceeds. 72

6.10     Appointment of Borrower Agent as Agent for Requesting Loans and Receipts of Loans and Statements. 72

6.11 Pro Rata Treatment. 73

6.12 Sharing of Payments, Etc. 73

6.13 Settlement Procedures. 74

6.14 Obligations Several; Independent Nature of Lenders’ Rights. 76

6.15 Bank Products. 77

SECTION 7. COLLATERAL REPORTING AND COVENANTS 77

7.1 Collateral Reporting. 77

7.2 Accounts Covenants. 78

7.3 Inventory Covenants. 79

7.4 Equipment Covenants. 80

7.5 Power of Attorney. 80

7.6 Right to Cure. 81

7.7 Access to Premises. 81

SECTION 8. REPRESENTATIONS AND WARRANTIES 82

8.1 Existence, Power and Authority. 82

8.2 Name; State of Organization; Chief Executive Office; Collateral Locations. 82

8.3 Financial Statements; No Material Adverse Effect. 83

8.4 Priority of Liens; Title to Properties. 83

8.5 Tax Returns. 83

8.6 Litigation. 83

8.7 Compliance with Other Agreements and Applicable Laws. 84

8.8 Environmental Compliance. 84

8.9 Employee Benefits. 85

8.10 Bank Accounts. 85

8.11 Intellectual Property. 85

8.12 Subsidiaries; Affiliates; Capitalization; Solvency. 86

8.13 Labor Disputes. 87

8.14 Restrictions on Subsidiaries. 87

8.15 Material Contracts. 87

8.16 Payable Practices. 87

8.17 OFAC.... 87

8.18 Accuracy and Completeness of Information. 88

8.19 Survival of Warranties; Cumulative. 88

SECTION 9. AFFIRMATIVE COVENANTS 88

9.1 Maintenance of Existence. 88

9.2 New Collateral Locations. 89

9.3 Compliance with Laws, Regulations, Etc. 89

9.4 Payment of Taxes and Claims. 90

9.5 Insurance. 90

9.6 Financial Statements and Other Information. 91

9.7 Compliance with ERISA. 94

9.8 End of Fiscal Years; Fiscal Quarters. 94

953600.10 ii

9.9 License Agreements. 95

9.10 Additional Guaranties and Collateral Security; Further Assurances. 95

9.11 Post-Closing Deliveries. 96

9.12 Costs and Expenses. 97

SECTION 10. NEGATIVE COVENANTS 97

10.1 Sale of Assets, Consolidation, Merger, Dissolution, Etc. 97

10.2 Encumbrances. 98

10.3 Indebtedness. 99

10.4 Investments. 102

10.5 Restricted Payments. 102

10.6 Transactions with Affiliates. 105

10.7 Change in Business. 106

10.8 Limitation of Restrictions Affecting Subsidiaries. 106

10.9 Certain Payments of Indebtedness, Etc. 107

10.10 Modifications of Indebtedness, Organizational Documents and Certain Other Agreements. 108

10.11 Inactive Subsidiaries; Parent Holding Company. 109

10.12 Sale and Leasebacks. 109

10.13 Designation of Designated Senior Debt. 110

10.14 Foreign Assets Control Regulations, Etc. 110

SECTION 11. FINANCIAL COVENANT 110

11.1 Fixed Charge Coverage Ratio. 110

SECTION 12. EVENTS OF DEFAULT AND REMEDIES 110

12.1 Events of Default. 110

12.2 Remedies. 112

SECTION 13.      JURY TRIAL WAIVER; OTHER WAIVERS CONSENTS; GOVERNING LAW 115

13.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver. 115

13.2 Waiver of Notices. 116

13.3 Amendments and Waivers. 117

13.4 Waiver of Counterclaims. 119

13.5 Indemnification. 119

SECTION 14. THE AGENT 120

14.1 Appointment, Powers and Immunities. 120

14.2 Reliance by Agent. 120

14.3 Events of Default. 120

14.4 Wachovia in Its Individual Capacity. 121

14.5 Indemnification. 121

14.6 Non-Reliance on Agent and Other Lenders. 121

14.7 Failure to Act. 122

14.8 Additional Loans. 122

14.9 Concerning the Collateral and the Related Financing Agreements. 122

14.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders. 123

14.11 Collateral Matters. 123

14.12 Agency for Perfection. 125

953600.10 iii

14.13 Agent May File Proofs of Claim. 125

14.14 Successor Agent. 126

14.15 Legal Representation of Agent. 126

14.16 Other Agent Designations. 126

SECTION 15. TERM OF AGREEMENT; MISCELLANEOUS 126

15.1 Term.... 126

15.2 Interpretative Provisions. 127

15.3 Notices. 129

15.4 Partial Invalidity. 130

15.5 Confidentiality. 130

15.6 Successors. 131

15.7 Assignments; Participations. 132

15.8 Entire Agreement. 134

15.9 USA Patriot Act. 134

15.10 No Advisory or Fiduciary Responsibility. 134

15.11 Counterparts, Etc. 135

953600.10 iv

INDEX

TO

EXHIBITS AND SCHEDULES

Exhibit A	Form of Assignment and Acceptance
Exhibit B	Form of Borrowing Base Certificate
Exhibit C	Information Certificate
Exhibit D	Form of Compliance Certificate
Exhibit E	Commitments
Schedule 1.35	Historical EBITDA
Schedule 1.65	Historical Fixed Charges

953600.10 v

LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement (“Agreement”) dated February 13, 2008 is entered into by and among Scranton Products, Inc., a Delaware corporation (“Scranton”), AZEK Building Products, Inc., a Delaware corporation (“AZEK”), Procell Decking Inc., a Delaware corporation (“Procell”, and together with Scranton and AZEK, and any Subsidiaries that may become parties hereto after the date hereof as borrowers, each individually a “Borrower” and collectively, “Borrowers” as hereinafter defined), CPG International Inc., a Delaware corporation (“Parent”), CPG International I Inc., a Delaware corporation (“CPG I”) Santana Products Inc., a Delaware corporation (“Santana”), CPG Sub I Corporation, a Delaware Corporation (“Sub I”), Vycom Corp., a Delaware corporation (“Vycom”) and Sanatec Sub I Corporation, a Delaware corporation (“Sanatec”, and together with Parent, CPG I, Santana, Sub I, Vycom, and any Subsidiaries that are not Foreign Subsidiaries that may become parties hereto after the date hereof as guarantors, each individually a “Guarantor” and collectively “Guarantors” as hereinafter defined), the parties hereto from time to time as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders” as hereinafter further defined), Wachovia Bank, National Association, a national banking association, in its capacity as agent for Lenders (in such capacity, “Agent” as hereinafter further defined).

W I T N E S S E T H:

WHEREAS, Borrowers and Guarantors have requested that Lenders provide a credit facility to Borrowers and each Lender is willing to (severally and not jointly) make such loans and provide such financial accommodations to Borrowers on a pro rata basis according to its Commitment (as defined below) on the terms and conditions set forth herein and in the other Financing Agreements (as defined below), and Agent is willing to act as agent for Lenders on the terms and conditions set forth herein and the other Financing Agreements;

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

 

SECTION 1. DEFINITIONS

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

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

1.2 “Acquired Business” shall have the meaning given such term in the definition of the term “Permitted Acquisitions” contained herein.

1.3 “Acquired Indebtedness” shall mean Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Subsidiary of Parent or at the time it merges or consolidates with the Parent or any of its Subsidiaries or assumed in connection with the acquisition of assets from such Person and in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such

953600.10

Person becoming a Subsidiary of the Borrower or such acquisition, merger or consolidation; provided, that, any Indebtedness of such Person that is extinguished, redeemed, defeased (other than through covenant defeasance), retired or otherwise repaid at the time of or immediately upon consummation of the transaction pursuant to which such Person becomes a Subsidiary of Parent will not be Acquired Indebtedness.

1.4 “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan comprising part of the same borrowing (including conversions, extensions and renewals), the rate per annum determined by dividing (a) the London Interbank Offered Rate for such Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not any Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage.

1.5 “AEA Group” shall mean, collectively, AEA Investors LLC, AEA Management (Cayman) Ltd., AEA Investors LP and their Affiliates.

1.6 “Affiliate” shall mean, with respect to a specified Person, any other Person (excluding any Subsidiary) which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person. For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power either (a) to vote ten (10%) percent or more of the securities having ordinary voting power for the election of directors of such Person or (b) to direct or cause the direction of the management and policies, whether through the ownership of Equity Interests, by agreement or otherwise. Notwithstanding the foregoing, none of Wachovia Capital Partners 2005, LLC, Agent or any Lender shall be deemed an Affiliate of Parent or any of its Subsidiaries solely by reason of the relationship created by the Financing Agreements. Furthermore, for purposes of Sections 8 and 10 (other than Section 10.6) hereof, neither the limited partners participating in the AEA Group's investment programs nor any mezzanine or other debt investment funds managed by the AEA Group nor portfolio companies of the AEA Group shall constitute an Affiliate of Parent or any of its Subsidiaries.

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

1.8 “Agent Payment Account” shall mean account no. 2070482789126 of Agent at Wachovia, or such other account of Agent as Agent may from time to time designate in writing to Borrower Agent as the Agent Payment Account for purposes of this Agreement and the other Financing Agreements.

1.9 “Applicable Margin” shall mean, with respect to Base Rate Loans and Eurodollar Rate Loans, the applicable percentage (on a per annum basis) set forth below based on the Quarterly Average Excess Availability for the immediately preceding calendar quarter.

2

Tier	Quarterly Average Excess Availability	Applicable Eurodollar Rate Margin	Applicable Base Rate Margin
1	Greater than $35,000,000	1.50%	.00%
2	Less than or equal to $35,000,000 and greater than $15,000,000	1.75%	.25%
3	Less than or equal to $15,000,000	2.25%	.50%

provided, that, (i) the Applicable Margin shall be calculated and established once every three (3) months and shall remain in effect until adjusted for the next three (3) month period, (ii) each adjustment of the Applicable Margin shall be effective as of the first day of each such three (3) month period based on the Quarterly Average Excess Availability for the immediately preceding three (3) month period, and (iii) the Applicable Margin through August 31, 2008 shall be the amount for Tier 2 set forth above. In the event that at any time after the end of any three (3) month period the Quarterly Average Excess Availability for such three (3) month period used for the determination of the Applicable Margin was less than the actual amount of the Quarterly Average Excess Availability for such period as a result of the inaccuracy of information provided by or on behalf of Borrowers to Agent for the calculation of Excess Availability, the Applicable Margin for such prior period shall be adjusted to the applicable percentage based on such actual Quarterly Average Excess Availability and any additional interest for the applicable period as a result of such recalculation shall be promptly paid to Agent. The foregoing shall not be construed to limit the rights of Agent and Lenders with respect to the amount of interest payable after a Default or Event of Default whether based on such recalculated percentage or otherwise.

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

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

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

1.13 “AZEK Companies” shall mean, collectively, the following (together with their respective successors and assigns): (a) AZEK, (b) Procell, and (c) any other Person that is a Borrower after the date hereof that engages in a line of business substantially similar to, or ancillary or related to, or used or useful to, the businesses that AZEK and Procell are engaged in on the date hereof; sometimes being referred to herein individually as an “AZEK Company”.

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

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1.15 “Bank Products” shall mean any one or more of the following types or services or facilities provided to a Borrower by Agent or a Bank Product Provider: (a) credit cards, debit cards or stored value cards or the processing of payments and other administrative services with respect to credit cards, debit cards or stored value cards or (b) cash management or related services, including (i) the automated clearinghouse transfer of funds for the account of a Borrower pursuant to agreement or overdraft for any accounts of Borrowers maintained at Agent or any Bank Product Provider that are subject to the control of Agent pursuant to any Deposit Account Control Agreement to which Agent, such Affiliate of Agent, Lender or Affiliate of Lender is a party, as applicable, and (ii) controlled disbursement services and (iii) Hedge Agreements if and to the extent permitted hereunder. Any of the foregoing shall only be included in the definition of the term “Bank Products” to the extent that the Lender, its Affiliate or the other financial institution has been approved by Agent in writing with notice to Borrower Agent.

1.16 “Base Rate” shall mean, on any date, the greater of (a) the rate from time to time publicly announced by Wachovia, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank or (b) the Federal Funds Rate in effect on such day plus one-half (1/2%) percent.

1.17 “Base Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Base Rate in accordance with the terms hereof. All Swing Line Loans shall be Base Rate Loans.

1.18 “Borrower Agent” shall mean CPG I in its capacity as Borrower Agent on behalf of itself and the other Borrowers and Guarantors pursuant to Section 6.10 hereof and its successors and assigns in such capacity.

1.19 “Borrowers” shall have the meaning set forth in the preamble hereto and include any other Person that at any time after the date hereof becomes a Borrower; each sometimes being referred to herein individually as a “Borrower”.

1.20 “Borrowing Base” shall mean, at any time, the amount equal to:

(a) the amount equal to:

(i)      eighty-five (85%) percent multiplied by the amount of Eligible Accounts of the AZEK Companies; plus

(ii)     the lesser of (A) seventy (70%) percent multiplied by the Value of Eligible Inventory of the AZEK Companies consisting of resin (that is not Eligible Domestic In-Transit Inventory) or (B) eighty-five (85%) percent of the Net Recovery Percentage for such Eligible Inventory multiplied by the Value of such Eligible Inventory; plus

(iii)    the lesser of (A) the sum of (1) sixty (60%) percent multiplied by the Value of Eligible Inventory of the AZEK Companies consisting of raw materials (other than resin) and (2) sixty-five (65%) percent multiplied by the Value of Eligible Inventory of the AZEK Companies consisting of finished goods (in each case that is not Eligible Domestic In-Transit Inventory) or (B) eighty-five (85%) percent of the Net Recovery Percentage for such Eligible Inventory multiplied by the Value of such Eligible Inventory; plus

(iv)    the lesser of (A) sixty (60%) percent multiplied by the Value of Eligible Inventory of the AZEK Companies consisting of Eligible Domestic In-Transit Inventory or (B) eighty-five (85%) percent of the Net Recovery Percentage for such Eligible Inventory multiplied by the Value of such Eligible Inventory; plus

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(v)     so long as the EBITDA of Parent and its Subsidiaries is not less than $35,000,000 for the Last Twelve Month Period immediately prior the commencement of, and during such period, then during the period from January 1 of each year to and including April 30 of such year, the lesser of (A) $5,000,000 or (B) the sum of:

(1) five (5%) percent multiplied by the amount of Eligible Accounts of the AZEK Companies, plus

(2) the lesser of (aa) five (5%) percent multiplied by the Value of Eligible Inventory of the AZEK Companies consisting of resin (that is not Eligible Domestic In-Transit Inventory) or (bb) five (5%) percent of the Net Recovery Percentage for such Eligible Inventory multiplied by the Value of such Eligible Inventory, plus

(3) the lesser of (aa) five (5%) percent multiplied by the Value of Eligible Inventory of the AZEK Companies consisting of raw materials (other than resin) and finished goods inventory (in each case that is not Eligible Domestic In-Transit Inventory) or (bb) five (5%) percent of the Net Recovery Percentage for such Eligible Inventory multiplied by the Value of such Eligible Inventory; minus

(vi) Reserves attributable to the AZEK Companies; plus

(b) the amount equal to:

(i)      eighty-five (85%) percent multiplied by the amount of Eligible Accounts of the Scranton Companies; plus

(ii)     the lesser of (A) seventy (70%) percent multiplied by the Value of Eligible Inventory of the Scranton Companies consisting of resin (that is not Eligible Domestic In-Transit Inventory) or (B) eighty-five (85%) percent of the Net Recovery Percentage for such Eligible Inventory multiplied by the Value of such Eligible Inventory; plus

(iii)    the lesser of (A) sixty (60%) percent multiplied by the Value of Eligible Inventory of the Scranton Companies consisting of raw materials (other than resin) and finished goods inventory (in each case that is not Eligible Domestic In-Transit Inventory) or (B) eighty-five (85%) percent of the Net Recovery Percentage for such Eligible Inventory multiplied by the Value of such Eligible Inventory; plus

(iv)    the lesser of (A) sixty (60%) percent multiplied by the Value of Eligible Inventory of the Scranton Companies consisting of Eligible Domestic In-Transit Inventory or (B) eighty-five (85%) percent of the Net Recovery Percentage for such Eligible Inventory multiplied by the Value of such Eligible Inventory; plus

(v)     so long as the EBITDA of Parent and its Subsidiaries is not less than $35,000,000 for the Last Twelve Month Period immediately prior the commencement of, and during such period, then during the period from July 1 of each year to and including October 31 of such year, the lesser of (A) $5,000,000 or (B) the sum of:

(1) five (5%) percent multiplied by the amount of Eligible Accounts of the Scranton Companies, plus

(2) the lesser of (aa) five (5%) percent multiplied by the Value of Eligible Inventory of the Scranton Companies consisting of resin (that is not Eligible Domestic In-Transit Inventory) or (bb)

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five (5%) percent of the Net Recovery Percentage for such Eligible Inventory multiplied by the Value of such Eligible Inventory, plus

(3) the lesser of (aa) five (5%) percent multiplied by the Value of Eligible Inventory of the Scranton Companies consisting of raw materials (other than resin) and finished goods inventory (in each case that is not Eligible Domestic In-Transit Inventory) or (bb) five (5%) percent of the Net Recovery Percentage for such Eligible Inventory multiplied by the Value of such Eligible Inventory; minus

(vi) Reserves attributable to the Scranton Companies.

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

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

1.23 “Capital Expenditures” shall mean with respect to any Person for any period the aggregate of all expenditures by such Person and its Subsidiaries made during such period that in accordance with GAAP are or should be included in “property, plant and equipment” or in a similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or financed and including all Capitalized Lease Obligations paid or payable during such period, other than the interest component of any Capitalized Lease Obligation (without duplication as to any period). No expenditures for assets purchased as part of a Permitted Acquisition will constitute Capital Expenditures for purposes hereof.

1.24 “Capitalized Lease Obligations” shall mean, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date on a balance sheet prepared in accordance with GAAP.

1.25 “Cash Dominion Event” shall mean a period either (a) commencing on the date that an Event of Default shall exist or have occurred and be continuing and ending on the date that such Event of Default ceases to exist or be continuing or (b) commencing on the date that the aggregate amount of the Excess Availability of Borrowers has been less than $7,500,000 for more than three (3) consecutive Business Days and ending on the date that such Excess Availability has been greater than such amount for each day of any ninety (90) consecutive day period thereafter unless and until Excess Availability shall thereafter be less than $7,500,000 for more than three (3) consecutive Business Days; provided, that, a Cash Dominion Event shall not be terminated following the second (2^nd) such termination in any twelve (12) consecutive month period, unless Excess Availability has been greater than such amount for each day of any one hundred eighty (180) consecutive day period thereafter.

1.26 “Cash Equivalents” shall mean (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within two years from the date of acquisition thereof; (b) marketable direct obligations issued by any state, commonwealth or territory of the United States of America

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or any political subdivision of any such state, commonwealth or territory or any public instrumentality thereof maturing within two years from the date of acquisition thereof and, at the time of acquisition, having an investment grade rating from either S&P or Moody's; (c) commercial paper or other indebtedness maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's (or, if at any time neither S&P nor Moody's shall be rating such obligations, then an equivalent rating from another nationally recognized rating service); (d) certificates of deposit, time deposits and Eurodollar time deposits or bankers' acceptances maturing within two years from the date of acquisition thereof and overnight bank deposits issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250,000,000 in the case of domestic banks and $100,000,000 (or the dollar equivalent thereof) in the case of foreign banks; (e) repurchase obligations for underlying securities of the types described in clauses (a), (b) and (d) above entered into with any bank meeting the qualifications specified in clause (iv) above or securities dealers of recognized national standing; (f) United States dollars, euros, pounds sterling and local currencies held by Foreign Subsidiaries from time to time in the ordinary course of business; (g) in the case of any investment by a Foreign Subsidiary or investments made in a country outside the United States of America, "Cash Equivalents" will also include: (i) direct obligations of the sovereign nation (or any agency thereof) in which such Foreign Subsidiary is organized and is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or agency thereof) and (ii) other customarily utilized high-quality investments in the country where such Subsidiary is located or in which such investment is made; and (h) investments in money market funds or shares of investment companies that are registered under the Investment Company Act of 1940 that invest substantially all their assets in securities of the types described in clauses (a) through (g) above. Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clauses (a), (b) and (f) above, provided, that, such amounts are converted into any currency listed in clauses (a), (b) and (f) above, as promptly as practicable and in any event within ten (10) Business Days following the receipt of such amounts.

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

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

1.29 “Change of Control” shall mean the occurrence of any of the following events: (a) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of Parent's assets (determined on a consolidated basis for Parent and its Subsidiaries) to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a “Group”), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Agreement), other than to the AEA Group and the Management Group; (b) the approval by the holders of Equity Interests of Parent or any Borrower, as the case may be, of any plan or proposal for the liquidation or dissolution of Parent or such Borrower, respectively (whether or not otherwise in compliance with the provisions of this Agreement); (c) any Person or Group, other than the AEA Group and the Management Group, shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than fifty (50%) percent of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Parent; (d) the replacement of a majority of the board of directors of Parent over a two-year period from the directors who constituted the board of directors of Parent at the beginning of such period, and such replacement shall not have been approved by a vote of at least a majority of the board of directors of Parent then still in office who either were members of any such board of directors at the beginning of such period or whose election as a

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member of any such board of directors was previously so approved; or (e) Parent at any time ceases to own, directly or indirectly, one hundred (100%) percent of the Equity Interests of any Borrower.

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

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

1.32 “Collateral Access Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, from any lessor of premises to any Borrower or Guarantor or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, in favor of Agent (and if applicable, Term Loan Agent) with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other person.

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

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

1.35 “Consolidated EBITDA” shall mean, for any period, the sum (without duplication) of: (a) Consolidated Net Income for such period; and (b) to the extent Consolidated Net Income has been reduced thereby, (i) all income taxes of Parent and its Subsidiaries paid or accrued in accordance with GAAP for such period, (ii) Interest Expense for such period, (iii) Consolidated Non-cash Items for such period less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for Parent and its Subsidiaries in accordance with GAAP, (iv) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued), and (v) up to (A) $1,500,000 each year payable to the AEA Group pursuant to the first paragraph of Section 2 of the Management Agreement (as in effect on the date hereof), (B) any transactional fees payable to the AEA Group pursuant to such Management Agreement and (C) reasonable expenses payable to the AEA Group pursuant to such Management Agreement (provided, that, the aggregate amounts for purposes of clauses (B) and (C) of this subsection (v) shall not exceed $1,500,000 each year). Notwithstanding the foregoing, the EBITDA of Parent and its Subsidiaries on a consolidated basis for each period set forth on Schedule 1.35 hereto shall be deemed to be the amount set forth on Schedule 1.35 hereto opposite such period.

1.36 “Consolidated Net Income” shall mean, with respect to Parent and its Subsidiaries for any period, the aggregate net income (or loss) of Parent and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided, that, there shall be excluded therefrom: (a) after-tax gains or losses from asset sales or abandonment or reserves relating thereto; (b) after-tax extraordinary or nonrecurring gains or losses and any unusual or non-recurring charges (including severance, relocation costs and one-time compensation charges and including restructuring charges or reserves including costs related to closure of facilities), including any expenses, charges, gains or losses incurred in connection with any

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issuance of debt or equity; (c) the cumulative effect of a change in accounting principles; (d) the net income of any Person, other than Parent or a Subsidiary, except to the extent of cash dividends or distributions paid to Parent or to its Subsidiary by such Person; (e) in the case of a successor to Parent or any Borrower by consolidation or merger or as a transferee of the assets of Parent or such Borrower, as the case may be, any net income of the successor corporation prior to such consolidation, merger or transfer of assets; (f) the amortization of any premiums, fees or expenses incurred in connection with any Permitted Acquisition by Parent or any of its Subsidiaries of assets or Capital Stock or any amounts required or permitted by Accounting Principles Board Opinions Nos. 16 (including non-cash write-ups and non-cash charges relating to inventory and fixed assets, in each case arising in connection with such acquisition) and 17 (including non-cash charges relating to intangibles and goodwill) to be recorded on Parent’s consolidated balance sheet, in each case in connection with such Permitted Acquisitions; (g) any non-cash compensation charge arising from the grant of or issuance of stock, stock options or other equity based awards; (h) unrealized gains and losses with respect to Hedging Agreements or other derivative instruments pursuant to FASB 133, “Accounting for Derivative Instruments and Hedging Activities”, or otherwise; (i) any non-cash impact attributable to the application of the purchase method of accounting in accordance with GAAP, including, without limitation, the total amount of depreciation and amortization, cost of sales or other non-cash expense resulting from the write-up of assets for such period on a consolidated basis in accordance with GAAP to the extent such non-cash expense results from such purchase accounting adjustments; (j) fees, costs and expenses incurred by Parent or any of its Subsidiaries during any period in connection with any acquisition by Parent or any of its Subsidiaries (including, without limitation, amortization of debt issuance costs, debt discount or premium and other financing fees and expenses directly relating thereto and write-offs of any debt issuance costs relating to Indebtedness being retired or repaid in connection with such acquisition, as well as bonus payments paid to employees in connection with such acquisition); (k) any net after-tax income (loss) from the early extinguishment of Indebtedness or Hedging Agreements or other derivative instruments or amortization or write-off of deferred financing fees and any expenses of bridge or other financing fees; and (l) any impairment charge or asset write-off pursuant to Financial Accounting Standards Board Statement No. 142 and No. 144 and the amortization of intangibles arising pursuant to No. 141.

1.37 “Consolidated Non-cash Items” shall mean, for any period, the aggregate depreciation, amortization and all other non-cash expenses of Parent (including, without limitation, charges related to the impairment of intangibles) and its Subsidiaries reducing Consolidated Net Income of Parent and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (including deferred rent but excluding any such charge which requires an accrual of or a reserve for cash charges for any period).

1.38 “Credit Facility” shall mean the Loans and Letters of Credit provided to or for the benefit of any Borrower pursuant to Sections 2.1, 2.2 and 2.3 hereof.

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

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

1.41 “Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent (and if applicable, Term Loan Agent), the Borrower or Guarantor that is the customer of the bank with respect to a deposit account at such bank and such bank, which, if required hereunder, is sufficient to perfect the security interests of Agent therein and provides such other rights with respect thereto as Agent requires.

1.42 “Disqualified Equity Interest” means, with respect to any Person, any Equity Interest in such Person that, by its terms (or by the terms of any security into which it is convertible or for which it is

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exchangeable, either mandatorily or at the option of the holder thereof) or upon the happening of any event or condition:

(a) matures or is mandatorily redeemable (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interests and cash in lieu of fractional shares of such Equity Interests), whether pursuant to a sinking fund obligation or otherwise;

(b) is convertible or exchangeable at the option of the holder thereof for Indebtedness or Equity Interests (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interest and cash in lieu of fractional shares of such Equity Interests); or

(c) is redeemable (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interest and cash in lieu of fractional shares of such Equity Interests) or is required to be repurchased by such Person or any of its Affiliates, in whole or in part, at the option of the holder thereof;

in each case, on or prior to the date that is six (6) months after the Maturity Date; provided, that, an Equity Interest that would not constitute a Disqualified Equity Interest but for terms thereof giving holders thereof the right to require such Person to redeem or purchase such Equity Interest upon the occurrence of an “asset sale” or a “change of control” shall not constitute a Disqualified Equity Interest if any such requirement becomes operative only after repayment in full in cash of all of the Obligations, the cancellation or expiration of all Letters of Credit and the termination of the Commitments.

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

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

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

(c) which is unpaid more than ninety (90) days after the original invoice date (or as to Accounts with a due date greater than thirty (30) days from the invoice date thereof, up to $3,000,000 of which are unpaid more than ninety (90) days after the original invoice date, but less than one hundred twenty (120) days after the invoice date), or which has been written off the books of such Person or otherwise designated as uncollectible;

(d) which is owing by an account debtor for which more than fifty (50%) percent of the Accounts owing by such Account debtor and its Affiliates are ineligible under paragraph (c) above;

(e) (i) which is owing by an account debtor whose securities are rated BBB or better by S&P or Baa3 or better by Moody’s to the extent the aggregate amount of Eligible Accounts owing by such account debtor and its Affiliates to (A) a Borrower and its Subsidiaries, taken as a whole, exceeds twenty (20%) percent of the aggregate amount of Eligible Accounts thereof or (B) Borrowers and their Subsidiaries, taken as a whole, exceeds twenty (20%) percent of the aggregate amount of Eligible Accounts thereof, or (ii) which are owing by an account debtor whose securities are not rated BBB or better by S&P or Baa3 or better

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by Moody’s (including any account debtor none of the securities of which are rated by such rating agencies) to the extent the aggregate amount of Accounts owing by such account debtor and its Affiliates to (A) a Borrower and its Subsidiaries, taken as a whole, exceeds ten (10%) percent of the aggregate amount of Eligible Accounts thereof or (B) Borrowers and their Subsidiaries, taken as a whole, exceeds ten (10%) percent of the aggregate amount of Eligible Accounts thereof, except, that, at Agent's discretion, the foregoing ten (10%) percent amounts may be increased (1) to twenty-five (25%) percent from January 1 through and including June 30 of each year and to twenty (20%) percent from July 1 through and including December 31 of each year, with respect only to accounts receivable from The Parksite Group and (2) to fifteen (15%) percent with respect to the accounts receivable from such other account debtors as Agent may determine, in the case of both clauses (1) and (2) above, subject to the receipt by Agent from Borrower Agent of satisfactory quarterly summary financial information with respect to liquidity and such other matters concerning such account debtors as Agent may require;

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

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

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

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

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

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

(l) which is owed in any currency other than US Dollars or Canadian Dollars;

(m) which is owed by (i) the government (or any department, agency, public corporation, or instrumentality thereof) of any country other than the United States or Canada, unless such Account is

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

(n) which is owed by any Affiliate, employee, officer, director or agent of any Borrower or Guarantor;

(o) which, for any account debtor, exceeds any credit limit with respect to such account debtor determined by the applicable Borrower from time to time, and such credit limit is acceptable to Agent in its Permitted Discretion (and otherwise such credit limit as Agent may determine after notice and consultation with Borrower Agent), to the extent of such excess;

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

(q) which is subject to any counterclaim, deduction, defense, setoff or dispute;

(r) which is evidenced by or arising under any promissory note, lease, chattel paper, or instrument;

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

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

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

(v) which is for goods that have been sold under a purchase order or pursuant to the terms of a contract or other agreement or understanding (written or oral) that indicates or purports to indicate that any Person other than such Person has or has had an ownership interest in such goods, or which indicates any party other than such Person as payee or remittance party;

(w) which was created on cash on delivery terms; or

(x) which Agent determines in its Permitted Discretion and after notice to Borrower Agent may not be paid by reason of the account debtor’s inability to pay.

The criteria for Eligible Accounts set forth above may only be changed and any new criteria for Eligible Accounts may only be established by Agent based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to

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the extent that such event, condition or circumstance has not been identified by a Borrower to the field examiners of Agent prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Accounts in any material respect as determined by Agent in the exercise of its Permitted Discretion. Any such changes will be effective three (3) days after delivery of notice thereof to Borrower Agent. Any Accounts that are not Eligible Accounts shall nevertheless be part of the Collateral.

1.44 “Eligible Domestic In-Transit Inventory” shall mean Inventory that would otherwise be Eligible Inventory (other than for its location) that has been shipped from a location of any Borrower or from the manufacturer or wholesale distributor thereof within the United States for receipt at a location of any Borrower within the United States and permitted hereunder, within fifteen (15) days of shipment, but in either case, which has not yet been delivered to such Borrower, for which the purchase order is in the name of a Borrower, title has passed to such Borrower (and Agent has received such evidence thereof as it has requested) and which is insured in accordance with the terms of this Agreement; provided, that, the aggregate amount of Inventory constituting Eligible Domestic In-Transit Inventory for purposes of the calculation of the Borrowing Base at any time will not exceed $3,000,000.

1.45 “Eligible Inventory” shall mean, as to each Borrower, Inventory of such Borrower consisting of raw materials and finished goods held for resale in the ordinary course of the business of such Borrower that satisfy the criteria set forth below as determined by Agent in its Permitted Discretion. Eligible Inventory shall not include any Inventory:

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

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

(c) which is, in Agent’s opinion, slow moving (with Inventory that has not been sold after a period of more than twelve (12) months being deemed to be slow moving for this purpose), obsolete, unmerchantable, defective, used, unfit for sale, not salable at prices approximating at least the cost of such Inventory in the ordinary course of business or unacceptable due to age, type, category and/or quantity;

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

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

(f) which constitutes spare or replacement parts, subassemblies, packaging and shipping material, manufacturing supplies, samples, prototypes, displays or display items, bill-and-hold goods, goods that are returned or marked for return, repossessed goods, defective or damaged goods, goods held on consignment, or goods which are not of a type held for sale in the ordinary course of business;

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(g) which is not located at premises owned or leased and controlled by any Borrower, except for Eligible Domestic In-Transit Inventory and Eligible LC Inventory and except as set forth in clause (i) below;

(h) which is located in any location leased by such Person or its Affiliates unless (i) the lessor (and its mortgagee, if any) has delivered to Agent a Collateral Access Agreement that Agent has acknowledged in writing is acceptable to it or (ii) a Reserve for rent, charges, and other amounts due or to become due with respect to such facility has been established by Agent in its Permitted Discretion;

(i) which is located in any third party warehouse or is in the possession of a bailee or is being processed offsite at a third party location or outside processor and, in any such case, is not evidenced by a Document, unless (i) such warehouseman or bailee or the owner of such third party location or such outside processor has delivered to Agent a Collateral Access Agreement that Agent has acknowledged in writing is acceptable to it and such other documentation as Agent may require or (ii) an appropriate Reserve has been established by Agent in its Permitted Discretion;

(k) which is a discontinued product or component thereof and is not immediately usable in a continuing product;

(l) which is the subject of a consignment by such Person as consignor;

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

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

(p) for which reclamation rights have been asserted by the seller.

The criteria for Eligible Inventory set forth above may only be changed and any new criteria for Eligible Inventory may only be established by Agent based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent that such event, condition or circumstance has not been identified by a Borrower to the field examiners of Agent prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Inventory as determined by Agent in the exercise of its Permitted Discretion. Any such changes will be effective three (3) days after delivery of notice thereof to Borrower Agent. Any Inventory that is not Eligible Inventory shall nevertheless be part of the Collateral.

1.46 “Eligible LC Inventory” shall mean Inventory that would otherwise be Eligible Inventory (other than for its location) as to which: (i) the Inventory is purchased with and subject to a Letter of Credit issued hereunder, (ii) the Inventory is then in transit (whether by vessel, air or land) from a location outside of the continental United States of America to a location permitted hereunder and for which Agent shall have received such evidence thereof as Agent may reasonably require, (iii) the title of the Inventory has passed to, and such Inventory is owned by, a Borrower and for which Agent shall have received such evidence thereof as Agent may reasonably require, (iv) Agent has received each of the following: (A) a copy of the certificate of marine cargo insurance in connection therewith in which Agent has been named as an additional insured and loss payee in a manner reasonably acceptable to Agent and (B) a copy of the invoice, packing slip and manifest with respect thereto, (v) the Inventory is either (A) subject to a negotiable bill of lading: (1) that is consigned to the Issuing Bank (unless and until such time as Agent shall require that the same be consigned

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to Agent, then thereafter, that is consigned to Agent either directly or by means of endorsements), (2) that was issued by the carrier in respect of such Inventory and (3) is either in the possession of the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of Agent or the subject of a telefacsimile or other electronic copy that Agent has received from the Issuing Bank with respect to the Letter of Credit and as to which Agent has also received confirmation from such Issuing Bank that such document is in transit to Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of Agent or (B) subject to a negotiable cargo receipt and is not the subject of a bill of lading (other than a negotiable bill of lading consigned to, and in the possession of a consolidator or Agent, or their respective agents) and such negotiable cargo receipt is (1) consigned to Issuing Bank (unless and until such time as Agent shall require that the same be consigned to Agent, then thereafter, that is consigned to Agent either directly or by means of endorsements), (2) issued by a consolidator in respect of such Inventory and (3) either in the possession of Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of Agent or the subject of a telefacsimile or other electronic copy that Agent has received from the Issuing Bank with respect to the Letter of Credit and as to which Agent has also received a confirmation from such Issuing Bank that such document is in transit to Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory, (vi) such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to Agent, and (vii) such Inventory shall not have been in transit for more than ninety (90) days.

1.47 “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is an Approved Fund, and in each case is approved by Agent (provided, that, subject to Section 15.7, so long as no Event of Default exists or has occurred and is continuing, such person shall not include any person that has been designated in writing by Borrower Agent to Agent prior to the date hereof as unacceptable); and (d) any other commercial bank, financial institution or “accredited investor” (as defined in Regulation D under the Securities Act of 1933) approved by Agent, such approval not to be unreasonably withheld, conditioned or delayed, provided, that, (i) neither any Borrower nor any Guarantor or any Affiliate of any Borrower or Guarantor shall qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of any Borrower or Guarantor shall qualify as an Eligible Transferee, except as Agent and Required Lenders may otherwise specifically agree.

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

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

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

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

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

1.53 “ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Pension Plan, other than events as to which the requirement of notice has been waived in regulations by the Pension Benefit Guaranty Corporation; (b) the adoption of any amendment to a Pension Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) a complete or partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Pension Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (f) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of $2,500,000.

1.54 “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof.

1.55 “Event of Default” shall have the meaning specified in Section 12.1 hereof.

1.56 “Excess Availability” shall mean the amount, as determined by Agent, calculated at any date, equal to: (a) the lesser of: (i) the Borrowing Base and (ii) the Maximum Credit (in each case under (i) or (ii) after giving effect to any applicable Reserves), minus, without duplication, (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations of the applicable Borrowers (excluding for this purpose any Obligations of a Borrower arising pursuant to any guarantees in favor of Agent and Lenders of the Obligations of the other Borrowers), plus (ii)  the aggregate amount of all then outstanding and unpaid trade payables and other obligations of the applicable Borrowers which are outstanding more than ninety (90) days past due as of the end of the immediately preceding month (other than trade payables or other obligations being contested or disputed by a Borrower in good faith). For purposes of determining the outstanding trade payables in the ordinary course, Borrower Agent shall provide to Agent the summary reports of payables as set forth in Section 7.1(a) hereof, together with such other information with respect thereto as Agent may from time to time reasonably request.

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

1.58 “Excluded Property” shall mean:

(a) any Real Property;

(b) motor vehicles subject to certificates of title in accordance with applicable State law;

(c) any rights or interests in any contract, lease, permit, license, charter or license agreement covering real or personal property, as such, if under the terms of such contract, lease, permit, license, charter or license agreement, or applicable law with respect thereto, the valid grant of a security interest or lien therein to Agent is prohibited and such prohibition has not been or is not waived or the consent of the other party to such contract, lease, permit, license, charter or license agreement has not been or is not otherwise obtained or under applicable law such prohibition cannot be waived; provided, that, the foregoing exclusion shall in no way be construed (i) to apply if any such prohibition is unenforceable under Sections 9-406, 9-407 or 9-408 of the UCC or other applicable law or (ii) so as to limit, impair or otherwise affect Agent's unconditional continuing security interests in and liens upon any rights or interests of a Borrower in or to monies due or to become due under any such contract, lease, permit, license, charter or license agreement (including any Receivables);

(d) any Equipment which is, or at the time of a Borrower's acquisition thereof shall be, subject to a purchase money mortgage or other purchase money lien or security interest (including such interest giving rise to Capitalized Lease Obligations) permitted under clause (e) of the definition of the term Permitted Liens hereof if: (i) the valid grant of a security interest or lien to Agent in such item of Equipment is prohibited by the terms of the agreement between such Borrower and the holder of such purchase money mortgage or other purchase money lien or security interest or under applicable law and such prohibition has not been or is not waived, or the consent of the holder of the purchase money mortgage or other purchase money lien or security interest has not been or is not otherwise obtained, or under applicable law such prohibition cannot be waived and (ii) the purchase money mortgage or other purchase money lien or security interest on such item of Equipment is or shall become valid and perfected;

(e) the Capital Stock of any Subsidiary organized under the laws of a jurisdiction outside the United States of America, its territories or its possessions that is a "controlled foreign corporation" (as such term is defined in Section 957(a) of the Code or a successor provision thereof) in excess of sixty five (65%) percent of all of the issued and outstanding shares of Capital Stock of such Subsidiary entitled to vote (within the meaning of Treasury Regulation Section 1.956-2);

(f) trademark or servicemark applications that have been filed with the U.S. Patent and Trademark Office on the basis of an "intent-to-use" with respect to such marks, unless and until a statement of use or amendment to allege use is filed or any other filing is made or circumstances otherwise change so that the interests of any Borrower or Guarantor in such applications is no longer on an "intent-to-use" basis, at which time such marks shall automatically and without further action by the parties be subject to the security interests and liens granted by Borrowers or Guarantors to Agent hereunder.

1.59 “Existing Credit Agreement” shall mean the Second Amended and Restated Credit Agreement, dated as of May 10, 2005, by and among Parent, certain of its affiliates, Wachovia Bank, National Association, as Administrative Agent, Co-Lead Arranger and Co-Book Runner, General Electric Capital Corporation, as Syndication Agent, Co-Lead Arranger and Co-Book Runner and the lenders party hereto.

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1.60 “Existing Letters of Credit” shall mean, collectively, the letters of credit issued for the account of a Borrower or Guarantor or for which such Borrower or Guarantor is otherwise liable listed on Schedule 1.60 of the Information Certificate.

1.61 “Federal Funds Rate” shall mean, for any period, a fluctuating interest rate per annum equal, for each day during such period, to the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal Funds brokers of recognized standing selected by it.

1.62 “Fee Letter” shall mean the fee letter, dated February 12, 2008, by and among Parent, for itself and its Subsidiaries (and by which Borrowers and Guarantors hereby confirm their agreement to be bound), Wachovia and certain other Persons, setting forth certain fees payable by Borrowers in connection with the Credit Facility.

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

1.64 “Fixed Charge Coverage Ratio” shall mean, with respect to any date of determination, the ratio of (a) the amount equal to (i) Consolidated EBITDA of any Person and its Subsidiaries on a consolidated basis, as of the end of a fiscal month for the immediately preceding twelve (12) consecutive fiscal months for which Agent has received financial statements pursuant to Section 9.6 hereof, less (ii) the amount of Capital Expenditures of such Person and its Subsidiaries during such period to the extent not financed by Indebtedness permitted hereunder for such purpose, less (iii) all taxes paid by such person and its Subsidiaries in cash during such period, less (iv) all dividends, distributions, repurchases and redemptions in respect of Equity Interests of Parent paid by such Person and its Subsidiaries during such period in cash (but in the case of Parent and its Subsidiaries, excluding payments for the redemption of its Equity Interests under the terms of the Procell Unit Purchase Agreement to the extent permitted under Section 10.5(h) hereof) to (b) Fixed Charges of such Person and its Subsidiaries, on a consolidated basis, for such period.

1.65 “Fixed Charges” shall mean, as to any Person and its Subsidiaries, on a consolidated basis, with respect to any period, the sum of, without duplication, (a) all Interest Expense paid in cash, plus (b) all regularly scheduled (as determined at the beginning of the respective period) principal payments of Indebtedness for borrowed money, Indebtedness for the deferred purchase price of any property or services, including, without limitation, any indemnification, adjustment of purchase price, earn-outs or other similar obligations incurred in connection with a Permitted Acquisition or Permitted Disposition (but excluding (i) the earn-outs required to be paid under the terms of the Procell Unit Purchase Agreement to the extent permitted under Section 10.9(b) and (ii) an account payable to a trade creditor (whether or not an Affiliate) incurred in the ordinary course of business of such Person and payable in accordance with customary trade practices), Indebtedness with respect to Capital Leases (and without duplicating in items (a) and (b) of this definition, the interest component with respect to Indebtedness under Capital Leases). Notwithstanding the foregoing, the Fixed Charges of Parent and its Subsidiaries on a consolidated basis for each period set forth on Schedule 1.65 hereto shall be deemed to be the amount set forth on Schedule 1.65 hereto opposite such period.

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1.66 “Foreign Lender” shall mean any Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code).

1.67 “Foreign Subsidiary” shall mean a Subsidiary of Parent that is organized or incorporated under the laws of any jurisdiction outside of the United States of America that is treated as a corporation for U.S. federal income tax purposes and any direct or indirect Subsidiary of a Foreign Subsidiary; sometimes being referred to herein collectively as “Foreign Subsidiaries”.

1.68 “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, unless otherwise agreed by Agent, for purposes of Section 11 hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Agent prior to the date hereof, subject, however, in the case of determination of compliance with the financial covenants in Section 11, to the provisions of Section 15.2(h) hereof.

1.69 “Governmental Authority” shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

1.70 “Guarantors” shall have the meaning set forth in the preamble hereto and include any other Person other than a Foreign Subsidiary that any time after the date hereof becomes a Guarantor; each sometimes being referred to herein individually as a “Guarantor”.

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

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

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1.73 “Hedge Agreement” shall mean an agreement between any Borrower or Guarantor and Agent or any Bank Product Provider that is a swap agreement as such term is defined in 11 U.S.C. Section 101, and including any rate swap agreement, basis swap, forward rate agreement, commodity swap, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement rate, floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, and any other similar agreement (including any option to enter into any of the foregoing or a master agreement for any the foregoing together with all supplements thereto) entered into for the purpose of protecting against or managing exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices; sometimes being collectively referred to herein as “Hedge Agreements”.

1.74 “Inactive Subsidiary” shall mean, collectively, (a) each Subsidiary of Parent listed on Schedule 1.74 to the Information Certificate and (b) a Subsidiary of Parent designated in writing by Borrower Agent to Agent after the date hereof as an Inactive Subsidiary and agreed to by Agent, provided, that, (i) such Subsidiary so designated after the date hereof shall only be considered an Inactive Subsidiary to the extent that the representations with respect thereto set forth in Section 8.12(e) hereof are true and correct with respect thereto and Agent shall have received such evidence thereof as it may reasonably require and (ii) such Subsidiaries are sometimes referred to herein collectively as “Inactive Subsidiaries”.

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

1.76 “Information Certificate” shall mean, collectively, the Information Certificate of Borrowers and Guarantors constituting Exhibit C hereto containing material information with respect to Borrowers and Guarantors, their respective businesses and assets provided by or on behalf of Borrowers and Guarantors to

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Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.

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

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

1.79 “Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one (1), two (2), three (3), or six (6) months duration (and, if acceptable to all Lenders, nine (9) or twelve (12) months duration)as any Borrower (or Borrower Agent on behalf of such Borrower) may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided, that, such Borrower (or Borrower Agent on behalf of such Borrower) may not elect an Interest Period which will end after the last day of the then-current term of this Agreement.

1.80 “Interest Rate” shall mean,

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

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

(ii)     as to Eurodollar Rate Loans, a rate equal to the then Applicable Margin for Eurodollar Rate Loans on a per annum basis plus the Adjusted Eurodollar Rate.

(b) Notwithstanding anything to the contrary contained herein,

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

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

1.81 “International” shall mean CPG International Holdings LP, a Delaware limited liability company, and its successors and assigns.

1.82 “Inventory” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by such Borrower or Guarantor as lessor; (b) are held by such Borrower or Guarantor for sale or lease or to be furnished under a contract of service; (c) are furnished by such Borrower or Guarantor under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business.

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

1.84 “Investment Property Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent (and if applicable, Term Loan Agent), the Borrower or Guarantor that is an account holder or customer (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of such account holder or customer, that is sufficient to perfect the security interests of Agent therein and provides such other rights with respect thereto as Agent requires.

1.85 “Issuing Bank” shall mean Wachovia in its capacity as the issuer of Letters of Credit hereunder or any other Lender as the Agent and Borrower Agent may agree in such capacity and in the case of any other Lender only to the extent that such person is a party hereto as an Issuing Bank and has executed and delivered such agreements with respect thereto as Agent may require.

1.86 “Last Twelve Month Period” shall mean, as of any date, the twelve (12) most recent immediately preceding fiscal months for which Agent has received financial statements in accordance with Section 9.6.

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

1.88 “Letter of Credit Documents” shall mean, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor,

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and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk or (b) any collateral security for such obligations.

1.89 “Letter of Credit Limit” shall mean $10,000,000.

1.90 “Letter of Credit Obligations” shall mean, at any time, the sum of (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time, plus, without duplication, (b) the aggregate amount of all drawings under Letters of Credit for which Issuing Bank has not at such time been reimbursed, and the aggregate amount of all payments made by each Lender to Issuing Bank with respect to such Lender’s participation in Letters of Credit as provided in Section 2.4 for which Borrowers have not at such time reimbursed the Lenders, whether by way of a Revolving Loan or otherwise.

1.91 “Letters of Credit” shall mean all letters of credit issued by an Issuing Bank for the account of any Borrower pursuant to this Agreement, and all amendments, renewals, extensions or replacements thereof. The “Letters of Credit” as such term is used herein shall include for all purposes hereunder the Existing Letters of Credit.

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

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

1.94 “London Interbank Offered Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Successor Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. Dollars at approximately 11:00 A.M. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, that, if more than one rate is specified on Telerate Successor Page 3750 for such comparable period, the applicable rate shall be the arithmetic mean of all such rates. If, for any reason, such rate is not available, the term “London Interbank Offered Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate for such comparable period shall be the arithmetic mean of all such rates.

1.95 “Management Agreement” shall mean the Management Agreement, dated as of May 10, 2005, by and between AEA Investors LLC and CPG I, as amended pursuant to Amendment No. 1 to Management Agreement, dated as of May 1, 2006, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.96 “Management Group” means the group consisting of the directors, executive officers and other management personnel of any Borrower or any direct or indirect parent entity of any Borrower, as the case may be, on the date hereof, together with (a) any new directors whose election by such boards of directors or whose nomination for election by the shareholders of any Borrower or any direct or indirect parent entity of any Borrower as applicable, was approved by a vote of a majority of the directors of such Borrower or any direct or indirect parent entity of such Borrower, as applicable, then still in office who were either directors on the date hereof or whose election or nomination was previously so approved and (b) executive officers and other management personnel of any Borrower or any direct or indirect parent entity of any Borrower, as applicable, hired at a time when the directors on the date hereof, together with the dⁱrectors so approved,

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constituted a majority of the directors of such Borrower or any direct or indirect parent entity of such Borrower, as applicable.

1.97 “Material Adverse Effect” shall mean a material adverse effect on (a) business, assets, liabilities, results of operations, property or financial condition of the Parent and its Subsidiaries taken as a whole; (b) the ability of any Borrower or any Guarantor to perform its obligations, when such obligations are required to be performed, under this Agreement or any of the other Financing Agreements or (c) the validity or enforceability of this Agreement, any of the Notes or any of the other Financing Agreements or the rights or remedies of the Agent or the Lenders hereunder or thereunder or the perfection or priority of any Lien in favor of the Agent.

1.98 “Material Contract” shall mean (a) any contract or other agreement (other than the Financing Agreements and Hedge Agreements), written or oral, of any Borrower or Guarantor involving monetary liability of or to any Person in an amount in excess of $2,000,000 in any fiscal year (but excluding for this purpose contracts or other agreements for the purchase and sale of goods or services where the other party thereto has no obligation to purchase or sell such goods or services under such contract or other agreement) and (b) any other contract or other agreement (other than the Financing Agreements and Hedge Agreements), whether written or oral, to which any Borrower or Guarantor is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect.

1.99 “Maturity Date” shall mean the earliest of: (a) February 13, 2013, (b) the date three (3) months prior to the maturity date of the Term Loans to the extent that any Indebtedness or other obligations of any Borrower or Guarantor in respect of such Term Loans is outstanding as of such date, exceptthat, (i) upon the request of Borrower Agent received prior to such date, this clause (b) shall not be applicable if as of such date after giving effect to a Reserve in the amount equal to such Indebtedness and other obligations then outstanding in respect thereof, using the most recent calculation of the Borrowing Base prior to such date, on a pro forma basis, the aggregate amount of the Excess Availability of Borrowers shall be not less than $10,000,000 and (ii) this clause (b) shall not be applicable if such Indebtedness and other obligations are not outstanding on such date as a result of having been refinanced, (c) the date six (6) months prior to the maturity date of the Senior Floating Rate Notes to the extent that any Indebtedness or other obligations of any Borrower or Guarantor in respect of such notes is outstanding as of such date, or (d) the date six (6) months prior to the maturity date of the Senior Fixed Rate Notes to the extent that any Indebtedness or other obligations of any Borrower or Guarantor in respect of such notes is outstanding as of such date.

1.100 “Maximum Credit” shall mean the amount of $65,000,000 (subject to adjustment as provided in Sections 2.5 and 2.6 hereof).

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

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

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

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

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

1.106 “Obligations” shall mean (a) any and all Revolving Loans, Swing Line Loans, Letter of Credit Obligations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers to Agent or any Lender, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under any of the Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to such Borrower under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, or secured or unsecured and (b) for purposes only of Section 5.1 hereof and subject to the priority in right of payment set forth in Section 6.7 hereof, all obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers or Guarantors to Agent or any Bank Product Provider arising under or pursuant to any Bank Products, whether now existing or hereafter arising, provided, that, (i) as to any such obligations, liabilities and indebtedness arising under or pursuant to a Hedge Agreement, the same shall only be included within the Obligations if upon Agent’s request, Agent shall have entered into an agreement, in form and substance satisfactory to Agent, with the Bank Product Provider that is a counterparty to such Hedge Agreement, as acknowledged and agreed to by Borrowers and Guarantors, providing for the delivery to Agent by such counterparty of information with respect to the amount of such obligations and providing for the other rights of Agent and such Bank Product Provider in connection with such arrangements, (ii) any Bank Product Provider, other than Wachovia and its Affiliates, shall have delivered written notice to Agent that (A) such Bank Product Provider has entered into a transaction to provide Bank Products to a Borrower or Guarantor and (B) the obligations arising pursuant to such Bank Products provided to Borrowers or Guarantors constitute Obligations entitled to the benefits of the security interest of Agent granted hereunder, and Agent shall have accepted such notice in writing and (iii) in no event shall any Bank Product Provider to whom such obligations, liabilities or indebtedness are owing be deemed a Lender for purposes hereof to the extent of and as to such obligations, liabilities or indebtedness other than for purposes of Section 5.1 hereof and other than for purposes of Sections 14.1, 14.2, 14.3(b), 14.6, 14.7, 14.9, 14.12 and 15.6 hereof and in no event shall the approval of any such person be required in connection with the release or termination of any security interest or lien of Agent.

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

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1.108 “Other Taxes” shall have the meaning given to such term in Section 6.8 hereof.

1.109 “Parent” shall mean CPG International Inc., a Delaware corporation, and its successors and assigns.

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

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

1.112 “Partnership Agreement” shall mean the Agreement of Limited Partnership in International, effective as of May 10, 2005, by and among CPH Holding I LLC, as General Partner and the persons who subscribe thereto as Limited Partners, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.113 “Permits” shall have the meaning set forth in Section 8.7.

1.114 “Permitted Acquisitions” shall mean the purchase by a Borrower or Guarantor after the date hereof of all or substantially all of the assets of any Person or a business or division of such Person (including pursuant to a merger with such Person or the formation of a wholly owned Subsidiary solely for such purpose that is merged with such Person) or of all or a majority of the Equity Interests (such assets or Person being referred to herein as the “Acquired Business”) and in one or a series of transaction that satisfies each of the following conditions:

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

(b) the daily average of the aggregate amount of the Excess Availability of Borrowers for the period of sixty (60) consecutive days immediately preceding the date of such acquisition shall be not less than $10,000,000;

(c)  as of the date of such acquisition and after giving effect thereto and to any payments in connection therewith and to any increase in the Borrowing Base as a result of such acquisition, using the most recent calculation of the Borrowing Base prior to the date of any such payment, on a pro forma basis, the aggregate amount of the Excess Availability of Borrowers shall be not less than $10,000,000;

(d) if the aggregate amount of the consideration payable with respect to such proposed acquisition or series of related acquisitions is greater than $5,000,000, Agent shall have received, not less than ten (10) Business Days’ prior to the acquisition, the Permitted Transaction Projections with respect to such acquisition showing that: (i) the aggregate amount of the Excess Availability of Borrowers at all times during the period subject to such projections commencing after the acquisition will be not less than $10,000,000 and (ii) the Fixed Charge Coverage Ratio for Parent and its Subsidiaries is projected to be equal to or greater than 1.0 to 1.0 at all times during such period; provided, that, consideration for such purpose shall include the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Equity Interests, net of

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the applicable Acquired Company’s cash (including Cash Equivalents) balance as of the date of the acquisition) to be paid, issued or delivered in connection with any such Permitted Acquisition;

(e)  Agent shall have received a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, the Fixed Charge Coverage Ratio for Parent and its Subsidiaries is equal to or greater than 1.0 to 1.0 as of the most recent fiscal month end for which Borrowers have delivered financial statements pursuant to Section 9.6 hereof,

(f)  the Acquired Business shall be a company that engages in a line of business substantially similar to, or ancillary or related to, or used or useful to, the business that Borrowers are engaged in on the date hereof;

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

(h) Agent shall have received, not less than ten (10) Business Days’ prior written notice of the proposed acquisition and such information with respect thereto as Agent may request, in each case with such information to include (A) parties to such acquisition, (B) the proposed date and amount of the acquisition, (C) a list and description of the assets or shares to be acquired, (D) the total purchase price for the assets to be purchased (and the terms of payment of such purchase price);

(i)  if Borrower Agent requests that any accounts or inventory acquired pursuant to such acquisition be included in the Borrowing Base, Agent shall have completed a field examination with respect to the business and assets of the Acquired Business in accordance with Agent’s customary procedures and practices and as otherwise required by the nature and circumstances of the business of the Acquired Business, the scope and results of which shall be satisfactory to Agent and any Accounts or Inventory of the Acquired Business shall only be Eligible Accounts or Eligible Inventory to the extent that Agent has so completed such field examination with respect thereto and the criteria for Eligible Accounts or Eligible Inventory set forth herein are satisfied with respect thereto in accordance with this Agreement (or such other or additional criteria as Agent may, at its option, establish with respect thereto in accordance with the definitions of Eligible Accounts and Eligible Inventory, as applicable, and subject to such Reserves as Agent may establish in connection with the Acquired Business in accordance with the definition of such term, and in the case of Eligible Inventory acquired pursuant to a Permitted Acquisition to the extent that it has been subject to an appraisal that satisfies the requirements of Section 7.3 hereof);

(j)  if the aggregate amount of the consideration payable with respect to such proposed acquisition or series of related acquisitions is greater than $5,000,000, Agent shall have received either (i) the audited consolidated financial statements with respect to the Acquired Business for the three (3) fiscal years most recently ended for which financial statements are available, together with an unqualified opinion of independent certified public accountants, and interim unaudited consolidated financial statements with respect to the Acquired Business for each quarterly period ended since the last audited financial statements for which financial statements are available, or (ii) a “quality of earnings” review with respect to the Acquired Business, conducted by a third party reasonably acceptable to Agent, or (iii) such other historical financial statements with respect to the Acquired Business as may be acceptable to Agent; provided, that, (A) if the Acquired Business has not existed for the last three (3) fiscal years, Agent shall have received such satisfactory audited consolidated financial statements for the full fiscal years for which it existed and which are completed and in addition, at the option of the Agent, such satisfactory “quality of earnings” review and (B) consideration for such purpose shall include the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred

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payments, or Equity Interests, net of the applicable Acquired Company’s cash (including Cash Equivalents) balance as of the date of the acquisition) to be paid, issued or delivered in connection with any such Permitted Acquisition;

(k) if the aggregate amount of the consideration payable with respect to such proposed acquisition or series of related acquisitions is equal to or less than $5,000,000, Agent shall have received either (i) the audited consolidated financial statements with respect to the Acquired Business for the three (3) fiscal years most recently ended for which financial statements are available, together with an unqualified opinion of independent certified public accountants, and interim unaudited consolidated financial statements with respect to the Acquired Business for each quarterly period ended since the last audited financial statements for which financial statements are available, or (ii) if any of such audited financial statements and opinions are not available, such unaudited financial statements or reviewed financial statements with respect to the Acquired Business for such fiscal years as may have been prepared, or (iii) such other historical financial statements with respect to the Acquired Business as may be acceptable to Agent; provided, that, consideration for such purpose shall include the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Equity Interests, net of the applicable Acquired Company’s cash (including Cash Equivalents) balance as of the date of the acquisition) to be paid, issued or delivered in connection with any such Permitted Acquisition;

(l)  Agent shall have received a certificate of the chief financial officer or chief executive officer of Borrower Agent certifying to Agent and Lenders that such transaction complies with this definition; and

(m)upon Agent’s request, Agent shall have received (i) a reasonably detailed description of all material information relating to such acquisition and copies of all material documentation pertaining to such transaction, and (ii) all such other information and data relating to such transaction or the Acquired Business as may be reasonably requested by Agent.

1.115 “Permitted Discretion” shall mean as used in this Agreement with reference to Agent, a determination made in good faith in the exercise of its reasonable business judgment based on how an asset-based lender with similar rights providing a credit facility of the type set forth herein would act in similar circumstances at the time with the information then available to it.

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

(a) sales and leasing of Inventory in the ordinary course of business,

(b) the sale or other disposition of used, worn-out, obsolete machinery, equipment and interests in real property or machinery, equipment and interests in real property no longer used or useful in the conduct of the business of Parent and its Subsidiaries, provided, that, subject to the Term Loan Intercreditor Agreement (if applicable), at any time a Cash Dominion Event exists, all of the Net Cash Proceeds of the sale or other disposition shall be paid to Agent for application to the Obligations in accordance with the terms hereof;

(c)  the sale or other disposition of property by Parent or any Subsidiary thereof to a Borrower or Guarantor, provided, that, if the transferor of such property is a Borrower or Guarantor (i) the transferee thereof must be (A) a Borrower if the transferor is a Borrower or (B) a Borrower or Guarantor if the transferor is a Guarantor, (ii) to the extent such transaction constitutes an Investment, such transaction is permitted under Section 10.4 hereof and (iii) to the extent of any security interests and lien of Agent with respect to such property prior to its sale or other disposition, the security interest and lien of Agent on such property shall continue in all respects and shall not be deemed released or terminated as a result of such sale

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or other disposition and Borrowers and Guarantors shall execute and deliver such agreements, documents and instruments as Agent may request with respect thereto;

(d) the sale or other disposition of property by any Subsidiary that is not a Borrower or Guarantor to any other Subsidiary that is not a Borrower or Guarantor;

(e)  the sale of accounts receivable in connection with the collection or compromise thereof in the ordinary course of business consistent with the practices of Parent and its Subsidiaries as of the date hereof;

(f)  the grant by Parent and its Subsidiaries after the date hereof of a license of any Intellectual Property owned by Parent and its Subsidiaries, provided, that, the rights of the licensee shall be subject to the rights of Agent, and shall not adversely affect, limit or restrict the rights of Agent to use any Intellectual Property of Parent and its Subsidiaries to sell or otherwise dispose of any Inventory or other Collateral or otherwise adversely limit or interfere in any respect with the use of any such trademarks by Agent in connection with the exercise of its rights or remedies hereunder or under any of the other Financing Agreements;

(g) the issuance and sale by Parent and its Subsidiaries of Equity Interests of Parent and its Subsidiaries after the date hereof for cash; provided, that, (A) Parent and its Subsidiaries shall not be required to pay any cash dividends or repurchase or redeem such Equity Interests or make any other payments in respect thereof, except as otherwise permitted in Section 10.5 hereof, (B) subject to the terms of the Term Loan Intercreditor Agreement (if applicable), except as Agent may otherwise agree in writing, and other than for the issuance of Equity Interests as provided in clauses (h) and (i) below or as payment of consideration for a Permitted Acquisition, at any time a Cash Dominion Event exists, all of the Net Cash Proceeds of the sale and issuance of such Equity Interests shall be paid to Agent for application to the Obligations in accordance with the terms hereof and (C) as of the date of such issuance and sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

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

(i)  the issuance of Equity Interests of a Foreign Subsidiary to foreign nationals to the extent required by foreign law and in the ordinary course of business;

(j) the termination of Hedge Agreements permitted hereunder;

(k) a transfer of Equipment by a Borrower or Guarantor to a manufacturer or dealer with respect to such Equipment pursuant to a trade-in of such Equipment; provided, that, such Equipment is replaced, substantially concurrently by like-kind equipment having the same or better value and without additional payments by such Borrower or Guarantor in respect thereof;

(l)  the abandonment or other disposition of Intellectual Property that is not material and is no longer used or useful in any material respect in the business of any Borrower, Guarantor or their Subsidiaries and does not appear on is or otherwise not affixed to or incorporated in any Inventory or necessary in connection with the Records or have any material value; provided, that, no Default or Event of Default shall exist or have occurred and be continuing as of the date of such abandonment or other disposition and after giving effect thereto;

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(m)the sale of any Equipment or Real Property that is otherwise permitted hereunder as a Permitted Disposition pursuant to a Sale and Leaseback Transaction;

(n) any sale or other disposition of assets (other than Receivables and Inventory) subject to a security interest or lien permitted hereunder pursuant to the exercise by the holder of such security interest or lien of its remedies with respect to such assets, to the extent that the default that gave rise to the right of such holder to exercise its remedies is not a Default or Event of Default hereunder;

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

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

(q) sales or other dispositions of assets of Parent and its Subsidiaries not otherwise subject to the provisions set forth in this definition, provided, that, as to any such sale or other disposition, each of the following conditions is satisfied:

(i)      in the case of any sale or other disposition where the amount of the consideration payable in connection with such sale or other disposition is in excess of $2,500,000 or at any time that the aggregate amount of the consideration payable in connection with all such sales or other dispositions permitted under this clause (q) in any fiscal year are in excess of $2,500,000, then as to all sales or other dispositions in such fiscal year thereafter (and consideration for such purpose shall include the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Equity Interests, to be paid, issued or delivered in connection with any such sale or other disposition):

(A)  not less than seventy-five (75%) percent of the consideration to be received by Borrowers and Guarantors shall be paid or payable in cash and shall be paid contemporaneously with consummation of the transaction;

(B)  the consideration paid or payable shall be in an amount not less than the fair market value of the property disposed of;

(C)  such transaction does not involve the sale or other disposition of any Equity Interest in any Subsidiary or of Receivables other than Receivables owned by or attributable to other property concurrently being disposed of in a transaction otherwise constituting a Permitted Disposition (but in no event constituting Accounts of a Borrower);

(D)  as of the date of such sale or other disposition and after giving effect thereto, using the most recent calculation of the Borrowing Base prior to the date of any such payment, on a pro forma basis, the aggregate amount of the Excess Availability of Borrowers shall be not less than $10,000,000,

(E)  at any time a Cash Dominion Event exists, subject to the terms of the Term Loan Intercreditor Agreement (if applicable), the Net Cash Proceeds from any such sale or other disposition, shall be applied to the Obligations (without permanent reduction thereof); and

(F)  as of the date of any such sale or other disposition, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

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(ii)     in the case of any sale or other disposition where the amount of the consideration payable in connection with such sale or other disposition is equal to or less than $2,500,000 and so long as the aggregate amount of the consideration payable in connection with all such sales or other dispositions permitted under this clause (q) in any fiscal year is equal to or less than $2,500,000, then as to all sales or other dispositions in such fiscal year (and consideration for such purpose shall include the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Equity Interests, to be paid, issued or delivered in connection with any such sale or other disposition):

(A)  as of the date of such sale or other disposition and after giving effect thereto, using the most recent calculation of the Borrowing Base prior to the date of any such sale or other disposition, on a pro forma basis, there shall be Excess Availability; and

(B)  as of the date of any such sale or other disposition, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing.

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

(a)  Investments consisting of accounts receivables owing to any Borrower or Guarantor if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms;

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

(c)  Investments in cash or Cash Equivalents; provided, that, (i) at any time a Cash Dominion Event exists, no Loans are then outstanding; exceptthat notwithstanding that any Loans are outstanding at any time a Cash Dominion Event exists, Parent and its Subsidiaries may from time to time in the ordinary course of business consistent with their current practices as of the date hereof make deposits of cash or other immediately available funds in operating demand deposit accounts used for disbursements to the extent required to provide funds for amounts drawn or anticipated to be drawn shortly on such accounts and such funds may be held in Cash Equivalents consisting of overnight investments until so drawn (so long as such funds and Cash Equivalents are not held more than two (2) Business Days from the date of the initial deposit thereof) and (ii) the terms and conditions of Section 5.3 hereof shall have been satisfied with respect to the deposit account, investment account or other account in which such cash or Cash Equivalents are held;

(d) deposits of cash for leases, utilities, worker’s compensation and similar matters in the ordinary course of business;

(e) obligations under Hedge Agreements permitted under Section 10.3(e) hereof;

(f)  Investments the sole payment for which is Equity Interests of Parent that are otherwise permitted to be issued under the terms hereof and do not constitute Indebtedness;

(g) receivables owing to Parent or any of its Subsidiaries if created or acquired in the ordinary course of business consistent with current practices as of the date hereof;

(h) payroll, travel, commission and similar advances to cover matters that in good faith are expected at the time of such advances to be treated as expenses for accounting purposes in accordance with GAAP and that are made in the ordinary course of business consistent with current practices as of the date hereof;

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(i)  the existing Investments of Parent and its Subsidiaries as of the date hereof in their respective Subsidiaries; provided, that, Parent and its Subsidiaries shall not have any further obligations or liabilities to make any capital contributions or other additional investments or other payments to or in or for the benefit of any of such Subsidiaries;

(j)  (i) loans and advances by Parent and its Subsidiaries to directors, officers and employees of Parent and its Subsidiaries in the ordinary course of business for bona fide (including, without limitation, in connection with the purchase of Equity Interests by such directors, officers and employees) business purposes not in excess of $5,000,000 at any time outstanding and (ii) Investments made in connection with split-dollar life insurance program for the benefit of directors, officers and employees of Parent and its Subsidiaries in the ordinary course of business consistent with the current practices of Parent and its Subsidiaries as of the date hereof;

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

(l)  obligations of account debtors to Parent and its Subsidiaries arising from Accounts which are past due evidenced by a promissory note made by such account debtor payable to Parent and its Subsidiaries; provided, that, promptly upon the receipt of the original of any such promissory note in an amount greater than $250,000 individually or in the aggregate from any single account debtor (or regardless of the amount after an Event of Default exists or has occurred and is continuing, at the request of Agent) by Parent and its Subsidiaries, such promissory note shall be endorsed to the order of Agent by Parent and its Subsidiaries and promptly delivered to Agent as so endorsed;

(m)loans, advances and other Investments by a Borrower or Guarantor to or in a Borrower or Guarantor, or by a Subsidiary that is not a Guarantor in any other Subsidiary that is not a Guarantor, after the date hereof; provided, that, as to any such Investments, each of the following conditions is satisfied: (i) to the extent that such Investment gives rise to any Indebtedness, such Indebtedness is permitted hereunder, (ii) to the extent that such Investment gives rise to the issuance of any Equity Interests, such issuance is permitted hereunder and (iii) as of the date of any such Investment and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(n) Investments constituting Restricted Payments permitted by Section 10.5;

(o) Investments by Parent or any of its Subsidiaries in the form of Equity Interests received as consideration for the sale of assets pursuant to a Permitted Disposition by Parent or such Subsidiary to the extent permitted under Section 10.1(b);

(p) any indemnity, purchase price adjustment, earnout or similar obligation payable to Parent or any of its Subsidiaries arising pursuant to a Permitted Acquisition in each case permitted under Section 10.4 or a Permitted Disposition in each case to the extent permitted under Section 10.1(b);

(q) Investments consisting of advance payments for the purchase of inventory, supplies, material or equipment or the licensing or contribution of Intellectual Property pursuant to joint marketing arrangements with other Persons and in respect of Capital Expenditures made in the ordinary course of business consistent with the current practices of Borrowers as of the date hereof, if any;

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(r) Investments permitted under Section 10.6;

(s)  loans by a Borrower or Guarantor to International the proceeds of which are used to make a substantially contemporaneous payment of amounts permitted to be paid to the former owners of Procell under Section 10.9(b);

(t)  Investments after the date hereof by Parent and its Subsidiaries in or to any Person (including, without limitation, a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form) not otherwise subject to the provisions above or in Section 10.4; provided, that, as to any such Investment, each of the following conditions is satisfied:

(i)      in the case of any such Investments that are in excess of $1,750,000 or at any time that the aggregate amount of such Investments in any fiscal year are in excess of $1,750,000, then as to all such Investments in such fiscal year thereafter:

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

(B)  the daily average of the aggregate amount of the Excess Availability of Borrowers for the period of sixty (60) consecutive days immediately preceding the date of such Investment or any payment in respect thereof shall be not less than $10,000,000;

(C)  as of the date of such Investment and after giving effect thereto and to any payments in connection therewith and to any increase in the Borrowing Base as a result of such Investment (if any), using the most recent calculation of the Borrowing Base prior to the date of any such Investment and payment, on a pro forma basis, the aggregate amount of the Excess Availability of Borrowers shall be not less than $10,000,000;

(D)  for any such Investment where the amount of any or all payments in respect thereof exceeds $5,000,000, Agent shall have received, not less than ten (10) Business Days’ prior to the Investment, the Permitted Transaction Projections with respect to such Investment showing that: (1) the aggregate amount of the Excess Availability of Borrowers at all times during the period subject to such projections after such Investment, will be not less than $10,000,000 and (2) the Fixed Charge Coverage Ratio for Parent and its Subsidiaries is projected to be equal to or greater than 1.0 to 1.0 at all times during such period;

(E)  Agent shall have received a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, the Fixed Charge Coverage Ratio for Parent and its Subsidiaries is equal to or greater than 1.0 to 1.0 as of the most recent fiscal month end for which Agent has received financial statements pursuant to Section 9.6 hereof,

(F)  the Investment shall be in or to a company that engages in a line of business substantially similar to, or ancillary or related to, or used or useful to, the business that Borrowers are engaged in on the date hereof;

(G)  Agent shall have received not less than ten (10) Business Days’ prior written notice of the proposed Investment and such information with respect thereto as Agent may request, in each case with such information to include (1) parties to such Investment, (2) the proposed date and amount of the Investment, and (3) the total amount of the Investment; and

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(H)  Agent shall have received a certificate of the chief financial officer or chief executive officer of Borrower Agent certifying to Agent and Lenders that such transaction complies with this definition; and

(I)   upon Agent’s request, Agent shall have received (1) a reasonably detailed description of all material information relating to such acquisition and copies of all material documentation pertaining to such transaction, and (2) all such other information and data relating to such transaction as may be reasonably requested by Agent;

(ii)     in the case of any such Investments that are equal to or less than $1,750,000 and so long as the aggregate amount of all such Investments in any fiscal year are equal to or less than $1,750,000, then as to all such Investments in such fiscal year:

(A)  as of the date of such Investment and after giving effect thereto, using the most recent calculation of the Borrowing Base prior to the date of any such sale or other disposition, on a pro forma basis, there shall be Excess Availability; and

(B)  as of the date of any such Investment, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing.

1.118 “Permitted Liens” shall mean:

(a)  the security interests and liens of Agent for itself and the benefit of the Secured Parties and the rights of setoff of Secured Parties provided for herein or under applicable law;

(b) liens securing the payment of taxes, assessments or other governmental charges or levies either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower, or Guarantor or Subsidiary, as the case may be, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien and with respect to which adequate reserves have been set aside on its books in accordance with GAAP;

(c)  non-consensual statutory liens (other than liens arising under ERISA or securing the payment of taxes) arising in the ordinary course of such Borrower’s, Guarantor’s or Subsidiary’s business that do not secure Indebtedness for borrowed money, such as carriers’, warehousemen’s, materialmen’s, landlords’, workmen’s suppliers’, repairmen’s and mechanics’ liens, to the extent: (i) such liens do not in the aggregate materially detract from the value of the property of Borrowers and Guarantors taken as a whole and do not materially impair the use thereof in the operation of Borrowers and Guarantors taken as a whole, (ii) such liens secure Indebtedness which is not overdue or is fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower, Guarantor or such Subsidiary, in each case prior to the commencement of foreclosure or other similar proceedings, which proceedings (or orders entered in connection with such proceeding) have the effect of preventing the forfeiture or sale of the property subject to any such lien and with respect to which adequate reserves have been set aside on its books in accordance with GAAP;

(d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of Real Property which do not interfere in any material respect with the use of such Real Property or ordinary conduct of the business of such Borrower, Guarantor or such Subsidiary as presently conducted thereon or materially impair the value or marketability of the Real Property which may be subject thereto;

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(e)  security interests in Equipment and Real Property arising after the date hereof to secure Indebtedness permitted under Section 10.3(b) hereof, whether such Indebtedness is assumed or incurred by a Borrower, Guarantor or Subsidiary;

(f)  pledges and deposits of cash by any Borrower, Guarantor or Subsidiary after the date hereof in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security benefits consistent with the current practices of such Borrower, Guarantor or Subsidiary as of the date hereof;

(g) pledges and deposits of cash by any Borrower, Guarantor or Subsidiary after the date hereof to secure the performance of tenders, bids, leases, trade contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations in each case in the ordinary course of business consistent with the current practices of such Borrower, Guarantor or Subsidiary as of the date hereof; provided, that, in connection with any performance bonds issued by a surety or other person, the issuer of such bond shall have waived in writing any rights in or to, or other interest in, any of the Collateral in an agreement, in form and substance reasonably satisfactory to Agent;

(h) liens arising from (i) operating leases and the precautionary UCC financing statement filings in respect thereof and (ii) equipment or other materials which are not owned by any Borrower, Guarantor or Subsidiary located on the premises of such Borrower, Guarantor or Subsidiary (but not in connection with, or as part of, the financing thereof) from time to time in the ordinary course of business and consistent with current practices of such Borrower or Guarantor and the precautionary UCC financing statement filings in respect thereof;

(i)  statutory or common law liens or rights of setoff of depository banks with respect to funds of any Borrower, Guarantor or Subsidiary at such banks to secure fees and charges in connection with returned items or the standard fees and charges of such banks in connection with the deposit accounts maintained by such Borrower, Guarantor or Subsidiary at such banks (but not any other Indebtedness or obligations);

(j)  judgments and other similar liens arising in connection with court proceedings that do not constitute an Event of Default, provided, that, (i) such liens are being contested in good faith and by appropriate proceedings diligently pursued, (ii) adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefor, (iii) a stay of enforcement of any such liens is in effect and (iv) Agent may establish a Reserve with respect thereto;

(k) leases or subleases of Real Property granted by any Borrower or Guarantor in the ordinary course of business and consistent with past practice to any Person so long as any such leases or subleases do not interfere in any material respect with the ordinary conduct of the business of such Borrower or Guarantor as presently conducted thereon;

(l)  licenses of Intellectual Property permitted under clause (f) of the definition of Permitted Disposition;

(m)liens on goods in favor of customs and revenue authorities arising as a matter of law to secure custom duties in connection with the importation of such goods;

(n) the security interests in and liens upon the assets of Borrowers and Guarantors arising after the date hereof to secure the Indebtedness permitted under Section 10.3(j) hereof, provided, that, (i) Agent shall have received, in form and substance reasonably satisfactory to Agent and Syndication Agent, the Term Loan Intercreditor Agreement duly authorized, executed and delivered by the parties thereto, (ii) upon the receipt by or on behalf of any Borrower or Guarantor of the proceeds of the Term Loans giving rise to such

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Indebtedness, Agent shall subordinate in its security interests in and liens upon the Equipment and such assets related to the Equipment (including proceeds thereof) as Agent may agree pursuant to the terms of the Term Loan Intercreditor Agreement, and (iii) the security interests and liens that secure such Indebtedness shall at all times be, in all respects, subject and subordinate in priority to the security interests and liens of Agent in the Collateral, other than the Equipment of Borrowers and such assets related to the Equipment as Agent may agree;

(o) security interests and liens to secure Acquired Indebtedness permitted hereunder; provided that (i) such security interests and liens otherwise constitute Permitted Liens hereunder, (ii) the security interests and liens secured such Acquired Indebtedness at the time of and prior to the incurrence of such Acquired Indebtedness by the Parent or a Subsidiary and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Parent or a Subsidiary and (iii) such security interests and liens do not extend to or cover any property or assets of Parent or of any of its Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Parent or a Subsidiary and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by Parent or a Subsidiary;

(p) the security interests and liens set forth on Schedule 8.4 to the Information Certificate which are not otherwise permitted under the other clauses of this definition and any security interests and liens to secure Refinancing Indebtedness of the Indebtedness secured by such security interests and liens to the extent permitted under Section 10.3(m) hereof.

1.119 “Permitted Tax Distributions” shall mean (a) in the event that International, the parent of Parent, is treated as a corporation for applicable Federal, State or local income tax purposes and is a member of a consolidated, combined or similar U.S. Federal, State or local income tax group of which it or another direct or indirect parent of Parent is the common parent, payments, dividends or distributions to International, or another direct or indirect parent of Parent, as the case may be, in order to pay the portion of any such consolidated, combined or similar income taxes that are attributable to the income of Parent and its Subsidiaries (to the extent such taxes are not payable directly by Parent or its Subsidiaries); provided, that, the amount of such payments, dividends or distributions, plus the amount of any such taxes payable directly by Parent and its Subsidiaries, do not exceed the taxes that Parent and its Subsidiaries would have paid as a stand-alone group; or (b) in the event that Parent is treated as a partnership for applicable U.S. Federal, State or local income tax purposes, aggregate payments, dividends or distributions to International, or any other direct parent entity of Parent, as the case may be, in an amount equal to, with respect to any taxable year of Parent, the product of (i) the highest combined U.S. Federal, State (or provincial) and local statutory tax rate (after taking into account the deductibility of State (or provincial) and local income tax for U.S. Federal income tax purposes) applicable to any direct (or, where the direct equity holder is a pass-through entity, indirect) equity holder of Parent, or any other direct parent entity of Parent, as the case may be, multiplied by (ii) the taxable income of Parent (to the extent such taxes are not payable directly by Parent or its Subsidiaries).

1.120 “Permitted Transaction Projections” shall mean, as to any proposed acquisition, Investment, disposition or other transaction, current, updated projections (including in each case, forecasted balance sheets and statements of income and loss, statements of cash flow, and the projected Borrowing Base and Excess Availability) for Parent and its Subsidiaries on such basis (whether monthly, quarterly, annually or otherwise) for such period as Agent may require after the acquisition, Investment or other transaction, giving effect thereto, all in reasonable detail and in a format consistent with the projections delivered by Parent to Agent prior to the date hereof, together with such supporting information as Agent may reasonably request, which projections shall have been prepared on the basis of the assumptions set forth therein which Borrowers believe are fair and reasonable as of the date of preparation in light of current and reasonably foreseeable

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business conditions and using such methodology as is consistent with the most recent financial statements delivered to Agent pursuant to Section 9.6 hereof and showing Borrowers’ reasonable best estimate of the future Borrowing Base and Excess Availability for the period set forth therein.

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

1.122 “Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multiemployer Plan has made contributions at any time during the immediately preceding six (6) plan years or with respect to which any Borrower or Guarantor may incur liability.

1.123 “Procell Unit Purchase Agreement” shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (i) the Unit Purchase Agreement, dated as of December 13, 2006, by and among CPG I and Christopher Bardasian, Kevin Sloan and Larry Sloan, (ii) that certain “side letter”, dated January 29, 2008, by and among CPG I, International, Christopher Bardasian, Kevin Sloan and Larry Sloan.

1.124 “Pro Forma Basis” shall mean, in connection with any calculation of Consolidated EBITDA and Fixed Charges, after giving effect on a pro forma basis for the period of such calculation to: (a) the incurrence or repayment of any Indebtedness of Borrowers and Guarantors (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to this Agreement, occurring during the Last Twelve Month Period or at any time subsequent to the last day of the Last Twelve Month Period and on or prior to the date of such incurrence or repayment, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Last Twelve Month Period; and (b) any asset sales or asset acquisitions (including, without limitation, any Permitted Acquisition giving rise to the need to make such calculation as a result of the Borrowers and Guarantors (including any Person who becomes a Borrower or Guarantor as a result of such Permitted Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA attributable to the assets that are the subject of the Permitted Acquisition or asset sale during the Last Twelve Month Period) occurring during the Last Twelve Month Period or at any time subsequent to the last day of the Last Twelve Month Period and on or prior to the date of such asset sale or Permitted Acquisition, as if such asset sale or Permitted Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Last Twelve Month Period, including giving effect to any Pro Forma Cost Savings; provided, that, such pro forma effect pursuant to this clause (b) shall be determined using the relevant financial statements of the business acquired or to be acquired if available and, in any event, shall be satisfactory to Agent.

1.125 “Pro Forma Compliance Certificate” shall mean, with respect to any event or transaction, or proposed event or transaction, a certificate of the chief financial officer, vice president of finance, treasurer or controller of Borrower Agent or Parent containing reasonably detailed calculations of the financial covenant set forth in Section 11 as of the most recent fiscal month end for which Agent has received financial statements pursuant to Section 9.6 based on the Last Twelve Month Period and certifying that the other conditions hereunder to the applicable event or transaction are satisfied, after giving effect to the applicable event or transaction on a Pro Forma Basis.

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1.126 “Pro Forma Cost Savings" shall mean with respect to any period, the reductions in costs that (a) occurred during the Last Twelve Month Period that are directly attributable to a stock or an asset acquisition and calculated on a basis that is consistent with Article 11 of Regulation S-X under the Securities Act or (b) are implemented, committed to be implemented, the commencement of implementation of which has begun or reasonably expected to be implemented in good faith by the business that was the subject of any such a stock or asset acquisition within six (6) months of the date of the stock or asset acquisition and that are supportable and quantifiable, as if, in the case of each of clauses (a) and (b), all such reductions in costs had been effected as of the beginning of such period, decreased by any non-one-time incremental expenses incurred or to be incurred during the Last Twelve Month Period in order to achieve such reduction in costs.

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

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

1.129 “Qualified Equity Interests” shall mean any Equity Interests other than Disqualified Equity Interests.

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

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

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

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thereof and proceeds of insurance covering the lives of employees on which any Borrower or Guarantor is a beneficiary).

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

1.134 “Refinancing Indebtedness” shall have the meaning set forth in Section 10.3(m) hereof.

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

1.136 “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate more than fifty (50%) percent of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom more than fifty (50%) percent of the then outstanding Loans and participation interests in other Obligations are owing.

1.137 “Reserves” shall mean as of any date of determination, such amounts as Agent may from time to time establish and revise in its Permitted Discretion reducing the amount of Loans and Letters of Credit which would otherwise be available to any Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which, as determined by Agent in its Permitted Discretion, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the Collateral or any other property which is security for the Obligations, its value or the amount that might be received by Agent from the sale or other disposition or realization upon such Collateral, or (ii) the assets or business of any Borrower or Guarantor or (iii) the security interests and other rights of Agent or any Lender in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Agent's good faith belief that any collateral report or financial information furnished by or on behalf of any Borrower or Guarantor to Agent is or may have been incomplete, inaccurate or misleading in any material respect or (c) in respect of any Default or an Event of Default. Without limiting the generality of the foregoing, Reserves may be established to reflect any of the following: (i) inventory shrinkage, (ii) reserves in respect of markdowns and cost variances (pursuant to discrepancies between the purchase order price of Inventory and the actual cost thereof), (iii) dilution with respect to Accounts (based on the ratio of the aggregate amount of non-cash reductions in Accounts for any period to the aggregate dollar amount of the sales of such Borrower for such period) as calculated by Agent for any period is or is reasonably anticipated to be greater than five (5%) percent, (iv) returns, discounts, claims, credits and allowances of any nature that are not paid pursuant to the reduction of Accounts, (v) the sales, excise or similar taxes included in the amount of any Accounts reported to Agent and amounts due or to become due in respect of sales, use and/or withholding taxes, (vi) any rental payments, service charges or other amounts due or to become due to owners or lessors of real property to the extent Inventory or Records are located in or on such property or in the possession or control of such parties or such Records are needed to monitor or otherwise deal with the Collateral (other than for locations where Agent has received a Collateral Access Agreement executed and delivered by the owner and lessor of such real property that Agent has acknowledged in writing is in form and substance satisfactory to Agent), provided, that, the Reserves established pursuant to this clause (vi) as to leased locations shall not exceed at any time the aggregate of amounts payable for the next three (3) months to the lessors of such locations, except that such limitation on the amount of the Reserves shall not apply at any time that a Default or Event of Default shall exist or have occurred and be continuing, or at any time there is any default or event of default under the lease with respect to such location or a notice thereof has been sent or received by or on behalf of any Borrower or Guarantor, (vii) any rental payments, service charges or other amounts due or to

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become due to lessors of personal property; (viii) an increase in the number of days of the turnover of Inventory or a change in the mix of the Inventory that results in an overall decrease in the value thereof or a deterioration in its nature or quality (but only to the extent not addressed by the lending formulas in a manner satisfactory to Agent), (ix) variances between the perpetual inventory records of Borrowers and the results of the test counts of Inventory conducted by Agent with respect thereto in excess of the percentage acceptable to Agent, (x) the aggregate amount of deposits, if any, received by any Borrower from its customers in respect of unfilled orders for goods, (xi) reserves for in-transit inventory, including freight, taxes, duty and other amounts which Agent estimates must be paid in connection with such Inventory upon arrival and for delivery to one of such Borrower’s locations for Eligible Inventory within the United States of America, (xii) obligations, liabilities or indebtedness (contingent or otherwise) of Borrowers or Guarantors to any Bank Product Provider arising under or in connection with any Bank Products of any Borrower or Guarantor with a Bank Product Provider or as such Bank Product Provider may otherwise require and Agent may agree in connection therewith to the extent that such obligation, liabilities or indebtedness constitute Obligations as such term is defined herein or otherwise receive the benefit of the security interest of Agent in any Collateral, and (xiii) in the event of the request by Borrower Agent under clause (b) of the definition of the term Maturity Date, the Indebtedness and other obligations in respect of the Term Loans outstanding on the date three (3) months prior to the maturity thereof as set forth in the definition of Maturity Date. To the extent that an event, condition or matter as to any Eligible Accounts or Eligible Inventory is addressed pursuant to the treatment thereof within the applicable definition of such terms, Agent shall not also establish a Reserve to address the same event, condition or matter. The amount of any Reserve established by Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such Reserve as determined by Agent in good faith and to the extent that such Reserve is in respect of amounts that may be payable to third parties Agent may, at its option, deduct such Reserve from the Maximum Credit at any time that such limit is less than the amount of the Borrowing Base.

1.138 “Restricted Payment” shall mean any (a) dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests of Parent or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or on account of any return of capital to Parent or such Subsidiary’s stockholders, partners or members (or the equivalent Person thereof), or payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any Equity Interests of Parent or any of its Subsidiaries, or any setting apart of funds or property for any of the foregoing, and (b) the payment by Parent or any of its Subsidiaries of any management, advisory or consulting fee to any Person or the payment of any extraordinary salary, bonus or other form of compensation to any Person who is directly or indirectly a significant partner, shareholder, owner or executive officer of any such Person, to the extent such extraordinary salary, bonus or other form of compensation is not included in the corporate overhead of Parent or such Subsidiary.

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

1.140 “Sale and Leaseback Transaction” shall mean, with respect to a Borrower or Guarantor, or any Subsidiary, any arrangement, directly or indirectly, with any Person whereby such Borrower or Guarantor or such Subsidiary shall sell or transfer any property used or useful in its business, whether now owned or hereafter acquired (other than transient ownership of equipment to be subject to any operating lease), and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred.

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

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

1.143 “S&P” shall mean Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and its successors and assigns.

1.144 “Scranton Companies” shall mean, collectively, the following (together with their respective successors and assigns): (a) Scranton and (b) any other Person that is a Borrower after the date hereof that engages in a line of business substantially similar to, or ancillary or related to, or used or useful to, the business that Scranton is engaged in on the date hereof; sometimes being referred to herein individually as an “Scranton Company”.

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

1.146 “Senior Fixed and Floating Rate Note Indenture” shall mean Indenture, dated as of July 5, 2005, by CPG I, as Issuer and the Senior Fixed and Floating Rate Note Trustee, with respect to the Senior Floating Rate Notes and Senior Fixed Rate Notes, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.147 “Senior Fixed and Floating Rate Note Trustee” shall mean Wells Fargo Bank, N.A., as Trustee and its successors and assigns, and any replacement trustee permitted pursuant to the terms and conditions of the Senior Fixed and Floating Rate Note Indenture.

1.148 “Senior Fixed Rate Notes” shall mean, collectively, the 10 ½% Senior Notes due 2013 in the original aggregate amount of $150,000,000 issued by CPG I pursuant to the Senior Fixed and Floating Rate Note Indenture, as the same now exist or may hereafter be amended, modified, supplemented, extended, modified, supplemented, extended, renewed, restated or replaced.

1.149 “Senior Floating Rate Notes” shall mean, collectively, the Senior Floating Rate Notes due 2012 in the original aggregate amount of $128,114,000 issued by CPG I pursuant to the Senior Fixed and Floating Rate Note Indenture, as the same now exist or may hereafter be amended, modified, supplemented, extended, modified, supplemented, extended, renewed, restated or replaced.

1.150 “Senior Note Documents” shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, modified, supplemented, extended, renewed, restated or replaced): (a) the Senior Floating Rate Notes, (b) the Senior Fixed Rate Notes, (c) the Senior Fixed and Floating Rate Note Indenture, and (d) any agreements, documents or instruments related to any of the foregoing.

1.151 “Solvent” shall mean, at any time with respect to any Person, that at such time such Person (a) is able to pay its debts as they mature and has (and has a reasonable basis to believe it will continue to

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

1.152 “Special Agent Advances” shall have the meaning set forth in Section 14.11 hereof.

1.153 “Subordinated Debt” shall mean any Indebtedness of a Borrower or Guarantor that is subject to, and subordinate in right of payment to, the right of Agent and Lenders to receive the prior final payment and satisfaction in cash in full of all of the Obligations and subject to such other terms and conditions as Agent may require with respect thereto and shall include the Cash Earn Out Consideration (if any), the Americhem Earn-Out Amount (if any) and the Tax Payment Consideration (if any), as each such terms is defined in the Procell Unit Purchase Agreement as in effect on the date hereof.

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

1.155 “Supermajority Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate more than seventy-five (75%) percent of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom more than seventy-five (75%) percent of the then outstanding Obligations are owing.

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

1.157 “Swing Line Loan Limit” shall mean $10,000,000.

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

1.159 “Syndication Agent” shall mean General Electric Capital Corporation in its capacity as syndication agent with respect to the Credit Facility.

1.160 “Term Loan Agent” shall mean Wachovia Bank, National Association, a national banking association, in its capacity as agent acting for and on behalf of the Term Loan Lenders pursuant to the Term Loan Agreement and any replacement or successor agent thereunder.

1.161 “Term Loan Agreement” shall mean the credit agreement entered into by Borrowers and Guarantors after the date hereof with Term Loan Agent and Term Loan Lenders, substantially on the terms set forth in the term sheet provided by Borrower Agent to Agent immediately prior to the date hereof and

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otherwise on terms and conditions reasonably satisfactory to Agent, as the same then exists or may thereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.162 “Term Loan Intercreditor Agreement” shall mean the intercreditor agreement by and among Agent and the holder or holders of the Indebtedness arising pursuant to the Term Loans and any agent on its or their behalf or any person that may otherwise have a security interest or lien securing such Indebtedness, as acknowledged and agreed to by Borrowers and Guarantors, providing for such parties' relative rights and priorities with respect to the assets and properties of Borrowers and Guarantors and related matters, as the same then exists or may thereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.163 “Term Loan Lenders” shall mean, collectively, the parties to the Term Loan Agreement as lenders and for whom Term Loan Agent is acting as agent pursuant thereto, and their respective successors and assigns.

1.164 “Term Loans” shall mean the term loans made to Borrowers or Guarantors by the Term Loan Lenders after the date hereof under the Term Loan Agreement.

1.165 “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York and any successor statute, as in effect from time to time (except that terms used herein which are not otherwise defined herein and defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Agent may otherwise determine).

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

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

1.168 “Wachovia” shall mean Wachovia Bank, National Association, and its successors and assigns.

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

 

SECTION 2. CREDIT FACILITIES

 

2.1 Revolving Loans.

Subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to make its Pro Rata Share of Revolving Loans to Borrowers from time to time in amounts

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requested by any Borrower (or Borrower Agent on behalf of Borrowers) up to the aggregate amount outstanding equal to the Commitment of such Lender, provided, that, after giving effect to any such Revolving Loan, (a) the aggregate principal amount of the Revolving Loans, Swing Line Loans and Letter of Credit Obligations outstanding shall not exceed the Borrowing Base at such time and (b) the aggregate principal amount of the Revolving Loans, Swing Line Loans and Letter of Credit Obligations outstanding with respect to all Borrowers shall not exceed the Maximum Credit at such time. Subject to the terms and conditions hereof, each Borrower (or Borrower Agent on behalf of Borrowers) may from time to time borrow, prepay and reborrow Revolving Loans. Borrowers shall not permit the outstanding Revolving Loans, Swing Line Loans and Letter of Credit Obligations on the books and records of the AZEK Companies to exceed the portion of the Borrowing Base based on the assets of the AZEK Companies and shall not permit the outstanding Revolving Loans, Swing Loan Loans and Letter of Credit Obligations on the books and records of the Scranton Companies to exceed the portion of the Borrowing Base based on the assets of the Scranton Companies. No Lender shall be required to make any Revolving Loan, if, after giving effect thereto the aggregate outstanding principal amount of all Revolving Loans of such Lender, together with such Lender’s Pro Rata Share of the aggregate amount of all Swing Line Loans and Letter of Credit Obligations, would exceed such Lender’s Commitment.

 

2.2 Swing Line Loans.

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

(b) Upon the making of a Swing Line Loan, without further action by any party hereto, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from the Swing Line Lender, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share in such Swing Line Loan. To the extent that there is no settlement in accordance with Section 6.13 below, the Swing Line Lender may at any time, require the Lenders to fund their participations. From and after the date, if any, on which any Lender has funded its participation in any Swing Line Loan, Agent shall promptly distribute to such Lender, such Lender’s Pro Rata Share of all payments of principal and interest received by Agent in respect of such Swing Line Loan.

 

2.3 Letters of Credit.

(a)  General. Subject to and upon the terms and conditions contained herein and in the Letter of Credit Documents, at the request of a Borrower (or Borrower Agent on behalf of any Borrower), each Issuing Bank agrees to issue, for the account of such Borrower one or more Letters of Credit, for the ratable risk of

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each Lender according to its Pro Rata Share, containing terms and conditions acceptable to Agent and such Issuing Bank.

(b) Notice of Issuance, Amendment, Renewal, Extension. The Borrower requesting such Letter of Credit (or Borrower Agent on behalf of such Borrower) shall give Agent and the Issuing Bank with respect thereto three (3) Business Days’ prior written notice of such Borrower’s request for the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit). Such notice shall be irrevocable and shall (i) specify the original face amount of the Letter of Credit requested (or identify the Letter of Credit to be amended, renewed or extended), (ii) the effective date (which date shall be a Business Day and in no event shall be a date less than ten (10) days prior to the end of the then current term of this Agreement) of issuance of such requested Letter of Credit (or such amendment, renewal or extension), (iii) whether such Letter of Credit may be drawn in a single or in partial draws, (iv) the date on which such requested Letter of Credit is to expire, (v) the purpose for which such Letter of Credit is to be issued, (vi) the name and address of the beneficiary of the requested Letter of Credit, (vii) such other information as shall be necessary to enable the Issuing Bank to prepare, amend, renew or extend such Letter of Credit and (viii) if requested by Issuing Bank or Agent, the Borrower requesting such Letter of Credit (or Borrower Agent on behalf of such Borrower) shall have delivered to Issuing Bank with respect thereto at such times and in such manner as such Issuing Bank may require, an application, in form and substance satisfactory to such Issuing Bank and Agent, for the issuance of the Letter of Credit and such other Letter of Credit Documents as may be required pursuant to the terms thereof. If requested by the Issuing Bank, the Borrower requesting the Letter of Credit (or Borrower Agent on behalf of such Borrower) shall attach to the request the proposed terms of the Letter of Credit. In no event shall a Letter of Credit be issued, amended, renewed or extended unless the forms and terms of the proposed Letter of Credit (as amended, renewed or extended, as the case may be) is satisfactory to Agent and Issuing Bank. The renewal or extension of, or increase in the amount of, any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder.

(c)  Certain Conditions. In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, a Letter of Credit shall be issued, amended, renewed or extended only if (and on issuance, amendment, renewal or extension of each Letter of Credit, Borrowers shall be deemed to represent and warrant that) immediately after giving effect to such issuance, amendment, renewal or extension: (i) no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that such Issuing Bank refrain from, the issuance of letters of credit generally or the issuance of such Letter of Credit, (ii) except as otherwise expressly permitted hereunder, after giving effect to the issuance, amendment, renewal or extension of such Letter of Credit, the Letter of Credit Obligations shall not exceed the Letter of Credit Limit, and (iii) after giving effect to the issuance, amendment, renewal or extension of any such Letter of Credit, (A) the aggregate principal amount of the Revolving Loans, Swing Line Loans and Letter of Credit Obligations outstanding shall not exceed the Borrowing Base at such time and (B) the aggregate principal amount of the Revolving Loans, Swing Line Loans and Letter of Credit Obligations outstanding with respect to all Borrowers shall not exceed the Maximum Credit at such time. Promptly after the delivery of any Letter of Credit or amendment to a Letter of Credit, the applicable Issuing Bank will also deliver to Borrower Agent and Agent a true and complete copy of such Letter of Credit or amendment. Except in Agent’s discretion and with the consent of all Lenders, the amount of all outstanding Letter of Credit Obligations shall not at any time exceed the Letter of Credit Limit.

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(d) Expiration. Each standby Letter of Credit shall expire at or prior to the earlier of (i) twelve (12) months after the date of the issuance of such standby Letter of Credit (or in the case of any renewal or extension thereof, twelve (12) months after such renewal or extension) and (ii) the date that is five (5) Business Days prior to the Maturity Date, provided, that, (A) any standby Letter of credit with a one year tenor may provide for automatic renewal or extension thereof for additional one year periods (which in no event shall extend beyond the date referred to in clause (ii) above) so long as such standby Letter of Credit permits the Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such standby Letter of Credit) by giving prior notice to the beneficiary thereof within a time period during such twelve-month period to be agreed upon at the time such standby Letter of Credit is issued and (B) if the Issuing Bank and Agent each consent, the expiration date on any standby Letter of Credit may extend beyond the date referred to in clause (ii) above. Each trade or commercial Letter of Credit shall expire on the earlier of one hundred eighty (180) days after such trade Letter of Credit’s date of issuance, renewal or extension (as applicable) or the date five (5) Business Days prior to the Maturity Date.

(e)  Participations. Immediately upon the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Lenders, each Lender shall be deemed to have irrevocably and unconditionally purchased and received, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share of the liability with respect to such Letter of Credit and the obligations of Borrowers with respect thereto (including all Letter of Credit Obligations with respect thereto). Each Lender shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to the Issuing Bank therefor and discharge when due, its Pro Rata Share of all of such obligations arising under such Letter of Credit. Without limiting the scope and nature of each Lender’s participation in any Letter of Credit, to the extent that an Issuing Bank has not been reimbursed or otherwise paid as required hereunder or under any such Letter of Credit, each such Lender shall pay to such Issuing Bank its Pro Rata Share of such unreimbursed drawing or other amounts then due to such Issuing Bank in connection therewith. The obligations of each Lender as to its participations pursuant hereto in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or Event of Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(f)  Reimbursement. If an Issuing Bank shall make any payment in respect of a Letter of Credit, Borrowers shall reimburse Issuing Bank by paying to Agent an amount equal to such payment by Issuing Bank not later than 12:00 noon on the date that such payment by Issuing Bank is made, if the applicable Borrower (or Borrower Agent on behalf of such Borrower) shall have received notice of such payment by the Issuing Bank prior to 10:00 a.m. on such date, or, if such notice shall not have been received by such Borrower (or Borrower Agent) prior to such time on such date, then not later than 12:00 noon on (i) the Business Day that such Borrower (or Borrower Agent) receives such notice, if such notice is received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii) the Business Day immediately following the day that such Borrower (or Borrower Agent) receives such notice, if such notice is not received prior to such time on the day of receipt; provided, that, unless such Borrower (or Borrower Agent) requests otherwise, and, subject to the conditions to borrowing set forth herein, each drawing under any Letter of Credit or other amount payable in connection therewith when due shall constitute a request by the Borrower for whose account such Letter of Credit was issued to Agent for a Base Rate Loan in the amount of such drawing or other amount then due, and shall be made by Agent on behalf of Lenders as a Revolving Loan or Swing Line Loan as Borrower Agent requests, or if such request is not received in a timely manner, as Agent determines (or Special Agent Advance, as the case may be) in an equivalent amount and, to the extent so financed, such Borrower's obligation to make such payment shall be discharged and replaced by the resulting Revolving Loan, Swing Line Loan (or Special Agent Advance, as the case may be). If the applicable Borrower fails to

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make such payment when due, subject to the rights of Agent under Section 6.13 hereof, Agent may notify each Lender of the applicable payment made by the Issuing Bank in respect of such Letter of Credit, the payment then due from such Borrower in respect thereof and such Lender's Pro Rata Share thereof. Promptly following receipt of such notice, each Lender shall pay to Agent its Pro Rata Share of the payment then due and Agent shall promptly pay to the applicable Issuing Bank the amounts so received by it from Lenders. Promptly following receipt by Agent of any payment from a Borrower pursuant to this paragraph, Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph to reimburse an Issuing Bank for any payment made by such Issuing Bank (other than the funding of a Revolving Loan, Swing Line Loan or Special Agent Advance as contemplated above) shall not constitute a Loan and shall not relieve the applicable Borrower of its obligation to reimburse such Issuing Bank for such payment.

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

(h) Disbursement Procedures. The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall promptly notify Agent and the applicable Borrower (or Borrower Agent) by telephone (confirmed by facsimile or otherwise as Borrower Agent and Issuing Bank may agree) of such demand for

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payment and whether such Issuing Bank has made or will make any payment in respect thereof; provided, that, any failure to give or delay in giving such notice shall not relieve the applicable Borrower of its obligation to reimburse such Issuing Bank and Lenders with respect to any such payment.

(i)  Interim Interest. If an Issuing Bank shall make any payment in respect of a Letter of Credit, or otherwise be owed any amounts in respect thereof, then, unless the applicable Borrower shall reimburse Issuing Bank for such payment or other amount in full on the date such payment is made or amount due, the unpaid amount thereof shall bear interest, for each day from and including the date such payment is made or amount due but excluding the date that the applicable Borrower reimburses such payment or other amount, at the rate per annum then applicable to Base Rate Loans. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by Agent or any Lender pursuant to Section 2.4(f) above to reimburse such Issuing Bank shall be for the account of Agent or such Lender to the extent of such payment, and shall be payable on demand or, if no demand has been made, on the date on which the applicable Borrower reimburses the applicable payment in full.

(j)  Indemnification. Borrowers and Guarantors shall indemnify and hold Agent and Lenders harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Agent or any Lender may suffer or incur in connection with any Letter of Credit and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by an Issuing Bank or correspondent with respect to any Letter of Credit, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or willful misconduct of Agent or any Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction. Each Borrower and Guarantor assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit or any documents, drafts or acceptances thereunder. Each Borrower and Guarantor hereby releases and holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions with respect to or relating to any Letter of Credit, except for the gross negligence or willful misconduct of Agent or any Lender as determined pursuant to a final, non-appealable order of a court of competent jurisdiction. The provisions of this Section 2.4(j) shall survive the payment of Obligations and the termination of this Agreement.

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

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2.4 Requests for Borrowings.

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

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

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

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

(iv) the date of such Revolving Loan, which shall be a Business Day;

(v)     if such Loan is to be a Revolving Loan, whether such Revolving Loan is to be a Base Rate Loan or a Eurodollar Rate Loan;

(vi)    in the case of a Eurodollar Rate Loan, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

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

(b) If no election as to whether a Revolving Loan is to be a Base Rate Loan or Eurodollar Rate Loan is specified in the applicable request, then the requested Revolving Loan shall be a Base Rate Loan. If no Interest Period is specified with respect to any request for a Eurodollar Rate Loan, then the applicable Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a request for a Revolving Loan in accordance with this Section, Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Revolving Loan to be made as part of the request.

(c)  All Loans and Letters of Credit under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, any Borrower or Guarantor when deposited to the credit of any Borrower or Guarantor or otherwise disbursed or established in accordance with the instructions of any Borrower or Guarantor or in accordance with the terms and conditions of this Agreement.

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

 

2.5 Increase in Maximum Credit.

(a)  Borrower Agent may, at any time, deliver a written request to Agent to increase the Maximum Credit. Any such written request shall specify the amount of the increase in the Maximum Credit that Borrowers are requesting, provided, that, (i) in no event shall the aggregate amount of any such increase

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cause the Maximum Credit to exceed $100,000,000, (ii) such request shall be for an increase of not less than $5,000,000, (iii) any such request shall be irrevocable, (iv) in no event shall there be more than one such increase in any calendar quarter and (v) no Default or Event of Default shall exist or have occurred and be continuing.

(b) Upon the receipt by Agent of any such written request, Agent shall notify each of the Lenders of such request and each Lender shall have the option (but not the obligation) to increase the amount of its Commitment by an amount up to its Pro Rata Share of the amount of the increase thereof requested by Borrower Agent as set forth in the notice from Agent to such Lender. Each Lender shall notify Agent within fifteen (15) days after the receipt of such notice from Agent whether it is willing to so increase its Commitment, and if so, the amount of such increase; provided, that, (i) the minimum increase in the Commitments of each such Lender providing the additional Commitments shall equal or exceed $1,000,000, and (ii) no Lender shall be obligated to provide such increase in its Commitment and the determination to increase the Commitment of a Lender shall be within the sole and absolute discretion of such Lender. If the aggregate amount of the increases in the Commitments received from the Lenders does not equal or exceed the amount of the increase in the Maximum Credit requested by Borrower Agent, Agent may seek additional increases from Lenders or Commitments from such Eligible Transferees as it may determine, after consultation with Borrower Agent. In the event Lenders (or Lenders and any such Eligible Transferees, as the case may be) have committed in writing to provide increases in their Commitments or new Commitments in an aggregate amount in excess of the increase in the Maximum Credit requested by Borrowers or permitted hereunder, Agent shall then have the right to allocate such commitments, first to Lenders and then to Eligible Transferees, in such amounts and manner as Agent may determine, after consultation with Borrower Agent.

(c)  The Maximum Credit shall be increased by the amount of the increase in the applicable Commitments from Lenders or new Commitments from Eligible Transferees, in each case selected in accordance with Section 2.5(b) above, for which Agent has received Assignment and Acceptances thirty (30) days after the date of the request by Borrower Agent for the increase or such earlier date as Agent and Borrower Agent may agree (but subject to the satisfaction of the conditions set forth below), whether or not the aggregate amount of the increase in Commitments and new Commitments, as the case may be, equal or exceed the amount of the increase in the Maximum Credit requested by Borrower Agent in accordance with the terms hereof, effective on the date that each of the following conditions have been satisfied:

(i)      Agent shall have received from each Lender or Eligible Transferee that is providing an additional Commitment as part of the increase in the Maximum Credit, an Assignment and Acceptance duly executed by such Lender or Eligible Transferee and each Borrower, provided, that, the aggregate Commitments set forth in such Assignment and Acceptance(s) shall be not less than $1,000,000;

(ii)     the conditions precedent to the making of Revolving Loans set forth in Section 4.2 shall be satisfied as of the date of the increase in the Maximum Credit, both before and after giving effect to such increase;

(iii)    such increase in the Maximum Credit, on the date of the effectiveness thereof, shall not violate any applicable law, regulation or order or decree of any court or other Governmental Authority and shall not be enjoined, temporarily, preliminarily or permanently; and

(iv)    there shall have been paid to each Lender and Eligible Transferee providing an additional Commitment in connection with such increase in the Maximum Credit all fees and expenses due and payable to such Person on or before the effectiveness of such increase.

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(d) As of the effective date of any such increase in the Maximum Credit, each reference to the term Commitments and Maximum Credit herein, as applicable, and in any of the other Financing Agreements shall be deemed amended to mean the amount of the Commitments and Maximum Credit specified in the most recent written notice from Agent to Borrower Agent of the increase in the Commitments and Maximum Credit, as applicable.

(e)  Effective on the date of each increase in the Maximum Credit pursuant to this Section 2.5, each reference in this Agreement to an amount of Excess Availability shall, automatically and without any further action, be deemed to be increased so that the ratio of the amount of Excess Availability to the amount of the Maximum Credit after such increase in the Maximum Credit remains the same as the ratio of the amount of Excess Availability to the amount of the Maximum Credit prior to such increase in the Maximum Credit.

 

2.6 Decrease in Maximum Credit.

(a)  Borrower Agent may, at any time, deliver a written request to Agent to decrease the Maximum Credit. Any such written request shall specify the amount of the decrease in the Maximum Credit that Borrower Agent is requesting and the effective date of such decrease (which date shall not be less than five (5) nor more than ten (10) Business Days after the date of such request); provided, that, (i) in no event shall the aggregate amount of any such decrease cause the Maximum Credit to be less than $40,000,000, (ii) any such request for a decrease shall be for an amount of not less than $5,000,000, (iii) any such request shall be irrevocable, (iv) in no event shall more than one such written request for a decrease be delivered to Agent in any calendar quarter, and (v) no Default or Event of Default shall exist or have occurred and be continuing.

(b) Upon the receipt by Agent of a written request to decrease the Maximum Credit, Agent shall notify each of the Lenders of such request and, subject to the terms of Section 2.6(c) hereof, the Commitment of each Lender shall be decreased on the date requested by Borrower Agent by an amount equal to such Lender’s Pro Rata Share of the amount of the decrease in the Maximum Credit requested by Borrower Agent as set forth in the notice from Agent to such Lender.

(c)  In the event of a request to decrease the Maximum Credit, the Maximum Credit shall be decreased by the amount of the decrease in Maximum Credit requested by Borrower Agent in accordance with the terms hereof; provided, that, after giving effect to such decrease, the Maximum Credit shall not be less than the aggregate principal amount of the Loans, Special Agent Advances and Letter of Credit Obligations outstanding at such time.

(d) As of the effective date of any such decrease in the Maximum Credit, each reference to the term Maximum Credit and Commitments herein, as applicable, and in any of the other Financing Agreements shall be deemed amended to mean the amount of the Maximum Credit and Commitments specified in the most recent written notice from Agent to Borrower Agent of the decrease in the Maximum Credit and Commitments, as applicable.

 

2.7 Prepayments.

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

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(b) In the event that (i) the aggregate amount of the Loans and the Letter of Credit Obligations outstanding at any time exceed the Maximum Credit, or (ii) except as otherwise provided herein, the aggregate principal amount of the Revolving Loans, Swing Line Loans and Letter of Credit Obligations outstanding exceed the Borrowing Base or (iii) the outstanding principal amount of the Swing Line Loans outstanding exceed the Swing Line Loan Limit, such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrowers shall, upon demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded.

 

2.8 Joint and Several Liability of Borrowers.

(a)  Notwithstanding anything in this Agreement or any other Financing Agreements to the contrary, each Borrower, jointly and severally, in consideration of the financial accommodations to be provided by Agent and Lenders under this Agreement and the other Financing Agreements, for the mutual benefit, directly and indirectly, of each Borrower and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations, it being the intention of the parties hereto that all of the Obligations shall be the joint and several obligations of each Borrower without preferences or distinction among them.

Borrowers shall be liable for all amounts due to Agent and Lenders under this Agreement, regardless of which Borrower actually receives the Revolving Loans, Swing Line Loans or Letter of Credit Obligations hereunder or the amount of such Revolving Loans received or the manner in which Agent or any Lender accounts for such Revolving Loans, Swing Line Loans, Letter of Credit Obligations or other extensions of credit on its books and records. The Obligations of Borrowers with respect to Revolving Loans made to one of them, and the Obligations arising as a result of the joint and several liability of one of the Borrowers hereunder, with respect to Revolving Loans and Swing Line Loans made to the other of the Borrowers hereunder, shall be separate and distinct obligations, but all such other Obligations shall be primary obligations of all Borrowers.

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

(c)  Except as otherwise expressly provided herein, to the extent permitted by law, each Borrower (in its capacity as a joint and several obligor in respect of the obligations of the other Borrowers) hereby waives notice of acceptance of its joint and several liability, notice of occurrence of any Default or Event of Default (except to the extent notice is expressly required to be given pursuant to the terms of this Agreement), or of any demand for any payment under this Agreement or the other Financing Agreements, notice of any action at any time taken or omitted by Agent or any Lender under or in respect of any of the obligations hereunder, any requirement of diligence and, generally, all demands, notices and other formalities of every kind in connection with this Agreement and the other Financing Agreements. Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Agent or any Lender at any time or times in respect of any default by the other Borrowers in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Agent or any Lender in respect of any of the obligations hereunder, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of such obligations or the addition, substitution or release, in whole or in part, of the other Borrowers. Without

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limiting the generality of the foregoing, each Borrower (in its capacity as a joint and several obligor in respect of the obligations of the other Borrowers) assents to any other action or delay in acting or any failure to act on the part of Agent or any Lender, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder which might, but for the provisions of this Section 2.8, afford grounds for terminating, discharging or relieving such Borrower, in whole or in part, from any of its obligations under this Section 2.8, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the obligations of such Borrower under this Section 2.8 shall not be discharged except by performance and then only to the extent of such performance. The obligations of each Borrower under this Section 2.8 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Borrower or a Lender. The joint and several liability of the Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any Borrower or any of the Lenders.

(d) The provisions of this Section 2.8 are made for the benefit of the Lenders and their successors and assigns, and subject to Section 14.3 hereof, may be enforced by them from time to time against any Borrower as often as occasion therefor may arise and without requirement on the part of Agent or any Lender first to marshal any of its claims or to exercise any of its rights against the other Borrowers or to exhaust any remedies available to it against the other Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 2.8 shall remain in effect until all the Obligations shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations is rescinded or must otherwise be restored or returned by Agent or any Lender upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of this Section 2.8 will forthwith be reinstated and in effect as though such payment had not been made.

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

(f)  With respect to the Obligations arising as a result of the joint and several liability of Borrowers hereunder with respect to Loans, Letter of Credit Obligations or other extensions of credit made to the other Borrowers hereunder, each of Borrowers waives, until the Obligations shall have been paid in full and this Agreement shall have been terminated, any right to enforce any right of subrogation or any remedy which Agent or any Lender now has or may hereafter have against any Borrower, any endorser or any guarantor of all or any part of the Obligations, and any benefit of, and any right to participate in, any security or collateral given to Agent or any Lender. Any claim which any Borrower may have against any other Borrower with respect to any payments to Agent or Lenders hereunder or under any of the other Financing Agreements are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations. Upon the occurrence of any Event of Default and for so long as the same is continuing, Agent and Lenders may proceed directly and at once, without notice, against (i) with respect to Obligations of Borrowers, either or both of them or (ii) with respect to Obligations of any Borrower, to collect and recover the full amount, or any portion of the applicable Obligations, without first proceeding against the other applicable Borrowers or any other Person, or against any security or collateral for the Obligations. Each Borrower consents and agrees that Agent and Lenders shall be under no obligation to marshal any assets in favor of Borrower(s) or against or in payment of any or all of the Obligations.

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2.9 Commitments.

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

 

SECTION 3. INTEREST AND FEES

 

3.1 Interest.

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

(b) Each Borrower (or Borrower Agent on behalf of such Borrower) may from time to time request Eurodollar Rate Loans or may request that Base Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an additional Interest Period. Such request from a Borrower (or Borrower Agent on behalf of such Borrower) shall specify the amount of the Eurodollar Rate Loans or the amount of the Base Rate Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans (and if it does not specify such Interest Period shall be deemed to be a one (1) month period). Subject to the terms and conditions contained herein, three (3) Business Days after receipt by Agent of such a request from a Borrower (or Borrower Agent on behalf of such Borrower), which may be telephonic (and followed by a confirmation in writing if requested by Agent) such Eurodollar Rate Loans shall be made or Base Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be; provided, that, (i) no Event of Default shall exist or have occurred and be continuing, (ii) no Borrower or Borrower Agent shall have sent any notice of termination of this Agreement, (iii) such Borrower (or Borrower Agent on behalf of such Borrower) shall have complied with such customary procedures as are established by Agent and specified by Agent to Borrower Agent from time to time for requests by Borrowers for Eurodollar Rate Loans, (iv) no more than six (6) Interest Periods may be in effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $1,000,000 or an integral multiple of $500,000 in excess thereof, and (vi) Agent and each Lender shall have determined that the Interest Period or Adjusted Eurodollar Rate is available to Agent and such Lender and can be readily determined as of the date of the request for such Eurodollar Rate Loan by such Borrower. Any request by or on behalf of a Borrower for Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Agent and Lenders had purchased such deposits to fund the Eurodollar Rate Loans. All Swing Line Loan shall be Base Rate Loans and shall not be entitled to be converted to Eurodollar Rate Loans.

(c)  Any Eurodollar Rate Loans shall automatically convert to Base Rate Loans upon the last day of the applicable Interest Period, unless Agent has received a request to continue such Eurodollar Rate Loan at least three (3) Business Days prior to such last day in accordance with the terms hereof and Borrowers are entitled to such Eurodollar Rate Loan under the terms hereof.

(d) Interest shall be payable by Borrowers to Agent, for the account of Lenders, monthly in arrears not later than the first day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed, other than for Base Rate Loans which shall be

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calculated on the basis of three hundred sixty-five (365) or three hundred sixty-six (366) day year, as applicable, and actual days elapsed. The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or decrease in the Base Rate effective on the date any change in such Base Rate is effective.

 

3.2 Fees.

(a)  Borrowers shall pay to Agent, for the account of Lenders, monthly an unused line fee at a rate equal to the applicable rate (on a per annum basis) determined as provided below calculated upon the amount by which the Maximum Credit exceeds the average daily principal balance of the outstanding Revolving Loans and Letters of Credit during the immediately preceding month (or part thereof) so long as any Obligations are outstanding. Such fees shall be payable on the first Business Day of each month in arrears and calculated based on a three hundred sixty (360) day year and actual days elapsed. Such percentages shall be increased or decreased, as the case may be, to the applicable percentage (on a per annum basis) set forth below based on the Quarterly Average Excess Availability for the immediately preceding three (3) month period commencing on the first day of the month of such period.

Tier	Quarterly Average Excess Availability	Unused Line Fee
1	Greater than $35,000,000	.500%
2	Less than or equal to $35,000,000 and greater than $15,000,000	.375%
3	Less than or equal to $15,000,000	.250%

provided, that, (i) the applicable percentage shall be calculated and established once each calendar quarter and shall remain in effect until adjusted thereafter after the end of the next calendar quarter, and (ii) notwithstanding anything to the contrary contained herein, the applicable percentages through August 31, 2008 shall be the amount for Tier 2 set forth above.

(b) Borrowers shall pay to Agent, for the benefit of Lenders, monthly a fee at the applicable rate determined as provided below (on a per annum basis) on the average daily outstanding balance of Letters of Credit for the immediately preceding month (or part thereof), payable in arrears as of the first day of each month, computed for each day from the date of issuance to the date of expiration. Such percentages shall be increased or decreased, as the case may be, to the applicable percentage (on a per annum basis) set forth below based on the Quarterly Average Excess Availability for immediately preceding three (3) month period commencing on the first day of the month of such period.

Tier	Quarterly Average Excess Availability	LC Fee Rate
1	Greater than $35,000,000	1.50%
2	Less than or equal to $35,000,000 and greater than $15,000,000	1.75%

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3 Less than or equal to $15,000,000 2.25%

provided, that, (i) the applicable percentage shall be calculated and established once each calendar quarter and shall remain in effect until adjusted thereafter after the end of the next calendar quarter, (ii) notwith-standing anything to the contrary contained herein, the applicable percentages through August 31, 2008 shall be the amount for Tier 2 set forth above, and (iii) Borrowers shall, at Agent’s option or at the written direction of the Required Lenders, pay such fees at a rate two (2%) percent greater than the highest rate above on such average daily maximum amount for: (A) the period from and after the date of termination or non-renewal hereof until Lenders have received full and final payment of all Obligations (notwithstanding entry of a judgment against any Borrower or Guarantor) and (B) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Agent. Such letter of credit fees shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrowers to pay such fee shall survive the termination or non-renewal of this Agreement. In addition to the letter of credit fees provided above, Borrowers shall pay to Issuing Bank for its own account (without sharing with Lenders) the letter of credit fronting fee of .125% per annum and the other customary charges from time to time of Issuing Bank with respect to the issuance, amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit.

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

 

3.3 Inability to Determine Applicable Interest Rate.

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

 

3.4 Illegality.

Notwithstanding anything to the contrary contained herein, if (a) any change in any law or interpretation thereof by any Governmental Authority makes it unlawful for a Lender to make or maintain a Eurodollar Rate Loan or to maintain any Commitment with respect to a Eurodollar Rate Loan or (b) a Lender determines in good faith (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) has become impracticable as a result of a circumstance that adversely affects the London interbank market or the position of such Lender in such market, then such Lender shall give notice thereof to Agent and Borrower Agent and may (i) declare that Eurodollar Rate Loans will not thereafter be made by such Lender, such that any request for a Eurodollar Rate Loans from such Lender shall be deemed to be a request for a Base Rate Loan unless such Lender’s declaration has been withdrawn (and it shall be withdrawn promptly upon the cessation of the circumstances described in clause (a) or (b) above and

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(ii) require that all outstanding Eurodollar Rate Loans made by such Lender be converted to Base Rate Loans immediately, in which event all outstanding Eurodollar Rate Loans of such Lender shall be so converted.

 

3.5 Increased Costs.

If any Change in Law shall: (a) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in the Adjusted Eurodollar Rate) or the Issuing Bank; (b) subject any Lender or the Issuing Bank to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender or the Issuing Bank in respect thereof (except for Taxes or Other Taxes covered by Section 6.8 and the imposition of, or any change in the rate of, any taxes payable by such Lender or the Issuing Bank described in Sections 6.8(a)(i) and (ii)); or (c) impose on any Lender or the Issuing Bank or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender or any Letter of Credit or participation therein, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or the Issuing Bank, Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

 

3.6 Capital Requirements.

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

 

3.7 Certificates for Reimbursement.

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

 

3.8 Delay in Requests.

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

 

3.9 Mitigation; Replacement of Lenders.

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

(b) If any Lender requests compensation under Sections 3.4, 3.5 or 3.6, if Borrowers are required to pay any additional amount to any Lender or Governmental Authority pursuant to Section 6.8, then within sixty (60) days thereafter, Borrower Agent may, at its sole expense and effort, upon notice to such Lender and Agent, replace such Lender by requiring such Lender to assign and delegate (and such Lender shall be obligated to assign and delegate), without recourse (in accordance with and subject to the restrictions contained in Section 13.7), all of its interests, rights and obligations under this Agreement to an Eligible Transferee that shall assume such obligations, provided, that, (i) Borrower Agent has received the prior written consent of Agent and each Issuing Bank, (ii) such Lender shall have received payment of an amount equal to the outstanding principal amount of its Loans and participations in Letter of Credit Obligations and Swing Line Loans that it has funded, if any, accrued interest thereon, accrued fees and other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal) and Borrower Agent (in the case of accrued interest, fees and other amounts, including amounts under Section 3.10), (iii) such assignment will result in a reduction in such compensation and payments, and (iv) such assignment does not conflict with applicable laws or regulations. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower Agent to require such assignment and delegation cease to apply. Nothing in this Section 3.9 shall impair any rights that any Borrower or Agent may have against any Lender that is a Defaulting Lender.

 

3.10 Funding Losses.

Borrowers shall pay to Agent its customary administrative charge and to each Lender all losses, expenses and liabilities (including any interest paid by such Lender to Lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or redeployment of such) that it sustains (a) if for any reason (other than a default by such

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Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a request for borrowing, or a conversion to or continuation of, any Eurodollar Rate Loan does not occur on a date specific therefor in a request for conversion or continuation, (b) if any prepayment or other principal payment of, or any conversion of, any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to such Loan, or (c) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by a Borrower (or on its behalf by Borrower Agent). This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations.

 

3.11 Maximum Interest.

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

 

3.12 No Requirement of Match Funding.

Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to acquire US Dollar deposits in the London interbank market or any other offshore US Dollar market to fund any Eurodollar Rate Loan or to otherwise match fund any Obligations as to which interest accrues based on the Eurodollar Rate. All of the provisions of this Section 3 shall be deemed to apply as if Agent, each Lender or any Participant had acquired such deposits to fund any Eurodollar Rate Loan or any other Obligation as to which interest is accruing at the Eurodollar Rate by acquiring such US Dollar deposits for each Interest Period in the amount of the Eurodollar Rate Loans or other applicable Obligations.

 

SECTION 4. CONDITIONS PRECEDENT

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4.1    Conditions Precedent to Effectiveness of Agreement to Make Initial Loans and Letters of Credit.

The agreement of Lenders to make the Loans and of Issuing Bank to issue Letters of Credit shall become effective upon the satisfaction, or waiver, immediately prior to or concurrently therewith each of the following conditions precedent:

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

(b) no material adverse change shall have occurred in the assets, business, operations or profits of Borrowers and Guarantors, taken as a whole, since the date of Agent’s latest field examination (not including for this purpose the field review referred to in clause (c) below) and no change or event shall have occurred which would impair in any material respect the ability of Borrowers and Guarantors taken as a whole to perform its obligations hereunder or under any of the other Financing Agreements to which it is a party or of Agent or any Lender to enforce the Obligations or realize upon the Collateral in all material respects, in each case as determined by Agent in its discretion in good faith;

(c)  Agent shall have completed an updated field review of the Records and such other updated information with respect to the Accounts and Inventory as Agent may require to determine the amount of Loans available to Borrowers (including, without limitation, roll-forwards of Accounts through the date of closing in a manner satisfactory to Agent, together with such supporting documentation as may be reasonably necessary or appropriate, and other documents and information that will enable Agent to accurately identify and verify the Accounts), the results of which in each case shall be satisfactory to Agent, not more than five (5) days prior to the date hereof or such earlier date as Agent may agree;

(d) Agent shall have received, in form and substance satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements, including, without limitation, Collateral Access Agreements; provided, that, the failure to deliver Collateral Access Agreements as to specific locations shall not be a condition of closing, so long as all other conditions are met after giving effect to any Reserves established by Agent in respect of amounts due or to become due to the owner, lessor or operator thereof as provided for in the definition of Reserves;

(e)  Agent shall have received, in form and substance reasonably satisfactory to Agent, all releases, terminations and such other documents as Agent may reasonably request to evidence and effectuate the termination of the financing arrangements pursuant to the Existing Credit Agreement, and the termination and release by the agent under such arrangements, of any interest in and to any assets and properties of Borrowers and Guarantors, duly authorized, executed and delivered by each of them, including, but not limited to, the authorization to file UCC financing statement amendments to terminate all UCC financing statements previously filed by or on behalf of any or all of them or their predecessors, as secured party, and any Borrower or Guarantor or their predecessors, as debtor and the termination of any deposit account control agreement;

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(f)  the aggregate amount of the Excess Availability of Borrowers as determined by Agent, on or about the date hereof, shall be not less than $30,000,000 after giving effect to the initial Loans made or to be made and Letters of Credit issued or to be issued in connection with the initial transactions hereunder;

(g) Agent shall have received evidence, in form and substance reasonably satisfactory to Agent, that Agent has a valid perfected first priority security interest in all of the Collateral (except as to (i) priority, subject to the liens permitted under clauses (b), (c), (i) and (j) of the definition of Permitted Liens, to the extent that such liens have priority over the liens of Agent under applicable law and except for such items of Collateral as Agent may determine not to perfect its security interest in based on the de minimus value thereof relative to the cost of such perfection and (ii) Intellectual Property registered, applied for or subsisting solely outside of the United States of America);

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

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

(j)  Agent shall have received, in form and substance reasonably satisfactory to Agent, a pro-forma balance sheet of Parent and Subsidiaries reflecting the initial transactions contemplated hereunder, including, but not limited to Loans and Letter of Credit Obligations outstanding on the date hereof and the use of the proceeds of the initial Loans as provided herein, accompanied by a certificate, dated of even date herewith, of Parent stating that such pro-forma balance sheet was prepared in good faith by an authorized officer of Parent and based on assumptions that are reasonable in light of all facts and circumstances known to Parent at such time;

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

(l)  Agent shall have received evidence of insurance and loss payee endorsements required hereunder and under the other Financing Agreements, in form and substance reasonably satisfactory to Agent, and certificates of insurance policies and/or endorsements naming Agent as loss payee and additional insured; and

(m)the other Financing Agreements (including Deposit Account Control Agreements to the extent required by Agent to be delivered hereunder) and all instruments and documents hereunder and thereunder shall have been duly executed and delivered to Agent, in form and substance satisfactory to Agent.

 

4.2 Conditions Precedent to All Loans and Letters of Credit.

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

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(a)  all representations and warranties contained herein and in the other Financing Agreements that are qualified as to materiality or Material Adverse Effect shall be true and correct and the representations and warranties that are not so qualified shall be true and correct in all material respects, in each case with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Loan or providing each such Letter of Credit and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and correct to the extent required hereunder or under the other Financing Agreements on and as of such earlier date);

(b) no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in writing in any court or before any arbitrator or Governmental Authority, which purports to enjoin, prohibit, restrain or otherwise affect the making of the Loans or providing the Letters of Credit, or the consummation of the transactions contemplated pursuant to the terms hereof or the other Financing Agreements; and

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

 

SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST

 

5.1 Grant of Security Interest.

To secure payment and performance of all Obligations, each Borrower and Guarantor hereby grants to Agent, for itself and the benefit of the other Secured Parties, a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to Agent, for itself and the benefit of the other Secured Parties, as security, all personal and real property and fixtures, and interests in property and fixtures, of each Borrower and Guarantor, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Lender, collectively, the “Collateral”), including:

(a) all Accounts;

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

(c) all goods, including, without limitation, Inventory and Equipment;

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

(e) all instruments, including, without limitation, all promissory notes;

(f) all documents;

(g) all deposit accounts;

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

(i)  all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts

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or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors;

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

(k) all commercial tort claims, including, without limitation, those identified in the Information Certificate;

(l) to the extent not otherwise described above, all Receivables;

(m) all Records; and

(n) all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral.

 

5.2 Exclusions from Collateral.

Notwithstanding anything to the contrary contained in Section 5.1 above, the types or items of Collateral described in such Section shall not include Excluded Property.

 

5.3 Perfection of Security Interests.

(a)  So long as any Obligations are outstanding the Commitments have not been terminated, each Borrower and Guarantor irrevocably and unconditionally authorizes Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent or its designee as the secured party and such Borrower or Guarantor as debtor, as Agent may require, and including any other information with respect to such Borrower or Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Each Borrower and Guarantor hereby ratifies and approves all financing statements naming Agent or its designee as secured party and such Borrower or Guarantor, as the case may be, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to the date hereof and ratifies and confirms the authorization of Agent to file such financing statements (and amendments, if any). Each Borrower and Guarantor hereby authorizes Agent to adopt on behalf of such Borrower and Guarantor any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and any Borrower or Guarantor as debtor includes assets and properties of such Borrower or Guarantor that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Borrower or Guarantor to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral. So long as any Obligations are outstanding and the Commitments have not been terminated, in no event shall any Borrower or Guarantor at any time file, or permit or cause to be filed, any correction statement or termination statement with respect to any financing

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statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured party and such Borrower or Guarantor as debtor.

(b) Each Borrower and Guarantor does not have any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth in the Information Certificate. In the event that any Borrower or Guarantor shall be entitled to or shall receive any chattel paper or instrument for obligations in excess of $250,000 in any one case or in the aggregate that constitutes Collateral after the date hereof, Borrowers and Guarantors shall promptly notify Agent thereof in writing. Promptly upon the receipt thereof by or on behalf of any Borrower or Guarantor (including by any agent or representative), such Borrower or Guarantor shall deliver, or cause to be delivered to Agent, all tangible chattel paper and instruments that such Borrower or Guarantor has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time reasonably specify, in each case except as Agent may otherwise agree. At Agent’s option, each Borrower and Guarantor shall, or Agent may at any time on behalf of any Borrower or Guarantor, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Agent with the following legend referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the security interest of Wachovia Bank, National Association, as Agent and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party.”

(c)  In the event that any Borrower or Guarantor shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction) that constitute Collateral, such Borrower or Guarantor shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, such Borrower or Guarantor shall take, or cause to be taken, such actions as Agent may reasonably request to give Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

(d) Each Borrower and Guarantor does not have any deposit accounts as of the date hereof, except as set forth in the Information Certificate. Borrowers and Guarantors shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit account, unless each of the following conditions is satisfied: (i) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of any Borrower or Guarantor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom such Borrower or Guarantor is dealing and the purpose of the account, (ii) the bank where such account is opened or maintained shall be reasonably acceptable to Agent, and (iii) on or before the opening of such deposit account, such Borrower or Guarantor shall deliver to Agent a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by such Borrower or Guarantor and the bank at which such deposit account is opened and maintained; provided, that, Borrowers and Guarantors shall not be required to deliver a Deposit Account Control Agreement with a depository bank as to any deposit account that is specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Borrower’s or Guarantor’s salaried employees.

(e)  No Borrower or Guarantor owns or holds, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or have any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate.

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(i)      In the event that any Borrower or Guarantor shall be entitled to or shall at any time after the date hereof hold or acquire any certificated securities that constitute Collateral, such Borrower or Guarantor shall promptly deliver the original of same to Agent, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may specify. If any securities that constitute Collateral, now or hereafter acquired by any Borrower or Guarantor are uncertificated and are issued to such Borrower or Guarantor or its nominee directly by the issuer thereof, such Borrower or Guarantor shall immediately notify Agent thereof and shall as Agent may specify, either (A) cause the issuer to agree to comply with instructions from Agent as to such securities, without further consent of any Borrower or Guarantor or such nominee, or (B) arrange for Agent to become the registered owner of the securities.

(ii)     Borrowers and Guarantors shall not, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary that constitute or do or will at any time have any Collateral in them unless each of the following conditions is satisfied: (A) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of such Borrower or Guarantor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom such Borrower or Guarantor is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be reasonably acceptable to Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, such Borrower or Guarantor shall execute and deliver, and cause to be executed and delivered to Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by such Borrower or Guarantor and such securities intermediary or commodity intermediary.

(f)  Borrowers and Guarantors are not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker’s acceptance or similar instrument as of the date hereof, except as set forth in the Information Certificate. In the event that any Borrower or Guarantor shall be entitled to or shall receive any right to payment under any letter of credit, banker’s acceptance or any similar instrument, whether as beneficiary thereof or otherwise after the date hereof involving an amount in excess of $250,000in any one case or in the aggregate that constitute Collateral, such Borrower or Guarantor shall promptly notify Agent thereof in writing. Such Borrower or Guarantor shall promptly, as Agent may specify, either (i) deliver, or cause to be delivered to Agent, with respect to any such letter of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance reasonably satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by such Borrower or Guarantor and agreeing to make all payments thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent to become, at Borrowers’ expense, the transferee beneficiary of the letter of credit, banker’s acceptance or similar instrument (as the case may be).

(g) Borrowers and Guarantors do not have any commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In the event that any Borrower or Guarantor shall at any time after the date hereof have any commercial tort claims involving a claim in excess of $100,000 that arise in connection with or are related to any other Collateral, such Borrower or Guarantor shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by such Borrower or Guarantor to Agent of a security interest in such commercial tort claim (and the proceeds thereof). In the event that such notice does not include such grant of a security interest, the sending thereof by such Borrower or Guarantor to Agent shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial tort

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claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting the authorization of Agent provided in Section 5.3(a) hereof or otherwise arising by the execution by such Borrower or Guarantor of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Agent or its designee as secured party and such Borrower or Guarantor as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, each Borrower and Guarantor shall promptly upon Agent’s request, execute and deliver, or cause to be executed and delivered, to Agent such other agreements, documents and instruments as Agent may reasonably require in connection with such commercial tort claim.

(h) Borrowers and Guarantors do not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date hereof, except as set forth in the Information Certificate and except for goods located in the United States in transit to a location of a Borrower or Guarantor permitted herein in the ordinary course of business of such Borrower or Guarantor in the possession of the carrier transporting such goods. In the event that any goods, documents of title or other Collateral are at any time after the date hereof having a value in excess of $250,000 in any one case or in the aggregate in the custody, control or possession of any other person not referred to in the Information Certificate or such carriers, Borrowers and Guarantors shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, Borrowers and Guarantors shall use their commercially reasonable efforts to deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and the Borrower or Guarantor that is the owner of such Collateral.

(i)  Borrowers and Guarantors shall take any other actions reasonably requested by Agent from time to time to cause the attachment, perfection and first priority of, and the ability of Agent to enforce, the security interest of Agent in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that any Borrower’s or Guarantor’s signature thereon is required therefor, (ii) causing Agent’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, and(iv) obtaining the consents and approvals of any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and taking all actions required by any earlier versions of the UCC or by other law, as applicable in any relevant jurisdiction.

 

SECTION 6. COLLECTION AND ADMINISTRATION

 

6.1 Borrowers’ Loan Accounts.

Agent shall maintain one or more loan account(s) on its books in which shall be recorded (a) all Loans, Letters of Credit and other Obligations and the Collateral, (b) all payments made by or on behalf of any Borrower or Guarantor and (c) all other appropriate debits and credits as provided in this Agreement, including fees, charges, costs, expenses and interest. All entries in the loan account(s) shall be made in accordance with Agent’s customary practices as in effect from time to time.

 

6.2 Statements.

Agent shall render to Borrower Agent each month a statement setting forth the balance in the Borrowers’ loan account(s) maintained by Agent for Borrowers pursuant to the provisions of this Agreement, including

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principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by Agent but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrowers and Guarantors and conclusively binding upon Borrowers and Guarantors as an account stated except to the extent that Agent receives a written notice from Borrower Agent of any specific exceptions of Borrower Agent thereto within thirty (30) days after the date such statement has been received by Borrower Agent. Until such time as Agent shall have rendered to Borrower Agent a written statement as provided above, the balance in any Borrower’s loan account(s) shall be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrowers and Guarantors, absent manifest error.

 

6.3 Lenders’ Evidence of Debt.

Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Obligations of each Borrower to such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. Any such records shall be presumptively correct, absent manifest error, provided, that, the failure to make any entry or any error in such records, shall not affect any Lender’s Commitments hereunder or the Obligations in respect of any applicable Loans and in the event of any inconsistency between the Register and any Lender’s records, the Register shall govern.

 

6.4 Register.

(a)  Agent (or its agent or sub-agent appointed by it) shall maintain a register (the “Register”) for the recordation of the names and addresses of Lenders and the Commitments of, and principal amount of the Loans (the “Registered Loans”) and Letter of Credit Obligations owing to each Lender from time to time. The Register, as in effect at the close of business on the preceding Business Day, shall be available for inspection by Borrower Agent or any Lender (with respect to a Lender, solely with respect to the Obligations owing to such Lender) at a reasonable time and from time to time upon reasonable prior notice. Agent shall record, or cause to be recorded, in the Register, the Commitments and the Loans in accordance with the provisions of Section 15.7 and Agent shall also maintain a copy of each Assignment and Acceptance delivered to and accepted by it and shall modify the Register to give effect to each Assignment and Acceptance, and any such recording shall be presumptively correct, absent manifest error; provided, that, the failure to make any entry or any error in such records, shall not affect any Lender’s Commitments or Obligations in respect of any Loan. Borrowers, Guarantors, Agent and Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. Borrowers hereby designate and authorize Agent, and Agent agrees, to maintain, or cause to be maintained as agent for Borrowers’ solely for purposes of maintaining the Register as provided in this Section 6.4(a).

(b) Each Lender that grants a participation shall maintain a register as a non-fiduciary agent of Borrowers on which it enters the name and address of each Participant and the principal and interest amount of each Participant’s interest in the Loans and Letters of Credit held by it (the “Participant Register”). The entries in the Participant Register shall be conclusive, absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

 

6.5 Promissory Notes.

Each Lender may at any time request that the Loans made by it be evidenced by a promissory note. In such event, Borrowers shall execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in a form furnished by

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Agent and reasonably acceptable to Borrower Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 15.7) be represented by one or more promissory notes in such form payable to the order of the payee named therein.

 

6.6 Cash Management; Collection of Proceeds of Collateral.

(a)  Each Borrower and Guarantor shall establish and maintain, at its expense, deposit accounts and cash management services of a type and on terms, and with the banks, set forth on Schedule 8.10 to the Information Certificate and, subject to Section 5.3(d) hereof, such other banks as such Borrower or Guarantor may hereafter select. The banks set forth on Schedule 8.10 of the Information Certificate constitute all of the banks with which Borrowers and Guarantors have deposit account and cash management arrangements as of the date hereof and identifies each of the deposit accounts at such banks that are used for receiving receipts from particular locations of a Borrower or otherwise describes the nature of the use of such deposit account by such Borrower or Guarantor (collectively, the “Cash Management Accounts” and individually a “Cash Management Account”). Borrowers and Guarantors shall deliver, or cause to be delivered to Agent, a Deposit Account Control Agreement duly authorized, executed and delivered by each bank where a Cash Management Account or Concentration Account is maintained and the applicable Borrower or Guarantor; provided, that, Borrowers and Guarantors shall not be required to deliver a Deposit Account Control Agreement with a depository bank as to any deposit account that is specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Borrower’s or Guarantor’s salaried employees.

(b) Each Borrower shall deposit or cause to be deposited all proceeds of Collateral, including all proceeds from sales of Inventory, all amounts payable to each Borrower and Guarantor and all other proceeds of Collateral, from each location of such Borrower on each Business Day into the Cash Management Account of such Borrower used for such purpose. All such funds deposited into the Cash Management Accounts shall be sent by wire transfer or other electronic funds transfer no less frequently than twice each week (or more frequently upon Agent’s request at any time that a Cash Dominion Event exists) to the Concentration Accounts, except nominal amounts which are required to be maintained in such Cash Management Accounts under the terms of such Borrower’s arrangements with the bank at which such Cash Management Accounts are maintained, which nominal amounts shall not exceed $5,000 as to any individual Cash Management Account at any time.

(c)  Without limiting any other rights or remedies of Agent or Lenders, Agent may, at its option, instruct the depository banks at which the Concentration Accounts are maintained to transfer all available funds received or deposited into the Concentration Accounts to the Agent Payment Account at any time that a Cash Dominion Event exists. At all times that Agent shall have notified any depository bank to transfer funds from a Concentration Account to the Agent Payment Account, all payments made to such Concentration Accounts, whether in respect of the Receivables, as proceeds of Inventory or other Collateral or otherwise shall be treated as payments to Agent in respect of the Obligations and therefore shall constitute the property of Agent and Lenders to the extent of the then outstanding Obligations.

(d) For purposes of calculating the amount of the Loans available to each Borrower, such payments will be applied (conditional upon final collection) to the Obligations on the Business Day of receipt by Agent of immediately available funds in the Agent Payment Account provided such payments and notice thereof are received in accordance with Agent’s usual and customary practices as in effect from time to time and within sufficient time to credit the applicable loan account on such day, and if not, then on the next Business Day.

(e)  Each Borrower and Guarantor and their respective employees, agents and Subsidiaries shall, acting as trustee for Agent, receive, as the property of Agent, any monies, checks, notes, drafts or any other

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payment relating to and/or proceeds of Accounts or other Collateral which come into their possession or under their control and promptly upon receipt thereof, shall deposit or cause the same to be deposited in the Concentration Accounts, or remit the same or cause the same to be remitted, in kind, to Agent. In no event shall the same be commingled with any Borrower’s or Guarantor’s own funds. Borrowers agree to reimburse Agent on demand for any amounts owed or paid to any bank or other financial institution at which a Concentration Account or any other deposit account or investment account is established or any other bank, financial institution or other person involved in the transfer of funds to or from the Concentration Accounts arising out of Agent’s payments to or indemnification of such bank, financial institution or other person. The obligations of Borrowers to reimburse Agent for such amounts pursuant to this Section 6.6 shall survive the termination of this Agreement.

 

6.7 Payments.

(a)  All Obligations shall be payable to the Agent Payment Account as provided in Section 6.6 or such other place as Agent may designate in writing to Borrower Agent from time to time.

(b) Subject to the other terms and conditions contained herein, Agent shall apply payments received or collected from any Borrower or Guarantor or for the account of any Borrower or Guarantor (including the monetary proceeds of collections or of realization upon any Collateral) as follows: first, to the payment in full of any fees, indemnities or expense reimbursements then due to Agent from any Borrower or Guarantor; second, ratably, to the payment in full of any fees, indemnities, or expense reimbursements then due to Lenders and Issuing Bank from any Borrower or Guarantor; third, ratably, to the payment in full of interest due in respect of any Loans (and including any Special Agent Advances) and Letter of Credit Obligations; fourth, to the payment in full of principal in respect of Special Agent Advances; fifth, to the payment in full of principal in respect of the Swing Line Loans; sixth, ratably, to the payment in full of principal in respect of the Revolving Loans and to pay Obligations then due arising under or pursuant to any Bank Products of a Borrower or Guarantor with a Bank Product Provider (but as to Obligations arising under or pursuant to such Bank Products, only up to the amount of any then effective Reserve established in respect of such Obligations), and seventh, to pay or prepay any other Obligations, whether or not then due, in such order and manner as Agent directs and for Agent to hold as cash collateral in respect of the Letter of Credit Obligations. All references to the term “ratably” as used in this Section 6.7(b) shall mean prorata on the basis of the amount owing to any one Person in relationship to the amounts owing to all Persons of the same category of Obligations within the same level of priority.

(c)  Notwithstanding anything to the contrary contained in this Agreement, (i) unless so directed by Agent, or unless a Default or an Event of Default shall exist or have occurred and be continuing, Agent shall not apply any payments which it receives to any Eurodollar Rate Loans, except (A) on the expiration date of the Interest Period applicable to any such Eurodollar Rate Loans or (B) in the event that there are no outstanding Base Rate Loans, and (ii) to the extent any Borrower uses any proceeds of the Loans or Letters of Credit to acquire rights in or the use of any Collateral or to repay any Indebtedness used to acquire rights in or the use of any Collateral, payments in respect of the Obligations shall be deemed applied first to the Obligations arising from Loans and Letter of Credit Obligations that were not used for such purposes and second to the Obligations arising from Loans and Letter of Credit Obligations the proceeds of which were used to acquire rights in or the use of any Collateral in the chronological order in which such Borrower acquired such rights in or the use of such Collateral.

(d) At Agent’s option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan account(s) of any Borrower maintained by Agent. If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Agent, any Lender or Issuing Bank is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such

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payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Agent or such Lender. Borrowers and Guarantors shall be liable to pay to Agent, and do hereby agree to indemnify and hold Agent and Lenders harmless for the amount of any payments or proceeds surrendered or returned. This Section 6.7(d) shall remain effective notwithstanding any contrary action which may be taken by Agent or any Lender in reliance upon such payment or proceeds. This preceding two sentences of this Section 6.7(d) shall survive the payment of the Obligations and the termination of this Agreement.

 

6.8 Taxes.

(a)  Any and all payments by or on account of any of the Obligations shall be made free and clear of and without deduction or withholding for or on account of, duties, taxes, levies, imposts, fees, deductions, charges or withholdings of any kind imposed by any Governmental Authority with respect to such payments, excluding (i) in the case of each Lender, Issuing Bank and Agent (A) duties, taxes, levies, imposts, fees, deductions, charges, or withholdings of any kind measured by its net income, and franchise taxes imposed on it, by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender, Issuing Bank or Agent (as the case may be) is incorporated or otherwise organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located and (B) any United States withholding taxes due or payable with respect to payments under the Financing Agreements under laws (including any statute, treaty or regulation) in effect on the date hereof (or, in the case of an Eligible Transferee, the date of the Assignment and Acceptance) applicable to such Lender, Issuing Bank or Agent, as the case may be, but not excluding any United States withholding taxes payable as a result of any change in such laws occurring after the date hereof (or the date of such Assignment and Acceptance) and (ii) in the case of each Lender, Issuing Bank or Agent, duties, taxes, levies, imposts, fees, deductions, charges or withholdings of any kind imposed on it as a result of a present or former connection between such Lender, Issuing Bank or Agent (as the case may be) and the jurisdiction imposing such duties, taxes, levies, imposts, fees, deductions, charges or withholdings but excluding any such connection arising from the activities of such Lender, Issuing Bank or Agent (as the case may be) pursuant to or in respect of this Agreement or any of the other Financing Agreements including but not limited to, executing delivering or performing its obligations or receiving a payment under or enforcing this Agreement or any of the other Financing Agreements (all such non-excluded duties, taxes, levies, imposts, fees, deductions, charges, or withholdings and all interest, penalties or similar liabilities with respect thereto being hereinafter referred to as “Taxes”).

(b) Subject to the last sentence of Section 6.8(g), if any Taxes shall be required by law to be deducted from or in respect of any sum payable in respect of the Obligations to any Lender, Issuing Bank or Agent (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 6.8), such Lender, Issuing Bank or Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the relevant Borrower or Guarantor shall make such deductions, (iii) the relevant Borrower or Guarantor shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law and (iv) the relevant Borrower or Guarantor shall deliver to Agent evidence of such payment.

(c)  In addition, each Borrower and Guarantor agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any political subdivision thereof or any applicable foreign jurisdiction, and all liabilities with respect thereto, in each case arising from any payment made hereunder or under any of the other Financing Agreements or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Financing Agreements (collectively, “Other Taxes”).

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(d) Subject to the last sentence of Section 6.8(g), each Borrower and Guarantor shall indemnify each Lender, Issuing Bank and Agent for the full amount of Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 6.8) paid by such Lender, Issuing Bank or Agent (as the case may be) and any liability (including for penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days from the date such Lender, Issuing Bank or Agent (as the case may be) makes written demand therefor. A certificate as to the amount of such payment delivered to Borrower Agent by a Lender, an Issuing Bank (with a copy to Agent) or by Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.

(e)  As soon as practicable after any payment of Taxes or Other Taxes by any Borrower or Guarantor, such Borrower or Guarantor shall furnish to Agent, at its address referred to herein, the original or a certified copy of a receipt evidencing payment thereof.

(f)  Without prejudice to the survival of any other agreements of any Borrower or Guarantor hereunder or under any of the other Financing Agreements, the agreements and obligations of such Borrower or Guarantor contained in this Section 6.8 shall survive the termination of this Agreement and the payment in full of the Obligations.

(g) Each Foreign Lender shall deliver to Borrower Agent (with a copy to Agent) on or prior to the date hereof, or in the case of a Foreign Lender that is an assignee of an interest under this Agreement pursuant to Sections 15.7(b) or 15.7(f) (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of the applicable Assignment and Acceptance, or upon any change in lending office of a Foreign Lender: (i) two (2) duly completed original signed copies of Internal Revenue Service Form W-8BEN claiming exemption from, or a reduction to, withholding tax under an income tax treaty with respect to payments to be made under this Agreement and any of the other Financing Agreements, or any successor form, (ii) two (2) duly completed original signed copies of Internal Revenue Service Form W-8ECI claiming exemption from withholding tax with respect to payments to be made under this Agreement and any of the other Financing Agreements because the income is effectively connected with a U.S. trade or business or any successor form, or (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Sections 871(h) or 881(c) of the Code, (A) a certificate of the Lender to the effect that such Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code or a “controlled foreign corporation” with respect to which any Borrower is a related person within the meaning of Section 864(d)(4) of the Code and (B) two (2) duly completed original signed copies of Internal Revenue Service Form W-8BEN certifying to such Lender’s entitlement to an exemption from withholding tax with respect to payments of interest to be made under this Agreement and any of the other Financing Agreements or any successor form. Each Lender that is not a Foreign Lender and is not a person whose name indicates that it is an “exempt recipient” (as such term is defined in Section 1.6049-4(c)(1)(ii) of the United States Treasury Regulations) agrees to deliver to Borrower Agent (with a copy to Agent) on or prior to the date hereof, or in the case of a Lender that is an assignee of an interest under this Agreement pursuant to Sections 15.7(b) or 15.7(f) (unless the respective Lender was already a Lender hereunder immediately prior to such assignment) on the date of the applicable Assignment and Acceptance two (2) duly completed original signed copies of Internal Revenue Service Form W-9 certifying to such Lender’s entitlement as of such date to a complete exemption from United States backup withholding tax with respect to payments to be made under this Agreement and any of the other Financing Agreements, or successor forms. In addition, each Lender agrees that it will deliver updated versions of the foregoing, as applicable, whenever the previous certification has become obsolete or inaccurate in any material respect, together with such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from United States withholding tax with respect to payments under this Agreement and any of the other Financing Agreements. Unless Borrower Agent and Agent have received

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forms or other documents satisfactory to them indicating that payments hereunder or under any of the other Financing Agreements to or for a Foreign Lender are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, Borrowers, Guarantors or Agent shall withhold amounts required to be withheld by applicable requirements of law from such payments at the applicable statutory rate. Borrowers and Guarantors shall not be required to indemnify any Foreign Lender or to pay any additional amounts to any Foreign Lender in respect of U.S. withholding tax pursuant Section 6.8(b) or 6.8(d) above to the extent that the obligation to pay such additional amounts would not have arisen but for a failure by such Foreign Lender to comply with the provisions of this Section 6.8(g). Should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, Borrowers and Guarantors shall, at such Lender’s expense, take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes.

(h) Any Lender claiming any additional amounts payable pursuant to this Section 6.8 shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its applicable lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that would be payable or may thereafter accrue and would not, in the sole determination of such Lender, be otherwise disadvantageous in any material respect to such Lender.

(i)  If the Borrowers or Guarantors pay any additional amount pursuant to this Section 6.8 with respect to any Lender, such Lender shall use reasonable efforts to obtain a refund of tax or credit against its tax liabilities on account of such payment; provided, that, such Lender shall have no obligation to use such reasonable efforts to obtain a credit if it is in an excess foreign tax credit position and shall have no obligation to use such reasonable efforts if it believes in good faith that claiming a refund or credit would cause adverse tax consequences to it. In the event that such Lender receives such a refund or credit, such Lender shall pay to the Borrowers or Guarantors, an amount that such Lender reasonably determines is equal to the net tax benefit obtained by such Lender as a result of such payment by the Borrowers or Guarantors, as applicable, so as to leave such Lender in no worse position that in which it would have been in if payment of the relevant additional amount had not been made. Nothing contained in this Section 6.8(j) shall require a Lender to disclose or detail the basis of its calculation of the amount of any tax benefit or any other amount or the basis of its determination referred to in the proviso to the first sentence of this Section 6.8(j) to the Borrowers, Guarantors or any other party.

 

6.9 Use of Proceeds.

Borrowers shall use the initial proceeds of the Loans and Letters of Credit hereunder only for: (a) payments to each of the persons listed in the disbursement direction letter furnished by Borrowers to Agent on or about the date hereof and (b) costs, expenses and fees in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Financing Agreements. All other Loans made or Letters of Credit provided to or for the benefit of any Borrower pursuant to the provisions hereof shall be used by such Borrower only to finance acquisitions by a Borrower or Guarantor to the extent permitted hereunder, or for general operating, working capital and other corporate purposes of such Borrower not otherwise prohibited by the terms of the organizational documents of such Borrower or Guarantor, provided, that, in no event shall any of the proceeds be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purposes of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Loans to be considered a “purpose credit” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended.

6.10  Appointment of Borrower Agent as Agent for Requesting Loans and Receipts of Loans and Statements.

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(a)  Each Borrower hereby irrevocably appoints and constitutes Borrower Agent as its agent and attorney-in-fact to request and receive Loans and Letters of Credit pursuant to this Agreement and the other Financing Agreements from Agent or any Lender in the name or on behalf of such Borrower. Agent and Lenders may disburse the Loans to such bank account of Borrower Agent or a Borrower or otherwise make such Loans to a Borrower and provide such Letters of Credit to a Borrower as Borrower Agent may designate or direct, without notice to any other Borrower or Guarantor. Notwithstanding anything to the contrary contained herein, Agent may at any time and from time to time require that Loans to or for the account of any Borrower be disbursed directly to an operating account of such Borrower.

(b) Borrower Agent hereby accepts the appointment by Borrowers to act as the agent and attorney-in-fact of Borrowers pursuant to this Section 6.10. Borrower Agent shall ensure that the disbursement of any Loans to each Borrower requested by or paid to or for the account of Parent, or the issuance of any Letter of Credit for a Borrower hereunder, shall be paid to or for the account of such Borrower.

(c)  Each Borrower and other Guarantor hereby irrevocably appoints and constitutes Borrower Agent as its agent to receive statements on account and all other notices from Agent and Lenders with respect to the Obligations or otherwise under or in connection with this Agreement and the other Financing Agreements.

(d) Any notice, election, representation, warranty, agreement or undertaking by or on behalf of any other Borrower or any Guarantor by Borrower Agent shall be deemed for all purposes to have been made by such Borrower or Guarantor, as the case may be, and shall be binding upon and enforceable against such Borrower or Guarantor to the same extent as if made directly by such Borrower or Guarantor.

(e)  No termination of the appointment of Borrower Agent as agent as aforesaid shall be effective, except after ten (10) Business Days’ prior written notice to Agent.

 

6.11 Pro Rata Treatment.

Except to the extent otherwise provided in this Agreement or as otherwise agreed by the applicable Lenders: (a) the making and conversion of Loans shall be made among the Lenders based on their respective Pro Rata Shares as to the Loans and (b) each payment on account of any Obligations to or for the account of one or more of Lenders in respect of any Obligations due on a particular day shall be allocated among the Lenders entitled to such payments based on their respective Pro Rata Shares and shall be distributed accordingly.

 

6.12 Sharing of Payments, Etc.

(a)  Each Borrower and Guarantor agrees that, in addition to (and without limitation of) any right of setoff, banker’s lien or counterclaim Agent or any Lender may otherwise have, each Lender shall be entitled, at its option (but subject, as among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset balances held by it for the account of such Borrower or Guarantor at any of its offices, in dollars or in any other currency, against any principal of or interest on any Loans owed to such Lender or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to such Borrower or Guarantor), in which case it shall promptly notify Borrower Agent and Agent thereof; provided, that, such Lender’s failure to give such notice shall not affect the validity thereof.

(b) If any Lender (including Agent) shall obtain from any Borrower or Guarantor payment of any principal of or interest on any Loan owing to it or payment of any other amount under this Agreement or any of the other Financing Agreements through the exercise of any right of setoff, banker’s lien or counterclaim or similar right or otherwise (other than from Agent as provided herein), and, as a result of such

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payment, such Lender shall have received more than its Pro Rata Share of the principal of the Loans or more than its share of such other amounts then due hereunder or thereunder by any Borrower or Guarantor to such Lender than the percentage thereof received by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and simultaneously purchase from such other Lenders a participation in the Loans or such other amounts, respectively, owing to such other Lenders (or such interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) in accordance with their respective Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored.

(c)  Each Borrower and Guarantor agrees that any Lender purchasing a participation (or direct interest) as provided in this Section may exercise, in a manner consistent with this Section, all rights of setoff, banker’s lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation.

(d) Nothing contained herein shall require any Lender to exercise any right of setoff, banker’s lien, counterclaims or similar rights or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or obligation of any Borrower or Guarantor. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, assign such rights to Agent for the benefit of Lenders and, in any event, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.

 

6.13 Settlement Procedures.

(a)  In order to administer the Credit Facility in an efficient manner and to minimize the transfer of funds between Agent and Lenders, Agent may, at its option, subject to the terms of this Section, make available, on behalf of Lenders, including the Swing Line Lender, the full amount of the Revolving Loans or Swing Line Loans requested or charged to any Borrower’s loan account(s) or otherwise to be advanced by Lenders pursuant to the terms hereof, without requirement of prior notice to Lenders of the proposed Loans.

(b) With respect to all Revolving Loans made by Agent on behalf of Lenders, or any Swing Line Loans made by Swing Line Lender or Agent on behalf of Swing Line Lender, the amount of each Lender’s Pro Rata Share of the outstanding Loans shall be computed weekly, and shall be adjusted upward or downward on the basis of the amount of the outstanding Loans as of 5:00 p.m. on the Business Day immediately preceding the date of each settlement computation; provided, that, Agent retains the absolute right at any time or from time to time to make the above described adjustments at intervals more frequent than weekly, but in no event more than twice in any week. Agent shall deliver to each of the Lenders after the end of each week, or at such lesser period or periods as Agent shall determine, a summary statement of the amount of outstanding Loans for such period (such week or lesser period or periods being hereinafter referred to as a “Settlement Period”). If the summary statement is sent by Agent and received by a Lender prior to 12:00 p.m., then such Lender shall make the settlement transfer described in this Section by no later than 3:00 p.m. on the same Business Day and if received by a Lender after 12:00 p.m., then such Lender shall make the settlement transfer by not later than 3:00 p.m. on the next Business Day following the date of receipt. If, as of the end of any Settlement Period, the amount of a Lender’s Pro Rata Share of the outstanding Loans is more than such Lender’s Pro Rata Share of the outstanding Loans as of the end of the previous Settlement Period, then such Lender shall forthwith (but in no event later than the time set forth in

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the preceding sentence) transfer to Agent by wire transfer in immediately available funds the amount of the increase. Alternatively, if the amount of a Lender’s Pro Rata Share of the outstanding Loans in any Settlement Period is less than the amount of such Lender’s Pro Rata Share of the outstanding Loans for the previous Settlement Period, Agent shall forthwith transfer to such Lender by wire transfer in immediately available funds the amount of the decrease. The obligation of each of the Lenders to transfer such funds and effect such settlement shall be irrevocable and unconditional and without recourse to or warranty by Agent. Agent and each Lender agrees to mark its books and records at the end of each Settlement Period to show at all times the dollar amount of its Pro Rata Share of the outstanding Loans and Letters of Credit. Each Lender shall only be entitled to receive interest on its Pro Rata Share of the Loans to the extent such Loans have been funded by such Lender. Because the Agent on behalf of Lenders may be advancing and/or may be repaid Loans prior to the time when Lenders will actually advance and/or be repaid such Loans, interest with respect to Loans shall be allocated by Agent in accordance with the amount of Loans actually advanced by and repaid to each Lender and the Agent and shall accrue from and including the date such Loans are so advanced to but excluding the date such Loans are either repaid by Borrowers or actually settled with the applicable Lender as described in this Section.

(c)  To the extent that Agent has made any such amounts available and the settlement described above shall not yet have occurred, upon repayment of any Loans by a Borrower, Agent may apply such amounts repaid directly to any amounts made available by Agent pursuant to this Section. In lieu of weekly or more frequent settlements, Agent may, at its option, at any time require each Lender to provide Agent with immediately available funds representing its Pro Rata Share of each Loan, prior to Agent’s disbursement of such Loan to Borrower. In such event, all Loans under this Agreement shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in the other Lender’s obligation to make a Loan requested hereunder nor shall the Commitment of any Lender be increased or decreased as a result of the default by any other Lender in the other Lender’s obligation to make a Loan hereunder.

(d) Upon the making of any Loan by Agent as provided herein, without further action by any party hereto, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from Agent, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share in such Loan. To the extent that there is no settlement in accordance with the terms hereof, Agent may at any time require the Lenders to fund their participations. From and after the date, if any, on which any Lender has funded its participation in any such Loan, Agent shall promptly distribute to such Lender, such Lender’s Pro Rata Share of all payments of principal and interest received by Agent in respect of such Loan.

(e)  If Agent is not funding a particular Loan to a Borrower (or Borrower Agent for the benefit of such Borrower) pursuant to Sections 6.13(a) and 6.13(b) above on any day, but is requiring each Lender to provide Agent with immediately available funds on the date of such Loan as provided in Section 6.13(c) above, Agent may assume that each Lender will make available to Agent such Lender’s Pro Rata Share of the Loan requested or otherwise made on such day and Agent may, in its discretion, but shall not be obligated to, cause a corresponding amount to be made available to or for the benefit of such Borrower on such day. If Agent makes such corresponding amount available to a Borrower and such corresponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. on that day by each of the three leading brokers of Federal funds transactions in New York selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Base Rate Loans. During the period

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in which such Lender has not paid such corresponding amount to Agent, notwithstanding anything to the contrary contained in this Agreement or any of the other Financing Agreements, the amount so advanced by Agent to or for the benefit of any Borrower shall, for all purposes hereof, be a Loan made by Agent for its own account. Upon any such failure by a Lender to pay Agent, Agent shall promptly thereafter notify Borrower Agent of such failure and Borrowers shall pay such corresponding amount to Agent for its own account within five (5) Business Days of Borrower Agent’s receipt of such notice. A Lender who fails to pay Agent its Pro Rata Share of any Loans made available by the Agent on such Lender’s behalf, or any Lender who fails to pay any other amount owing by it to Agent, Swing Line Lender or Issuing Bank, is a “Defaulting Lender”.

(f)  Agent shall not be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees). Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may hold and, in its reasonable discretion, relend to a Borrower the amount of all such payments received or retained by it for the account of such Defaulting Lender. For purposes of voting or consenting to matters with respect to this Agreement and the other Financing Agreements and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be zero (0). This Section shall remain effective with respect to a Defaulting Lender until such default is cured. The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by any Borrower or Guarantor of their duties and obligations hereunder. Agent or Borrower Agent shall have the right, but not the obligation, at any time, and upon the exercise by Agent or Borrower Agent of such right, any Defaulting Lender shall have the obligation, to immediately sell, assign and transfer to Agent or such Eligible Transferee as Agent or Borrower Agent may specify, the Commitment of such Defaulting Lender and all rights and interests of such Defaulting Lender pursuant thereto, provided, that, such Defaulting Lender shall have received payment of an amount equal to the outstanding principal amount of its Loans and participations in Letter of Credit Obligations and Swing Line Loans that it has funded, if any, accrued interest thereon, accrued fees and other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal) and Borrower Agent (in the case of accrued interest, fees and other amounts, including amounts under Section 3.10). Agent shall provide the Defaulting Lender with prior written notice of its intent to exercise its right under this Section (or if Agent does not exercise such right, Borrower Agent shall provide Agent and the Defaulting Lender with prior written notice of its intent to exercise its right under this Section), which notice shall specify the date on which such purchase and sale shall occur. Such purchase and sale shall be pursuant to the terms of an Assignment and Acceptance (whether or not executed by the Defaulting Lender).

(g) Nothing in this Section or elsewhere in this Agreement or the other Financing Agreements shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights that any Borrower may have against any Lender as a result of any default by any Lender hereunder in fulfilling its Commitment.

 

6.14 Obligations Several; Independent Nature of Lenders’ Rights.

The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement or any of the other Financing Agreements and no action taken by the Lenders pursuant hereto or thereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and subject to Section 14.3 hereof, each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

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6.15 Bank Products.

Borrowers and Guarantors, or any of their Subsidiaries, may (but no such Person is required to) request that the Bank Product Providers provide or arrange for such Person to obtain Bank Products from Bank Product Providers, and each Bank Product Provider may, in its sole discretion, provide or arrange for such Person to obtain the requested Bank Products. Borrowers and Guarantors or any of their Subsidiaries that obtains Bank Products shall indemnify and hold Agent, each Lender and their respective Affiliates harmless from any and all obligations now or hereafter owing to any other Person by any Bank Product Provider in connection with any Bank Products other than for gross negligence or willful misconduct on the part of any such indemnified Person. This Section 6.15 shall survive the payment of the Obligations and the termination of this Agreement. Borrower and its Subsidiaries acknowledge and agree that the obtaining of Bank Products from Bank Product Providers (a) is in the sole discretion of such Bank Product Provider, and (b) is subject to all rules and regulations of such Bank Product Provider. Each Bank Product Provider shall be deemed a party hereto for purposes of any reference in a Financing Agreement to the parties for whom Agent is acting, provided, that, the rights of such Bank Product Provider hereunder and under any of the other Financing Agreements shall consist exclusively of such Bank Product Provider’s right to share in payments and collections out of the Collateral as set forth herein. In connection with any such distribution of payments and collections, Agent shall be entitled to assume that no amounts are due to any Bank Product Provider unless such Bank Product Provider has notified Agent in writing of any such liability owed to it as of the date of any such distribution.

 

SECTION 7. COLLATERAL REPORTING AND COVENANTS

 

7.1 Collateral Reporting.

(a)  Borrowers shall provide Agent with the following documents in a form satisfactory to Agent:

(i)      as soon as possible after the end of each calendar month (but in any event within fifteen (15) Business Days after the end thereof), or more frequently as Agent may require at any time a Default or Event of Default exists or has occurred and is continuing or the aggregate amount of the Excess Availability of Borrowers shall be less than $7,500,000 and thereafter, (A) a Borrowing Base Certificate setting forth the calculation of the Borrowing Base as of the last Business Day of the immediately preceding period, duly completed and executed by the chief financial officer, vice president of finance, treasurer or controller of Parent, together with all schedules required pursuant to the terms of the Borrowing Base Certificate duly completed, (B) inventory reports by division (and including the amounts of Inventory and the value thereof at any leased locations and at premises of warehouses, processors or other third parties or consignees), (C) agings of accounts receivable (together with a reconciliation to the previous period’s aging and the general ledger), (D) agings of outstanding accounts payable (and including information indicating the amounts owing to owners and lessors of leased premises, warehouses, processors, and other third parties from time to time in possession of any Collateral);

(ii)     as soon as possible after the end of each calendar month (but in any event within fifteen (15) Business Days after the end thereof), on a monthly basis or more frequently as Agent may request, a certificate by the chief financial officer, vice president of finance, treasurer or controller of Parent consisting of: (A) a statement confirming the payment of rent and other amounts due to owners and lessors of real property used by Borrowers in the immediately preceding month, subject to year-end or monthly percentage rent payment adjustments, (B) the addresses of all distribution center locations of Borrowers and Guarantors acquired or opened since the date of the most recent certificate delivered to Agent containing the information required under this clause, (C) a report of any new deposit account established or used by any Borrower or Guarantor with any bank or other financial institution and any existing deposit account currently

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established or used by any Borrower or Guarantor with any bank or other financial institution that is at any time identified after the date hereof and was not set forth in the Information Certificate, including in each case, the Borrower or Guarantor in whose name the account is maintained, the account number, the name and address of the financial institution at which such account is maintained, the purpose of such account and, if any, the amount held in such account on or about the date of such report, and (D) a statement that all sales and use taxes have been paid when due as of the date of the certificate, except as specifically described in such certificate,

(iii)    upon Agent’s request, (A) reports of sales for each category of Inventory, (B) summary reports on sales and use tax collections, deposits and payments, including monthly sales and use tax accruals, (C) true, correct and complete copies of all agreements, documents and instruments relating to any Permitted Acquisition which Agent has not otherwise received, (E) true, correct and complete copies of all agreements, documents or instruments evidencing or otherwise related to Indebtedness that Agent has not otherwise received and (F) a certificate of the chief financial officer, vice president of finance, treasurer or controller of Parent listing (1) all applications, if any, for Intellectual Property made since the date of the prior certificate (or, in the case of the first such certificate, the date hereof), (2) all issuances of registrations or letters on existing applications for Intellectual Property received since the date of the prior certificate (or, in the case of the first such certificate, the date hereof), and (3) all material License Agreements entered into since the date of the prior certificate (or, in the case of the first such certificate, the date hereof); and

(iv)    such other reports as to the Collateral as Agent shall reasonably request from time to time.

(b) Nothing contained in any Borrowing Base Certificate shall be deemed to limit, impair or otherwise affect the rights of Agent contained herein and in the event of any conflict or inconsistency between the calculation of the Borrowing Base as set forth in any Borrowing Base Certificate and as determined by Agent in good faith, the determination of Agent shall govern and, absent manifest error, be conclusive and binding upon Borrowers and Guarantors. Without limiting the foregoing, Borrowers shall furnish to Agent any information which Agent may reasonably request regarding the determination and calculation of any of the amounts set forth in any Borrowing Base Certificate. Subject to the limitations set forth herein, the Borrowing Base may be adjusted based on the information received by Agent pursuant to this Agreement. If any Borrower’s or Guarantor’s records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, such Borrower and Guarantor hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to Agent and to follow Agent’s reasonable instructions with respect to further services.

 

7.2 Accounts Covenants.

(a)  Borrowers shall notify Agent promptly of (i) the assertion of any claims, offsets, defenses or counterclaims by any account debtor, or any disputes with any account debtor or any settlement, adjustment or compromise thereof, to the extent any of the foregoing exceeds $250,000 in any one case or $500,000 in the aggregate and (ii) all material adverse information of which it has notice relating to the financial condition of any account debtor. No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor except in the ordinary course of a Borrower’s business in accordance with the current practices of such Borrower as in effect on the date hereof. At any time that an Event of Default exists or has occurred and is continuing, Agent shall, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any credits, discounts or allowances.

(b) With respect to each Account: (i) the amounts shown on any invoice delivered to Agent or schedule thereof delivered to Agent shall be true and complete in all material respects, (ii) no payments shall

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be made thereon except those sent to the Concentration Accounts, (iii) no credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor except as reported to Agent in accordance with this Agreement and except for credits, discounts, allowances or extensions made or given in the ordinary course of each Borrower’s business, (iv) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto other than as reported to Agent in accordance with the terms of this Agreement, and (v) none of the transactions giving rise thereto will violate any applicable foreign, Federal, State or local laws or regulations, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms.

(c)  Agent shall have the right at any time or times, in Agent’s name or in the name of a nominee of Agent, to verify the validity, amount or any other matter relating to any Receivables or other Collateral, by mail, telephone, facsimile transmission or otherwise.

 

7.3 Inventory Covenants.

With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate records in all material respects itemizing and describing the kind, type, quality and quantity of Inventory, such Borrower’s or Guarantor’s cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall conduct a physical count of the Inventory either through periodic cycle counts or wall to wall counts, so that all Inventory is subject to such counts at least once each year, but at any time or times as Agent may request at any time a Default or an Event of Default exists or has occurred and is continuing, and promptly following such physical inventory (whether through periodic cycle counts or wall to wall counts) shall supply Agent at least once each calendar quarter if any such counts are performed within such quarter, or otherwise once each calendar year, with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales of Inventory in the ordinary course of its business and except to move Inventory directly from one location set forth or permitted herein to another such location and except for Inventory shipped from the manufacturer thereof to such Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (d) Borrowers shall, at their expense, one (1) time in any twelve (12) month period, or up to one (1) additional time in such twelve (12) month period upon Agent’s request, but at any time at their expense as Agent may request if a Default or Event of Default shall exist or have occurred and be continuing, or the aggregate amount of the Excess Availability of Borrowers shall be less than $7,500,000, deliver or cause to be delivered to Agent written appraisals as to the Inventory in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors shall produce, use, store and maintain the Inventory with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) as of the date hereof, Borrowers and Guarantors do not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory but shall give Agent prior written notice if such practice changes together with such information with respect to the new policy as may reasonably be requested by Agent; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) Borrowers and Guarantors shall not acquire or accept any Inventory on consignment or approval unless such Inventory has been specifically identified in a report with respect thereto provided by

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Borrower Agent to Agent pursuant to Section 7.1(a) hereof when required to be included in such report or Agent has otherwise received prior written notice thereof in form and substance reasonably satisfactory to Agent.

 

7.4 Equipment Covenants.

With respect to the Equipment: (a) at any time as Agent may request if a Default or an Event of Default shall exist or have occurred and be continuing, deliver or cause to be delivered to Agent written appraisals as to the Equipment in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (b) Borrowers and Guarantors shall keep the Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted); (c) Borrowers and Guarantors shall use the Equipment with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with all applicable laws in all material respects; (d) the Equipment is and shall be used in the business of Borrowers and Guarantors and not for personal, family, household or farming use; provided, that, certain motor vehicles used primarily by employees for business purposes may from time to time be incidentally used for personal, family or household use, as permitted by the internal policies of the applicable Borrower or Guarantor if any; (e) Borrowers and Guarantors shall not remove any Equipment from the locations set forth or permitted herein, except to the extent necessary to have any Equipment repaired, replaced or maintained in the ordinary course of its business or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of such Borrower or Guarantor in the ordinary course of business; (f) the Equipment is now and shall remain personal property and Borrowers and Guarantors shall not permit any of the Equipment to be or become a part of or affixed to real property (but not including for this purpose any plumbing and electrical fixtures, heating, ventilation and air conditioning, wall and floor coverings, walls or ceilings and other fixtures not constituting trade fixtures); and (g) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the use, sale or other disposition of the Equipment (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party).

 

7.5 Power of Attorney.

Each Borrower and Guarantor hereby irrevocably designates and appoints Agent (and all persons designated by Agent) as such Borrower’s and Guarantor’s true and lawful attorney-in-fact, and authorizes Agent, in such Borrower’s, Guarantor’s or Agent’s name, to: (a) at any time an Event of Default exists or has occurred and is continuing (i) demand payment on any Collateral, (ii) enforce payment of any of the Collateral by legal proceedings or otherwise, (iii) exercise all of such Borrower’s or Guarantor’s rights and remedies to collect any Collateral, (iv) sell or assign any Collateral upon such terms, for such amount and at such time or times as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew any of the Collateral, (vi) discharge and release any Collateral, (vii) prepare, file and sign such Borrower’s or Guarantor’s name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Collateral, (viii) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Collateral to an address designated by Agent, and open and dispose of all mail addressed to such Borrower or Guarantor and handle and store all mail relating to the Collateral, (ix) clear Inventory the purchase of which was financed with a Letter of Credit through U.S. Bureau of Customs and Border Protection or foreign export control authorities in such Borrower’s or Guarantor’s name, Agent’s name or the name of Agent’s designee, and to sign and deliver to customs officials powers of attorney in such Borrower’s or Guarantor’s name for such purpose, and to complete in such Borrower’s or Guarantor’s or Agent’s name, any order, sale or transaction, obtain the necessary documents in connection therewith and collect the proceeds thereof, and (x) do all acts and things which are necessary, in Agent’s reasonable determination, to fulfill such Borrower’s or Guarantor’s obligations under

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this Agreement and the other Financing Agreements and (b) at any time a Cash Dominion Event exists to (i) take control in any manner of any item of payment constituting Collateral or otherwise received in or for deposit in the Concentration Accounts and (ii) have access to any lockbox or postal box into which remittances from account debtors or other obligors in respect of Collateral are sent or received if a Cash Dominion Event exists, and (c) at any time to (i) take control of any item of payment constituting Collateral that is received by Agent or any Lender, (ii) endorse such Borrower’s or Guarantor’s name upon any items of payment in respect of Collateral received by Agent and any Lender and deposit the same in Agent’s account for application to the Obligations, (iii) endorse such Borrower’s or Guarantor’s name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goods pertaining thereto or any other Collateral, including any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, and (iv) sign such Borrower’s or Guarantor’s name on any verification of amounts owing constituting Collateral and notices thereof to account debtors or any secondary obligors or other obligors in respect thereof. Each Borrower and Guarantor hereby releases Agent and Lenders and their respective officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Agent’s or any Lender’s own gross negligence or willful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction.

 

7.6 Right to Cure.

Agent may, at its option, upon prior notice to Borrower Agent, (a) cure any default by any Borrower or Guarantor under any material agreement with a third party that affects the Collateral, its value or the ability of Agent to collect, sell or otherwise dispose of the Collateral or the rights and remedies of Agent or any Lender therein or the ability of any Borrower or Guarantor to perform its obligations hereunder or under any of the other Financing Agreements, (b) pay or bond on appeal any judgment entered against any Borrower or Guarantor, (c) discharge taxes, liens, security interests or other encumbrances at any time levied on or existing with respect to the Collateral and (d) pay any amount, incur any expense or perform any act which, in Agent’s judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Agent and Lenders with respect thereto. Agent may add any amounts so expended to the Obligations and charge any Borrower’s account therefor or may demand immediate payment thereof. Agent and Lenders shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of any Borrower or Guarantor.

 

7.7 Access to Premises.

From time to time as requested by Agent, at the cost and expense of Borrowers, (a) Agent or its designee shall have complete access to all of each Borrower’s and Guarantor’s premises during normal business hours and after notice to Parent, or at any time and without notice to Borrower Agent if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral and all of each Borrower’s and Guarantor’s books and records, including the Records, and in addition, if an Event of Default exists or has occurred and is continuing, a Syndication Agent or Documentation Agent hereunder may, at its option, have a representative accompany Agent in connection with a field examination conducted by Agent (provided that such representative shall be subject to the direction of Agent) and (b) each Borrower and Guarantor shall promptly furnish to Agent such copies of such books and records or extracts therefrom as Agent may reasonably request, and Agent or any Lender or Agent’s designee may use during normal business hours such of any Borrower’s and Guarantor’s personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event of Default exists or has occurred and is continuing for the collection of Receivables and realization of other Collateral. Agent shall not conduct more than three (3) field examinations with respect to the Collateral in any twelve (12) month period at the expense of Borrowers, except that at any time after The aggregate amount of the Excess Availability of Borrowers shall

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be less than $7,500,000, or a Default or Event of Default shall exist or have occurred and be continuing, Agent may conduct such other field examinations at the expense of Borrowers as Agent may require.

 

SECTION 8. REPRESENTATIONS AND WARRANTIES

Each Borrower and Guarantor hereby represents and warrants to Agent, Lenders and Issuing Bank the following:

 

8.1 Existence, Power and Authority.

Each Borrower and Guarantor is a corporation, limited liability company or limited partnership duly organized and in good standing under the laws of its jurisdiction of organization and is duly qualified as a foreign corporation, limited liability company or limited partnership, as applicable, and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, where the failure to so qualify has or would reasonably be expected to have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder (a) are all within each Borrower’s and Guarantor’s corporate or limited liability company or limited partnership powers, (b) have been duly authorized, (c) are not in contravention of law or the terms of any Borrower’s or Guarantor’s certificate of incorporation, certificate of formation, bylaws, operating agreement, limited partnership agreement or other organizational documentation, or any indenture, material agreement or undertaking to which any Borrower or Guarantor is a party or by which any Borrower or Guarantor or its property are bound and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant, any lien, security interest, charge or other encumbrance upon any property of any Borrower or Guarantor except as permitted hereunder. This Agreement and the other Financing Agreements to which any Borrower or Guarantor is a party constitute legal, valid and binding obligations of such Borrower and Guarantor enforceable in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or law).

 

8.2 Name; State of Organization; Chief Executive Office; Collateral Locations.

(a)  The exact legal name of each Borrower and Guarantor is as set forth on the signature page of this Agreement and in the Information Certificate. No Borrower or Guarantor has, during the five (5) years prior to the date of this Agreement, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property or assets out of the ordinary course of business, except as set forth in the Information Certificate.

(b) Each Borrower and Guarantor is an organization of the type and organized in the jurisdiction set forth in the Information Certificate. The Information Certificate accurately sets forth the organizational identification number of each Borrower and Guarantor or accurately states that such Borrower or Guarantor has none and accurately sets forth the federal employer identification number of each Borrower and Guarantor.

(c)  The chief executive office and mailing address of each Borrower and Guarantor and each Borrower’s and Guarantor’s Records concerning Accounts are located only at the address identified as such in Schedule 8.2 to the Information Certificate and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to the Information Certificate,

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subject to the rights of any Borrower or Guarantor to establish new locations in accordance with Section 9.2 below and other than Collateral in transit to any such locations.

 

8.3 Financial Statements; No Material Adverse Effect.

All financial statements relating to any Borrower or Guarantor which have been or may hereafter be delivered by any Borrower or Guarantor to Agent and Lenders have been prepared in accordance with GAAP (except as to any interim financial statements, to the extent such statements are subject to normal year-end adjustments and do not include any notes) and fairly present in all material respects the financial condition and the results of operation of such Borrower and Guarantor as at the dates and for the periods set forth therein. Except as disclosed in any interim financial statements furnished by Borrowers and Guarantors to Agent prior to the date of this Agreement, there has been no act, condition or event which has had or is reasonably likely to have a Material Adverse Effect since the date of the most recent audited financial statements of any Borrower or Guarantor furnished by any Borrower or Guarantor to Agent prior to the date of this Agreement. The projections dated January 16, 2008 for the fiscal year ending 2008 that have been delivered to Agent or any projections hereafter delivered to Agent have been prepared in light of the past operations of the businesses of Borrowers and Guarantors and are based upon estimates and assumptions stated therein, all of which Borrowers and Guarantors believe to be reasonable and fair in light of the then current conditions and current facts and reflect the good faith and reasonable estimates of Borrowers and Guarantors of the future financial performance of Parent and its Subsidiaries and of the other information projected therein for the periods set forth therein.

 

8.4 Priority of Liens; Title to Properties.

The security interests and liens granted to Agent under this Agreement and the other Financing Agreements constitute valid and perfected first priority liens and security interests in and upon the Collateral subject only to the liens indicated on Schedule 8.4 to the Information Certificate and the other liens permitted under Section 10.2 hereof. Each Borrower and Guarantor has good and marketable fee simple title to or valid leasehold interests in all of its Real Property and good, valid and merchantable title to all of its other properties and assets subject to no liens, mortgages, pledges, security interests, encumbrances or charges of any kind, except those granted to Agent and such others as are specifically listed on Schedule 8.4 to the Information Certificate or permitted under Section 9.8 hereof.

 

8.5 Tax Returns.

Each Borrower and Guarantor has filed, or caused to be filed, in a timely manner all material tax returns, reports and declarations which are required to be filed by it. All information in such tax returns, reports and declarations is complete and accurate in all material respects. Each Borrower and Guarantor has paid or caused to be paid all taxes due and payable by it, except taxes (a) the validity of which is being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or Guarantor and with respect to which adequate reserves have been set aside on its books and (b) which could not, individually or in the aggregate, have a Material Adverse Effect. Adequate provision has been made for the payment of all accrued and unpaid Federal, State, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed.

 

8.6 Litigation.

Except as set forth on Schedule 8.6 to the Information Certificate, (a) there is no investigation by any Governmental Authority pending, or to the best of any Borrower’s or Guarantor’s knowledge threatened in writing, against or affecting any Borrower or Guarantor, its or their assets or business and (b) there is no action, suit, proceeding or claim by any Person pending, or to the best of any Borrower’s or Guarantor’s

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knowledge threatened in writing, against any Borrower or Guarantor or its or their assets or goodwill, or against or affecting any transactions contemplated by this Agreement, in each case, which if adversely determined against such Borrower or Guarantor has or could reasonably be expected to have a Material Adverse Effect.

 

8.7 Compliance with Other Agreements and Applicable Laws.

(a)  Borrowers and Guarantors are not in default in any respect under, or in violation in any respect of the terms of, any agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound. Borrowers and Guarantors are in material compliance with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority relating to their respective businesses, including, without limitation, those set forth in or promulgated pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the rules and regulations thereunder, and all Environmental Laws, in each case where the failure to comply has or could reasonably be expected to have a Material Adverse Effect.

(b) Borrowers and Guarantors have obtained all material permits, licenses, approvals, consents, certificates, orders or authorizations of any Governmental Authority required for the lawful conduct of its business (the “Permits”). All of the Permits are valid and subsisting and in full force and effect. There are no actions, claims or proceedings pending or to the best of any Borrower’s or Guarantor’s knowledge, threatened in writing that seek the revocation, cancellation, suspension or modification of any of the Permits where any of the same would have a Material Adverse Effect.

 

8.8 Environmental Compliance.

Except as set forth in Schedule 8.8 to the Information Certificate, which matters, when considered either individually or in the aggregate, could not be reasonably expected to have a Material Adverse Effect and except as otherwise could not reasonably be expected to have a Material Adverse Effect:

(a)  Borrowers, Guarantors and their Subsidiaries have not generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on any property owned, leased or operated by it or used by it in any manner which at any time violates any applicable Environmental Law or Permit, and the operations of Borrowers, Guarantors and their Subsidiaries at such properties complies with all Environmental Laws and all Permits.

(b) No Borrower or Guarantor has received any notice of or otherwise has any information that there has been any investigation by any Governmental Authority or any proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any investigation pending or to the best of any Borrower’s or Guarantor’s knowledge threatened in writing, with respect to any non compliance with or violation of the requirements of any Environmental Law by any Borrower or Guarantor and any of its Subsidiaries or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter with regard to any properties or assets owned, leased or operated by it or used by Borrowers, Guarantors or their Subsidiaries or their businesses.

(c)  Borrowers, Guarantors and their Subsidiaries have no liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials under or from any property owned, leased or operated by it or used by it or otherwise in connection with their businesses.

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8.9 Employee Benefits.

(a)  Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or State law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service and to the best of any Borrower’s or Guarantor’s knowledge, nothing has occurred which would cause the loss of such qualification where such loss, when combined with other such occurrences or failures to comply, would not reasonably be expected to have a Material Adverse Effect. Each Borrower and its ERISA Affiliates have made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

(b) Except as set forth in the Information Certificate, there are no pending, or to the best of any Borrower’s or Guarantor’s knowledge, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan. Except as set forth in the Information Certificate, there has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan.

(c)  (i) Except as set forth in the Information Certificate, no ERISA Event has occurred or is reasonably expected to occur; (ii) based on the latest valuation of each Pension Plan and on the actuarial methods and assumptions employed for such valuation (determined in accordance with the assumptions used for funding such Pension Plan pursuant to Section 412 of the Code), the aggregate current value of accumulated benefit liabilities of such Pension Plan under Section 4001(a)(16) of ERISA does not exceed the aggregate current value of the assets of such Pension Plan; (iii) each Borrower and Guarantor, and their ERISA Affiliates, have not incurred and do not reasonably expect to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) each Borrower and Guarantor, and their ERISA Affiliates, have not incurred and do not reasonably expect to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) each Borrower and Guarantor, and their ERISA Affiliates, have not engaged in a transaction that would be subject to Section 4069 or 4212(c) of ERISA.

 

8.10 Bank Accounts.

All of the deposit accounts, investment accounts or other accounts in the name of or used by any Borrower or Guarantor maintained at any bank or other financial institution are set forth on Schedule 8.10 to the Information Certificate, subject to the right of each Borrower and Guarantor to establish new accounts in accordance with Section 5.3 hereof.

 

8.11 Intellectual Property.

Except as would not have a Material Adverse Effect, each Borrower and Guarantor owns or licenses or otherwise has the right to use all Intellectual Property necessary for the operation of its business as presently conducted. As of the date hereof, Borrowers and Guarantors do not have any material Intellectual Property registered, or subject to pending applications, in the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof, other than those described in Schedule 8.11 to the Information Certificate and has not granted any licenses with respect thereto other than as set forth in Schedule 8.11 to the Information Certificate. Except as would not have a Material Adverse Effect, no event has occurred which permits or would permit after notice or passage of time or both, the revocation, suspension or termination of such rights. To the best of any Borrower’s and Guarantor’s knowledge, no slogan or other advertising device, product, process, method, substance or other Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to be sold by

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or employed by any Borrower or Guarantor infringes any patent, trademark, servicemark, tradename, copyright, license or other Intellectual Property owned by any other Person presently where such infringement has or would reasonably be expected to have Material Adverse Effect or adversely affect the ability of any Borrower to sell or otherwise dispose of Inventory having a value in excess of $250,000. No claim or litigation is pending or threatened in writing against or affecting any Borrower or Guarantor contesting its right to sell or use any such Intellectual Property where such claim or litigation if adversely determined for any Borrower or Guarantor would reasonably be expected to have a Material Adverse Effect or would adversely affect the ability of any Borrower to sell or otherwise dispose of Inventory having a value in excess of $250,000. Schedule 8.11 to the Information Certificate sets forth all of the material agreements or other arrangements of each Borrower and Guarantor pursuant to which such Borrower or Guarantor has a license or other right to use any trademarks, logos, designs, representations or other Intellectual Property owned by another person as in effect on the date hereof and the dates of the expiration of such agreements or other arrangements of such Borrower or Guarantor as in effect on the date hereof which is necessary or of material value to such Borrower’s or Guarantor’s business (collectively, together with such agreements or other arrangements as may be entered into by any Borrower or Guarantor after the date hereof, collectively, the “License Agreements” and individually, a “License Agreement”). No material trademark, servicemark, copyright or other material Intellectual Property at any time used by any Borrower or Guarantor which is owned by another person, or owned by such Borrower or Guarantor subject to any security interest, lien, collateral assignment, pledge or other encumbrance in favor of any person other than Agent, is affixed to or incorporated in any Eligible Inventory, except (a) to the extent permitted under the term of the license agreements listed on Schedule 8.11 to the Information Certificate and (b) to the extent the sale of Inventory to which such Intellectual Property is affixed or incorporated is permitted to be sold by such Borrower or Guarantor under applicable law (including the United States Copyright Act of 1976).

 

8.12 Subsidiaries; Affiliates; Capitalization; Solvency.

(a)  Each Borrower and Guarantor does not have any direct or indirect Subsidiaries or Affiliates and is not engaged in any joint venture or partnership as of the date hereof except as set forth in Schedule 8.12 to the Information Certificate.

(b) As of the date hereof, each Borrower and Guarantor is the record and beneficial owner of all of the issued and outstanding shares of Equity Interests of each of the Subsidiaries listed on Schedule 8.12 to the Information Certificate as being owned by such Borrower or Guarantor and there are no proxies, irrevocable or otherwise, with respect to such shares and no equity securities of any of the Subsidiaries are or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any kind or nature and there are no contracts, commitments, understandings or arrangements by which any Subsidiary is or may become bound to issue additional shares of its Equity Interests or securities convertible into or exchangeable for such shares.

(c)  The issued and outstanding shares of Equity Interests of each Borrower and Guarantor (other than Parent) are directly and beneficially owned and held by the persons indicated in the Information Certificate, and in each case all of such shares have been duly authorized and are fully paid and non-assessable, free and clear of all claims, liens, pledges and encumbrances of any kind, except as disclosed in writing to Agent prior to the date hereof or otherwise permitted hereunder.

(d) Each Borrower and Guarantor is Solvent and will continue to be Solvent after the creation of the Obligations, the security interests of Agent and the other transaction contemplated hereunder.

(e)  The Inactive Subsidiaries do not have any material liabilities, are not engaged in any business or commercial activities, do not own any assets with a book value of more than $100,000 in the

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aggregate and are not obligated or liable, directly or indirectly, contingently or otherwise, in respect of any material Indebtedness or other material obligations.

 

8.13 Labor Disputes.

(a)  Set forth on Schedule 8.13 to the Information Certificate is a list (including dates of termination) of all collective bargaining or similar agreements between or applicable to each Borrower and Guarantor and any union, labor organization or other bargaining agent in respect of the employees of any Borrower or Guarantor on the date hereof.

(b) Except as set forth on Schedule 8.13 to the Information Certificate, there is (i) no significant unfair labor practice complaint pending against any Borrower or Guarantor or, to the best of any Borrower’s or Guarantor’s knowledge, threatened in writing against it, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is pending on the date hereof against any Borrower or Guarantor or, to best of any Borrower’s or Guarantor’s knowledge, threatened against it, and (ii) no significant strike, labor dispute, slowdown or stoppage is pending against any Borrower or Guarantor or, to the best of any Borrower’s or Guarantor’s knowledge, threatened against any Borrower or Guarantor.

 

8.14 Restrictions on Subsidiaries.

Except for restrictions contained in this Agreement or any other agreement with respect to Indebtedness of any Borrower or Guarantor permitted hereunder as in effect on the date hereof, there are no contractual or consensual restrictions on any Borrower or Guarantor or any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between any Borrower or Guarantor and any of its or their Subsidiaries or (ii) between any Subsidiaries of any Borrower or Guarantor or (b) the ability of any Borrower or Guarantor or any of its or their Subsidiaries to incur Indebtedness or grant security interests to Agent or any Lender in the Collateral.

 

8.15 Material Contracts.

Schedule 8.15 to the Information Certificate sets forth all Material Contracts to which any Borrower or Guarantor is a party or is bound as of the date hereof. Borrowers and Guarantors have delivered true, correct and complete copies of such Material Contracts to Agent on or before the date hereof. Borrowers and Guarantors are not in breach or in default in any material respect of or under any Material Contract and have not received any notice of the intention of any other party thereto to terminate any Material Contract.

 

8.16 Payable Practices.

Each Borrower and Guarantor has not made any material change in its customary accounts payable practices from those in effect immediately prior to the date hereof.

 

8.17 OFAC.

None of Borrower, any Subsidiary of Borrower or any Affiliate of Borrower: (a) is a Sanctioned Person, (b) has more than ten (10%) percent of its assets in Sanctioned Entities, or (c) derives more than ten (10%) percent of its operating income from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. The proceeds of any Loan will not be used and have not been used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

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8.18 Accuracy and Completeness of Information.

All information furnished by or on behalf of any Borrower or Guarantor in writing to Agent or any Lender in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, including all information on the Information Certificate is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading. No event or circumstance has occurred which has had or could reasonably be expected to have a Material Adverse Affect, which has not been fully and accurately disclosed to Agent in writing prior to the date hereof.

 

8.19 Survival of Warranties; Cumulative.

(a)  All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and shall be deemed to have been made again to Agent and Lenders on the date of each additional borrowing or Letter of Credit issued hereunder, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date) and shall be conclusively presumed to have been relied on by Agent and Lenders regardless of any investigation made or information possessed by Agent or any Lender. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which any Borrower or Guarantor shall now or hereafter give, or cause to be given, to Agent or any Lender. The representations and warranties contained in this Agreement shall terminate on the date that the Commitments have been terminated and all Obligations have been paid in full in cash (other than contingent Obligations for which Agent has received cash collateral, or at its option, a letter of credit in accordance with Section 15.1 hereof).

 

SECTION 9. AFFIRMATIVE COVENANTS

 

9.1 Maintenance of Existence.

(a)  Each Borrower and Guarantor shall at all times preserve, renew and keep in full force and effect its corporate or limited liability company or limited partnership existence and rights and franchises with respect thereto and maintain in full force and effect all Permits necessary to carry on the business as presently or proposed to be conducted, other than as (i) permitted in Section 10.1 hereof or (ii) otherwise permitted hereunder or under any of the other Financing Agreements.

(b) No Borrower or Guarantor shall change its name unless each of the following conditions is satisfied: (i) Agent shall have received not less than thirty (30) days (or at such later time as Agent may agree) prior written notice from Borrower Agent of such proposed change in its corporate name, which notice shall accurately set forth the new name; and (ii) Agent shall have received a copy of the amendment to the certificate of incorporation, certificate of formation or other organizational document of such Borrower or Guarantor, as applicable, providing for the name change certified by the Secretary of State of the jurisdiction of incorporation or organization of such Borrower or Guarantor as soon as it is available.

(c)  No Borrower or Guarantor shall change its chief executive office or its mailing address or organizational identification number (or if it does not have one, shall not acquire one) unless Agent shall have received not less than thirty (30) days’ prior written notice from Borrower Agent of such proposed change, which notice shall set forth such information with respect thereto as Agent may reasonably require and Agent shall have received such agreements as Agent may reasonably require in connection therewith. No Borrower or Guarantor shall change its type of organization, jurisdiction of organization or other legal structure, except that a Borrower, Guarantor or Subsidiary may convert (either directly or by way of merger)

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into a limited liability company or limited partnership or other form of legal entity acceptable to Agent, provided, that, each of the following conditions is satisfied: (i) such company, partnership or other legal entity is organized under the laws of a jurisdiction in the United States of America, (ii) Agent shall have received not less than fifteen (15) days’ prior written notice from Borrower Agent of such proposed change, which notice shall accurately set forth a description of the new form, (iii) Agent shall have received the organizational documents of such entity (certified by the appropriate Governmental Authority, where available to be so certified), together with such other agreements, documents, and instruments related thereto as Agent may reasonably request, (iv) such change shall not adversely affect the security interests and liens of Agent in the assets of such Borrower or Guarantor or the ability of Agent to enforce any of its rights or remedies with respect to such Borrower or Guarantor, in the determination of Agent and (v) as of the date of such conversion, and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing.

 

9.2 New Collateral Locations.

(a)  Each Borrower and Guarantor may only open any new location so long as (a) such locations are within the United States or its territories or Canada, (b) such location is set forth in the applicable report provided for in Section 7.1(a) to the extent required under such Section or in any event if Collateral having a value of more than $250,000 is or will be kept at such location, Agent has received ten (10) Business Days’ written notice within the time of the opening of any such new location and (c) upon Agent’s request, such Borrower or Guarantor executes and delivers, or causes to be executed and delivered, to Agent such agreements, documents, and instruments as Agent may deem reasonably necessary or desirable to protect its interests in the Collateral at such location; provided, that, so long as no Event of Default exists or has occurred and is continuing, upon Agent’s request, Borrowers and Guarantors shall only be required to use their commercially reasonable efforts to obtain a Collateral Access Agreement and to the extent that Agent has not received a Collateral Access Agreement acceptable to it for any such location, it may establish a Reserve as provided herein.

 

9.3 Compliance with Laws, Regulations, Etc.

(a)  Each Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times, comply in all respects with all laws, rules, regulations, licenses, approvals, orders and other Permits applicable to it and duly observe all requirements of any foreign, Federal, State or local Governmental Authority where the failure to do so has or could reasonably be expected to have a Material Adverse Effect.

(b) Borrowers and Guarantors shall give written notice to Agent immediately upon any Borrower’s or Guarantor’s receipt of any notice of, or any Borrower’s or Guarantor’s otherwise obtaining knowledge of, (i) the occurrence of any event involving the release, spill or discharge, threatened or actual, of a material amount of any Hazardous Material that has or could reasonably be expected to have a Material Adverse Effect or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice that with respect to any of the following that has or could reasonably be expected to have a Material Adverse Effect: (A) any non-compliance with or violation of any Environmental Law by any Borrower or Guarantor or (B) the release, spill or discharge of any Hazardous Material other than in the ordinary course of business and other than as permitted under any applicable Environmental Law. Copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations shall be promptly furnished, or caused to be furnished, by such Borrower or Guarantor to Agent upon Agent’s request. Each Borrower and Guarantor shall take prompt action to respond to any material non-compliance with any of the Environmental Laws and shall regularly report to Agent on such response.

(c)  Without limiting the generality of the foregoing, whenever Agent reasonably determines that there is non-compliance, or any condition which requires any action by or on behalf of any Borrower or

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Guarantor in order to avoid any non compliance, with any Environmental Law that has or could reasonably be expected to have a Material Adverse Effect, Borrowers shall, at Agent’s request and Borrowers’ expense: (i) cause an independent environmental engineer reasonably acceptable to Agent to conduct such tests of the site where non-compliance or alleged non compliance with such Environmental Laws has occurred as to such non-compliance and prepare and deliver to Agent a report as to such non-compliance setting forth the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Agent a supplemental report of such engineer whenever the scope of such non-compliance, or such Borrower’s or Guarantor’s response thereto or the estimated costs thereof, shall change in any material respect.

(d) Each Borrower and Guarantor shall indemnify and hold harmless Agent and Lenders and their respective directors, officers, employees, agents, invitees, representatives, successors and assigns, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and expenses) directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presence of a Hazardous Material, including the costs of any required or necessary repair, cleanup or other remedial work with respect to any property of any Borrower or Guarantor and the preparation and implementation of any closure, remedial or other required plans. All representations, warranties, covenants and indemnifications in this Section 9.3 shall survive the payment of the Obligations and the termination of this Agreement.

 

9.4 Payment of Taxes and Claims.

Except as could not reasonably be expected to have a Material Adverse Effect, each Borrower and Guarantor shall, and shall cause any Subsidiary to, duly pay and discharge all taxes, assessments, contributions and governmental charges upon or against it or its properties or assets, except for taxes the validity of which is being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower, Guarantor or Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on its books to the extent required by GAAP.

 

9.5 Insurance.

Each Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be reasonably satisfactory to Agent as to form, amount and insurer (provided, that, Borrowers and Guarantors may maintain self insurance plans to the extent companies of the same or similar businesses and similarly situated do so). Borrowers and Guarantors shall furnish certificates, policies or endorsements to Agent as Agent shall reasonably require as proof of such insurance, and, Agent is authorized, but not required, to obtain such insurance at the expense of Borrowers if any Borrower or Guarantor fails at any time to do so. All policies shall provide for at least thirty (30) days prior written notice to Agent of any cancellation or reduction of coverage. Agent may act as attorney for each Borrower and Guarantor in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance. Borrowers and Guarantors shall cause Agent to be named as a loss payee as its interests may appear and an additional insured (but without any liability for any premiums) under such insurance policies and Borrowers and Guarantors shall obtain non-contributory lender’s loss payable endorsements to all insurance policies in form and substance satisfactory to Agent. Such lender’s loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Agent as its interests may appear and further specify that Agent and Lenders shall be paid regardless of any act or omission by any Borrower, Guarantor or any of its or their Affiliates. Payments of insurance proceeds may be subject to the Term Loan Intercreditor Agreement, if and to the extent applicable. Without limiting any

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other rights of Agent or Lenders, any insurance proceeds received by Agent or proceeds of condemnation awards payable at any time may be applied to payment of the Obligations (without permanent reduction thereof), whether or not then due, in any order and in such manner as Agent may determine. Upon application of such proceeds to the Revolving Loans, Revolving Loans may be available subject and pursuant to the terms hereof to be used for the costs of repair or replacement of the Collateral lost or damages resulting in the payment of such insurance proceeds.

9.6 Financial Statements and Other Information.

(a)  Each Borrower and Guarantor shall, and shall cause any Subsidiary to, keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of such Borrower, Guarantor and its Subsidiaries in accordance with GAAP. Borrowers and Guarantors shall during regular business hours and upon reasonable notice from the Agent furnish to Agent and Lenders all such financial and other information as Agent shall reasonably request relating to the Collateral and the assets, business and operations of Borrowers and Guarantors, and Borrower shall notify the auditors and accountants of Borrowers and Guarantors that Agent is authorized to obtain such information directly from them (other than materials protected by the attorney-client privilege and materials which the Borrower may not disclose without violation of a confidentiality obligation binding upon it) at any reasonable time (upon three days advance notice so long as no Default or Event of Default shall have occurred and be continuing). Without limiting the foregoing, Borrowers shall furnish or cause to be furnished to Agent, and upon Agent’s request, to each Lender, the following:

(i)      as soon as available, but in any event within thirty (30) days after the end of each fiscal month that is not the end of a fiscal quarter of Parent, monthly unaudited consolidated financial statements and unaudited consolidating financial statements (in substantially the same format and with the same scope of information as have been provided to Agent prior to the date hereof), all in reasonable detail (but without footnotes), fairly presenting in all material respects the financial position and the results of the operations of Parent and its Subsidiaries as of the end of and through such fiscal month, subject to normal year-end adjustments; and

(ii)     as soon as available, but in any event within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of Parent, quarterly unaudited consolidated financial statements and unaudited consolidating financial statements (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders’ equity), all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Parent and its Subsidiaries as of the end of and through such fiscal quarter, subject to normal year-end adjustments; and

(iii)    within ninety (90) days after the end of each fiscal year, audited consolidated financial statements and unaudited consolidating financial statements of Parent and its Subsidiaries (including in each case balance sheets, statements of income and loss, statements of cash flow and statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Parent and its Subsidiaries as of the end of and for such fiscal year.

(b) Borrowers and Guarantors shall promptly notify Agent in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to Collateral having a value of more than $250,000 or which if adversely determined would result in any material adverse change in any Borrower’s or Guarantor’s business, properties, assets, goodwill or condition, financial or otherwise, (ii) any Material Contract being terminated or amended or any new Material Contract entered into (in which event Borrowers and Guarantors shall provide Agent with a copy of such Material Contract), (iii) any order,

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judgment or decree in excess of $500,000 shall have been entered against any Borrower or Guarantor any of its or their properties or assets, (iv) any notification of a material violation of laws or regulations received by any Borrower or Guarantor, (v) any ERISA Event, and (vi) the occurrence of any Default or Event of Default.

(c)  Borrowers and Guarantors shall furnish to Agent (i) not less than ten (10) Business Days’ prior written notice of (A) the intention of any Subsidiaries of Parent to merge or consolidate as permitted under Section 10.1(a) hereof, together with such other information with respect thereto as Agent may reasonably request, (B) the issuance and sale by Parent or any Subsidiary of Equity Interests as permitted under clause (g) of the definition of Permitted Dispositions, together with such other information with respect thereto as Agent may reasonably request, (C) the intention of any Subsidiary of Parent to wind up, liquidate or dissolve as permitted under Section 10.1(c) hereof, together with such other information with respect thereto as Agent may reasonably request, and (ii) all notices or demands in connection with such Indebtedness either received by any Borrower or Guarantor or on its behalf promptly after the receipt thereof, or sent by any Borrower or Guarantor or on its behalf concurrently with the sending thereof, as the case may be.

(d) Borrowers and Guarantors shall furnish to Agent, and upon Agent’s reasonable request, to each Lender, in form and detail reasonably satisfactory to Agent:

(i)      concurrently with the delivery of the financial statements referred to in Section 9.6(a)(iii), the unqualified opinion of independent certified public accountants with respect to the audited consolidated financial statements, which independent accounting firm shall be selected by Borrower Agent and reasonably acceptable to Agent, that such audited consolidated financial statements have been prepared in accordance with GAAP, and present fairly in all material respects the results of operations and financial condition of Parent and its Subsidiaries as of the end of and for the fiscal year then ended and stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, or if any such Default or Event of Default shall exist, stating the nature and status of such event;

(ii)     concurrently with the delivery of the financial statements referred to in Sections 9.6(a)(ii) and 9.6(a)(iii), a compliance certificate substantially in the form of Exhibit D hereto by the chief financial officer, vice president of finance, treasurer or controller of Borrower Agent on behalf of Borrowers and Guarantors, along with a schedule in form reasonably satisfactory to Agent of the calculations used in determining, as of the end of such month, the ratio and amounts provided for in Section 11 of this Agreement for such month and a written summary of material changes in GAAP and in the consistent application thereof that materially affected the financial covenant calculations for the applicable period;

(iii)    at such time as available, but in any event prior to the end of each fiscal year of Parent, beginning with the fiscal year ending December 31, 2008, projected consolidated financial statements (including in each case substantially in the same format and with the same scope of information as in the projections most recently provided to Agent prior to the date hereof) of Parent and its Subsidiaries for the next fiscal year, all in reasonable detail, and in a format consistent with the projections delivered by Borrowers to Agent prior to the date hereof, together with such supporting information as Agent may reasonably request, which projected financial statements shall be prepared on a quarterly basis for the next succeeding year and shall represent the reasonable best estimate by Borrowers and Guarantors of the future financial performance of Parent and its Subsidiaries for the periods set forth therein and shall have been prepared on the basis of the assumptions set forth therein which Borrowers and Guarantors believe are fair and reasonable as of the date of preparation in light of current and reasonably foreseeable business conditions (it being understood that actual results may differ from those set forth in such projected financial statements);

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(iv)    promptly after the same are available, copies of each annual report, proxy or annual or quarterly financial statement or other report or communication sent to the equity holders of any Borrower or Guarantor, and copies of all annual, regular, periodic and special reports and registration statements which a Borrower or Guarantor may file or be required to file with the Securities and Exchange Commission under Section 13 or 15(d) of the Exchange Act, and not otherwise required to be delivered to Agent pursuant hereto;

(v)     concurrently with the delivery of the financial statements referred to in Sections 9.6(a)(i) and 9.6(a)(ii), a certificate by the chief financial officer, vice president of finance, treasurer or controller of Borrower Agent on behalf of Borrowers and Guarantors containing information regarding the amount of all sales or other dispositions of assets (whether voluntary or involuntary), issuances or incurrence of Indebtedness or Equity Interests, Permitted Investments, Restricted Payments, and optional prepayments of Indebtedness that occurred during the period covered by such financial statements and such other information with respect thereto as Agent may request;

(vi)    promptly after any request by Agent or any Lender, (A) copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of Parent by independent accountants in connection with the accounts or books of Parent or any Subsidiary, or any audit of any of them and (B) the outstanding Revolving Loans, Swing Line Loans and Letter of Credit Obligations on the books and records of the AZEK Companies and the outstanding Revolving Loans, Swing Loan Loans and Letter of Credit Obligations on the books and records of the Scranton Companies as of the most recent fiscal month end for which financial statements are then available or after a Cash Dominion Event, at such other time or times as Agent may request;

(vii)   promptly, and in any event within five (5) Business Days after receipt thereof by any Borrower or Guarantor or any Subsidiary thereof, copies of each notice or other correspondence received from the Securities and Exchange Commission (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by such agency regarding financial or other operational results of Parent or any Subsidiary thereof;

(viii)  concurrently with the delivery of the financial statements referred to in Sections 9.6(a)(i) and 9.6(a)(ii), a certificate by the chief executive officer, chief financial officer, vice president of finance, treasurer or controller of Borrower Agent on behalf of Borrowers and Guarantors attaching the insurance binder or other evidence of insurance for any insurance coverage of Borrowers, Guarantors or any Subsidiary that was renewed, replaced or modified during the period covered by such financial statements.

(e)  As to any information contained in materials furnished pursuant to Section 9.6(d)(iv), Parent shall not be separately required to furnish such information under Section 9.6(a) hereof, but the foregoing shall not be in derogation of the obligation of Parent to furnish the information and materials described in Section 9.6(a) at the times specified therein.

(f)  Documents required to be delivered pursuant to Section 9.6(a)(iii) or Section 9.6(d)(iv) (to the extent any such documents are included in materials otherwise filed with the Securities and Exchange Commission may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which such documents are posted on a Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and Agent has access (whether commercial, third-party website or whether sponsored by Agent); providedthat: (A) Borrowers shall deliver paper copies of such documents to Agent or any Lender that requests Borrowers to deliver such paper copies until a written request to cease delivering paper copies is given by Agent or such Lender and (B) Borrowers shall notify Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to Agent by electronic mail

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electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance Borrowers shall be required to provide paper copies of the compliance certificates required by Section 9.6(d)(ii) to Agent. Except for such compliance certificates, Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by Borrowers with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

(g) Borrowers and Guarantors hereby acknowledge that Agent and/or its Affiliates may make available to Lenders and Issuing Bank materials and/or information provided by or on behalf of Borrowers hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) and certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to Borrowers, Guarantors or their securities) (each, a “Public Lender”). Borrowers and Guarantors shall be deemed to have authorized Agent and its Affiliates, and the Lenders to treat Borrower Materials marked “PUBLIC” or otherwise at any time filed with the Securities and Exchange Commission as not containing any material non-public information with respect to Borrowers, Guarantors or their securities for purposes of United States federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 15.5). All Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor.” Agent and its Affiliates and Lenders shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” or that are not at any time filed with the Securities and Exchange Commission as being suitable only for posting on a portion of the Platform not marked as “Public Investor.”

(h) Borrowers and Guarantors shall furnish or cause to be furnished to Agent such other information respecting the Collateral and the business of Borrowers and Guarantors, as Agent may, from time to time, reasonably request. Agent is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrowers and Guarantors to any court or other Governmental Authority or to any Lender or Participant or prospective Lender or Participant or any Affiliate of any Lender or Participant subject to Section 15.5 hereof. Any documents, schedules, invoices or other papers delivered to Agent or any Lender may be destroyed or otherwise disposed of by Agent or such Lender one (1) year after the same are delivered to Agent or such Lender, except as otherwise designated by Borrower Agent to Agent or such Lender in writing.

 

9.7 Compliance with ERISA.

Except as could not reasonably be expected to have a Material Adverse Effect, each Borrower and Guarantor shall, and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance with the applicable provisions of ERISA, the Code and other Federal and State law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) not terminate any Pension Plan so as to incur any liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited transaction involving any Plan or any trust created thereunder which would subject such Borrower, Guarantor or such ERISA Affiliate to a tax or other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA; (e) make all required contributions to any Plan which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or suffer to exist any accumulated funding deficiency, whether or not waived, with respect to any such Pension Plan; (g) not engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; or (h) not allow or suffer to exist any occurrence of a reportable event or any other event or condition which presents a risk of termination by the Pension Benefit Guaranty Corporation of any Plan that is a single employer plan, which termination could result in any liability to the Pension Benefit Guaranty Corporation.

 

9.8 End of Fiscal Years; Fiscal Quarters.

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Each Borrower and Guarantor shall, for financial reporting purposes, cause its, and each of its Subsidiaries’ fiscal years to end on December 31 of each year, and fiscal quarters to end on the last day of each of March, June, September and December of each year.

 

9.9 License Agreements.

(a)  With respect to a material License Agreement applicable to Intellectual Property that is owned by a third party and licensed to a Borrower or Guarantor and that is affixed to or otherwise necessary for the manufacture, sale or distribution of any Inventory or the collection of Receivables (other than an off-the-shelf product with a shrink wrap license or that is generally available), each Borrower and Guarantor shall (i) give Agent prompt prior written notice of its intention to not renew or to terminate, cancel, surrender or release its rights under any such License Agreement, or any amendment of any such License Agreement that limits the scope of the right of such Borrower or Guarantor to use the Intellectual Property subject to such License Agreement in any material respect, either with respect to product, territory, term or otherwise, or that increases in any material respect the amounts to be paid by such Borrower or Guarantor thereunder or in connection therewith (and Agent may establish such Reserves as a result of any of the foregoing as Agent may determine in its Permitted Discretion), (ii) give Agent prompt written notice of any such License Agreement entered into by such Borrower or Guarantor after the date hereof, or any material amendment to any such License Agreement existing on the date hereof, in each case together with a true, correct and complete copy thereof and such other information with respect thereto as Agent may in good faith request, (iii) give Agent prompt written notice of any material breach of any obligation, or any default, by the third party that is the licensor or by the Borrower or Guarantor that is the licensee or any other party under any such License Agreement, and deliver to Agent (promptly upon the receipt thereof by such Borrower or Guarantor in the case of a notice to such Borrower or Guarantor and concurrently with the sending thereof in the case of a notice from such Borrower or Guarantor) a copy of each notice of default and any other notice received or delivered by such Borrower or Guarantor in connection with any such a License Agreement that relates to the scope of the right, or the continuation of the right, of such Borrower or Guarantor to use the Intellectual Property subject to such License Agreement or the amounts required to be paid thereunder.

(b) With respect to a material License Agreement applicable to Intellectual Property that is owned by a third party and licensed to a Borrower or Guarantor and that is affixed to or otherwise necessary for the manufacture, sale or distribution of any Inventory or the collection of Receivables (other than an off-the-shelf product with a shrink wrap license or that is generally available), at any time an Event of Default shall exist or have occurred and be continuing, Agent shall have, and is hereby granted, the irrevocable right and authority, at its option, to renew or extend the term of such License Agreement, whether in its own name and behalf, or in the name and behalf of a designee or nominee of Agent or in the name and behalf of such Borrower or Guarantor, subject to and in accordance with the terms of such License Agreement. Agent may, but shall not be required to, perform any or all of such obligations of such Borrower or Guarantor under any of the License Agreements, including, but not limited to, the payment of any or all sums due from such Borrower or Guarantor thereunder. Any sums so paid by Agent shall constitute part of the Obligations.

 

9.10 Additional Guaranties and Collateral Security; Further Assurances.

(a)  In the case of the formation or acquisition by a Borrower or Guarantor of any Subsidiary after the date hereof (other than a Foreign Subsidiary or Inactive Subsidiary), as to any such Subsidiary, (i) the Borrower or Guarantor forming such Subsidiary shall cause any such Subsidiary to execute and deliver to Agent, in form and substance satisfactory to Agent, a joinder agreement to the Financing Agreements in order to make such Subsidiary a party to this Agreement as a “Borrower” if it owns accounts or inventory that would constitute Eligible Accounts and Eligible Inventory or otherwise as a “Guarantor” (and if a Borrower to be deemed either one of the Scranton Companies or AZEK Companies based on the business or businesses from which the greatest percentage of its revenues arose in the immediately preceding fiscal year

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of such person or based on such other circumstances as Agent and Borrower Agent may agree), and a party to any guarantee as a “Guarantor” or pledge agreement as a “Pledgor”, and including, but not limited to, supplements and amendments hereto and to any of the other Financing Agreements, authorization to file UCC financing statements, Collateral Access Agreements (to the extent required under Section 9.2), other agreements, documents or instruments contemplated under Section 5.3 and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem reasonably necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets of such Subsidiary and the Equity Interests of any Borrower or Guarantor in such Subsidiary, corporate resolutions and other organization and authorizing documents of such Person, and favorable opinions of counsel to such person and (ii) the Borrower or Guarantor forming such Subsidiary shall execute and deliver to Agent, a pledge and security agreement, in form and substance satisfactory to Agent, granting to Agent a first pledge of and lien on all of the issued and outstanding shares of Equity Interests of any such Subsidiary, and otherwise comply with the terms of Section 5.3 hereof with respect thereto, such other agreements, documents and instruments as Agent may require in connection with the documents referred to above, including, but not limited to, supplements and amendments hereto, corporate resolutions and other organization and authorizing documents and favorable opinions of counsel to such person.

(b) In the case of an acquisition of assets (other than Equity Interests) by a Borrower or Guarantor after the date hereof, Agent shall have received, in form and substance satisfactory to Agent, (i) evidence that Agent has valid and perfected security interests in and liens upon all purchased assets to the extent such assets constitute Collateral hereunder (except in the case of deposit accounts, within thirty (30) days after the acquisition thereof, provided, that, in no event shall any such assets consisting of Accounts or Inventory so purchased be deemed to be Eligible Accounts or Eligible Inventory until Agent is perfected in such deposit accounts, except as Agent may otherwise agree), (ii) except as Agent may otherwise agree, all Collateral Access Agreements (to the extent required under Section 9.2 hereof) and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets purchased, and (iii) such other agreements, documents and instruments as Agent may require in connection with the documents referred to above, including, but not limited to, supplements and amendments hereto, corporate resolutions and other organization and authorizing documents and favorable opinions of counsel to such person. Borrowers and Guarantors shall use commercially reasonable efforts to obtain the agreement of the seller consenting to the collateral assignment by the Borrower or Guarantor purchasing such assets of all rights and remedies and claims for damages of such Borrower or Guarantor relating to the Collateral (including, without limitation, any bulk sales indemnification) under the agreements, documents and instruments relating to such acquisition; provided, that, Borrowers and Guarantors shall not be required to use such commercially reasonable efforts if in the good faith, reasonable judgment of Borrowers, such efforts would result in the failure to consummate the acquisition. 

(c)  At the request of Agent at any time and from time to time, Borrowers and Guarantors shall, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements. Agent may at any time and from time to time request a certificate from an officer of any Borrower or Guarantor representing that all conditions precedent to the making of Loans and providing Letters of Credit contained herein are satisfied. In the event of such request by Agent, Agent and Lenders may, at Agent’s option, cease to make any further Loans or provide any further Letters of Credit until Agent has received such certificate and, in addition, Agent has determined that such conditions are satisfied.

 

9.11 Post-Closing Deliveries.

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On or before February 29, 2008, Agent shall have received projected financial statements of Parent and its Subsidiaries for the period from January 1, 2009 through December 31, 2013 prepared on an annual basis, together with a certificate, dated the date hereof, of an authorized officer of Parent stating that such projected financial statements were prepared by an authorized officer of Parent in good faith and are based on assumptions that are reasonable in light of all facts and circumstances known to Parent at such time, all of which shall be reasonably satisfactory to Agent (it being understood that the projected results may differ from the actual results).

 

9.12 Costs and Expenses.

Borrowers and Guarantors shall pay to Agent on demand all reasonable costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, syndication, administration, collection, liquidation, enforcement and defense of the Obligations, Agent’s rights in the Collateral, this Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all costs and expenses of filing or recording (including UCC financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable), (b) costs and expenses and fees for insurance premiums, environmental audits, title insurance premiums, surveys, assessments, engineering reports and inspections, appraisal fees and search fees, background checks, costs and expenses of remitting loan proceeds, collecting checks and other items of payment, and establishing and maintaining the Concentration Accounts, together with Agent’s customary charges and fees with respect thereto; (c) customary charges, fees or expenses charged by any Issuing Bank in connection with any Letter of Credit; (d) actual costs and expenses of preserving and protecting the Collateral; (e) actual costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Agent in the Collateral, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against Agent or any Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); (f) all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Agent during the course of periodic field examinations of the Collateral and such Borrower’s or Guarantor’s operations, plus a per diem charge at Agent’s then standard rate for Agent’s examiners in the field and office (which rate as of the date hereof is $1,000 per person per day), subject to the limitations set forth in Section 7.7 hereof; and (g) the reasonable fees and disbursements of counsel (including legal assistants) to Agent in connection with any of the foregoing and in addition, at any time an Event of Default exists or has occurred and is continuing, the reasonable fees and disbursements of one counsel (including legal assistants) to Lenders in connection with matters described in clauses (d) or (e) above.

SECTION 10. NEGATIVE COVENANTS

 

10.1 Sale of Assets, Consolidation, Merger, Dissolution, Etc.

Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, directly or indirectly,

(a)  merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it exceptthat any wholly-owned Subsidiary of Parent may merge with and into or consolidate with any other wholly-owned Subsidiary of Parent (including any such Subsidiary that only becomes a Subsidiary after giving effect to such merger or consolidation subject to the conditions set forth herein), provided, that, in each case each of the following conditions is satisfied: (i) as of the effective date of the merger or consolidation and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (ii) Agent shall have received, true, correct and complete copies of all

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agreements, documents and instruments relating to such merger or consolidation, including, but not limited to, the certificate or certificates of merger to be filed with each appropriate Secretary of State (with a copy as filed promptly after such filing), (iii) the surviving entity shall expressly confirm, ratify and assume the Obligations and the Financing Agreements to which it is a party in writing, in form and substance reasonably satisfactory to Agent, and Borrowers and Guarantors shall execute and deliver such other agreements, documents and instruments as Agent may reasonably request in connection therewith and (iv) in the case of a merger with a Person that is not a wholly-owned Subsidiary immediately prior to such merger, such merger shall not be permitted unless it is also permitted under Section 10.4(b) hereof;

(b) sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any Equity Interests or any of its assets to any other Person, except for Permitted Dispositions; provided, that, to the extent that any Collateral is sold as permitted by this Section 10.1(b), other than to a Borrower or Guarantor, or to the extent that Agent and Required Lenders may consent to any other sale of any assets, concurrently with, and subject to the satisfaction of the conditions to such sale (including the receipt of the Net Cash Proceeds related thereto), upon the written request of Borrower Agent and effective upon the transfer of the title of the assets sold and the satisfaction of the applicable conditions to such Permitted Disposition, Agent shall, at Borrowers’ expense, cause to be filed a UCC financing statement amendment providing for the release by Agent of the assets so sold from its security interest granted hereunder;

(c)  suspend operations, wind up, liquidate or dissolve except that any Subsidiary of Parent (other than a Borrower) may wind up, liquidate and dissolve; provided, that, each of the following conditions is satisfied, (i) the winding up, liquidation and dissolution of such Guarantor or other Subsidiary shall not violate any law or any order or decree of any court or other Governmental Authority in any material respect and shall not conflict with or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, or any other agreement or instrument to which any Borrower or Guarantor is a party or may be bound, (ii) such winding up, liquidation or dissolution shall be done in accordance with the requirements of all applicable laws and regulations, (iii) effective upon such winding up, liquidation or dissolution, all of the assets and properties of such Guarantor or other Subsidiary shall be duly and validly transferred and assigned to its shareholders, free and clear of any liens, restrictions or encumbrances other than the security interest and liens of Agent or as are otherwise permitted hereunder (and Agent shall have received such evidence thereof as Agent may reasonably require) and Agent shall have received such deeds, assignments or other agreements as Agent may request to evidence and confirm the transfer of such assets and without limiting the foregoing, in the case of a winding up, liquidation or dissolution of a Borrower the transfer and assignment shall be to an entity that is or becomes a Borrower upon such transfer and assignment and has executed and delivered all such agreements, documents and instruments as Agent may require and as is otherwise provided for herein and Agent shall maintain and have a perfected security interests in and liens upon all such assets and properties as so transferred on the same terms and with the same priority, (iv) Agent shall have received all documents and agreements that any Borrower or Guarantor has filed with any Governmental Authority or as are otherwise required to effectuate such winding up, liquidation or dissolution, (v) no Borrower or Guarantor shall assume any Indebtedness, obligations or liabilities as a result of such winding up, liquidation or dissolution, or otherwise become liable in respect of any obligations or liabilities of the entity that is winding up, liquidating or dissolving, unless such Indebtedness is otherwise expressly permitted hereunder, and (vi) as of the date of such winding up, liquidation or dissolution and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; or

(d) agree to do any of the foregoing, except to the extent that such agreement contains a condition requiring the consent of the Required Lenders if the agreement to do any of the foregoing is otherwise prohibited by the terms hereof.

 

10.2 Encumbrances.

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(a)  Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties, including the Collateral, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any security interest or lien with respect to any such assets or properties, except Permitted Liens.

 

10.3 Indebtedness.

Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly), the Indebtedness, performance, obligations or dividends of any other Person, except:

(a)  the Obligations (excluding Obligations under Hedge Agreements permitted pursuant to Section 10.3(e) below);

(b) Indebtedness (including Capitalized Lease Obligations) arising after the date hereof to the extent secured by security interests in Equipment and mortgages on Real Property acquired after the date hereof in an aggregate outstanding principal amount not to exceed $10,000,000 at any time; provided, that, (i) such security interests and mortgages do not apply to any property of such Borrower, Guarantor or Subsidiary other than specific items of Equipment or Real Property, (ii) the Indebtedness secured thereby does not exceed the cost of the applicable Equipment or Real Property, as the case may be and (iii) as of the date any such Indebtedness is incurred and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(c)  Indebtedness and the Guaranty Obligations of the Parent and its Subsidiaries under the Senior Floating Rate Notes and the Senior Fixed Rate Notes; provided, that, the aggregate outstanding principal amount of such Indebtedness evidenced by the Senior Floating Rate Notes shall not exceed $128,114,000 and the aggregate outstanding principal amount of such Indebtedness evidenced by the Senior Fixed Rate Notes shall not exceed $150,000,000, except to the extent that Parent may incur additional Indebtedness under clause (k) of this Section 10.3 below;

(d) Indebtedness of any Borrower or Guarantor to any other Borrower or Guarantor or any other Subsidiary of Parent arising after the date hereof pursuant to Permitted Investments consisting of loans and advances to such Borrower, Guarantor or other Subsidiary; provided, that, as to any such Indebtedness at any time owing by a Borrower to a Guarantor or any other Subsidiary of Parent (other than a Borrower), (i) the Indebtedness arising pursuant to such Investment shall be Subordinated Debt, (ii) promptly upon Agent’s request, Agent shall have received a subordination agreement, in form and substance satisfactory to Agent, providing for the terms of the subordination in right of payment of such Indebtedness of such Borrower (or such Guarantor, in the case of Indebtedness owing by a Guarantor to a Subsidiary of Parent that is not a Borrower or Guarantor) to the prior final payment and satisfaction in full of all of the Obligations, duly authorized, executed and delivered by such Guarantor and such Borrower, (iii) such Borrower (or such Guarantor, in the case of Indebtedness owing by a Guarantor to a Subsidiary of Parent that is not a Borrower or Guarantor) shall not, directly or indirectly make, or be required to make, any payments in respect of such Indebtedness except subject to the terms of subordination applicable thereto, (iv) in the case of any Indebtedness owing to a Borrower or Guarantor, the Indebtedness arising pursuant to any such loan shall not be evidenced by a promissory note or other instrument, unless the single original of such note or other instrument is promptly delivered to Agent upon its request to hold as part of the Collateral, with such endorsement and/or assignment by the payee of such note or other instrument as Agent may require, and (v) except as Agent may otherwise hereafter agree, as of the date any such Indebtedness is incurred and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

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(e)  Indebtedness of any Borrower or Guarantor entered into in the ordinary course of business pursuant to a Hedge Agreement; provided, that, (i) such arrangements are not for speculative purposes, and (ii) such Indebtedness shall be unsecured, except to the extent such Indebtedness constitutes part of the Obligations arising under or pursuant to Hedge Agreements with any Bank Product Provider that are secured under the terms hereof;

(f)  Indebtedness in respect of netting services, overdraft protections and otherwise in connection with deposit accounts and Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, that, such Indebtedness is extinguished within five (5) Business Days of incurrence;

(g) Guaranty Obligations in respect of Indebtedness of a Borrower or Guarantor to the extent that such Indebtedness is otherwise permitted pursuant to this Section 10.3;

(h) Indebtedness of Parent or any of its Subsidiaries in respect of bid, payment and performance bonds, workers’ compensation claims, unemployment insurance, health, disability and other employee benefits or property, casualty or liability insurance, or guarantees of the foregoing types of Indebtedness, in the ordinary course of business and consistent with current practices as of the date hereof; provided, that, upon Agent’s request, Agent shall have received true, correct and complete copies of all material agreements, documents or instruments evidencing or otherwise related to such Indebtedness, as duly authorized, executed and delivered by the parties thereto;

(i)  Indebtedness arising after the date hereof from agreements of Parent or a Subsidiary to provide for customary indemnification, adjustment of purchase price or similar obligations, earn-outs or other similar obligations, in each case, incurred in connection with a Permitted Acquisition or Permitted Disposition other than guarantees of Indebtedness of any Person acquiring all or any portion of such business, assets or subsidiary for the purpose of financing such acquisition or disposition;

(j)  Indebtedness arising after the date hereof pursuant to the Term Loans; provided, that, (i) Agent shall have received not less than ten (10) Business Days’ prior written notice of the incurrence of such Indebtedness, (ii) the aggregate principal amount of such Indebtedness shall not exceed $25,000,000, (iii) such Indebtedness shall be secured to the extent permitted under clause (n) of the definition of Permitted Liens, (iv) Agent shall have received the Term Loan Intercreditor Agreement, duly authorized, executed and delivered by the Term Loan Agent, Borrowers and Guarantors, and true, correct and complete copies of the Term Loan Agreement and all agreements, documents or instruments evidencing or otherwise related to such Indebtedness, in each case in form and substance reasonably satisfactory to Agent, (v) except as Agent may otherwise agree in writing, at any time a Cash Dominion Event exists, all of the proceeds of the loans or other accommodations giving rise to such Indebtedness shall be paid to Agent for application to the Obligations in accordance with the terms hereof, and (vi) as of the date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(k) unsecured Indebtedness of Borrowers and Guarantors arising after the date hereof to any third person (but not to any other Borrower or Guarantor or other Affiliate of Parent), including Acquired Indebtedness, not otherwise permitted in this Section 10.3; provided, that, each of the following conditions is satisfied:

(i)      in the case of any such Indebtedness in excess of $2,500,000 or at any time after the aggregate amount of such Indebtedness incurred in any fiscal year exceeds $2,500,000 thereafter as to any such Indebtedness incurred in such fiscal year, Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of such Borrower or Guarantor to incur such Indebtedness, which

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notice shall set forth in reasonable detail satisfactory to Agent the amount of such Indebtedness, the person or persons to whom such Indebtedness will be owed, the interest rate, the schedule of repayments and maturity date with respect thereto and such other information as Agent may request with respect thereto,

(ii) such Indebtedness shall be on commercially reasonable terms and conditions,

(iii)    in the case of any such Indebtedness in excess of $2,500,000 or at any time after the aggregate amount of such Indebtedness incurred in any fiscal year exceeds $2,500,000 thereafter as to any such Indebtedness incurred in such fiscal year, Agent shall have received a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, the Fixed Charge Coverage Ratio for Parent and its Subsidiaries is equal to or greater than 1.0 to 1.0 as of the most recent fiscal month end for which Agent has received financial statements pursuant to Section 9.6 hereof,

(iv)    for any such Indebtedness in excess of $5,000,000, Agent shall have received, not less than ten (10) Business Days’ prior to incurring such Indebtedness, the Permitted Transaction Projections showing that: (i) the aggregate amount of the Excess Availability of Borrowers at all times during the period subject to such projections commencing after such Indebtedness is incurred, will be not less than $10,000,000 and (ii) the Fixed Charge Coverage Ratio for Parent and its Subsidiaries is projected to be equal to or greater than 1.0 to 1.0 at all times during such period;

(v)     Agent shall have received true, correct and complete copies of all agreements, documents or instruments evidencing or otherwise related to such Indebtedness, and

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

(l)  the Indebtedness set forth in the Information Certificate which is not otherwise permitted by the other clauses of this Section 10.3; and

(m)Indebtedness of any Borrower or Guarantor arising after the date hereof issued in exchange for, or the proceeds of which are used to extend, refinance, replace or substitute for Indebtedness permitted under Sections 10.3(b), (c), (j) and (l) hereof (the “Refinancing Indebtedness”); provided, that, as to any such Refinancing Indebtedness, each of the following conditions is satisfied: (i) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention to incur such Indebtedness, which notice shall set forth in reasonable detail satisfactory to Agent, the amount of such Indebtedness, the schedule of repayments and maturity date with respect thereto and such other information with respect thereto as Agent may reasonably request, (ii) promptly upon Agent’s request, Agent shall have received true, correct and complete copies of all agreements, documents and instruments evidencing or otherwise related to such Indebtedness, as duly authorized, executed and delivered by the parties thereto, (iii) the Refinancing Indebtedness shall have a Weighted Average Life to Maturity and a final maturity equal to or greater than the Weighted Average Life to Maturity and the final maturity, respectively, of the Indebtedness being extended, refinanced, replaced, or substituted for, (iv) the Refinancing Indebtedness shall rank in right of payment no more senior than, and be at least as subordinated (if subordinated) to, the Obligations as the Indebtedness being extended, refinanced, replaced or substituted for, (v) the Refinancing Indebtedness shall not include terms and conditions with respect to any Borrower or Guarantor which are more burdensome or restrictive in any material respect than those included in the Indebtedness so extended, refinanced, replaced or substituted for, taken as a whole, so that in view of all of the terms and conditions of the Refinancing Indebtedness, such terms and conditions are more favorable to such Borrower or Guarantor, (vi) as of the date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (vii) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount of the Indebtedness so extended, refinanced, replaced or substituted for (plus the amount of

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reasonable refinancing fees and expenses incurred in connection therewith outstanding on the date of such event), (viii) the Refinancing Indebtedness shall be secured by substantially the same assets, provided, that, such security interests (if any) with respect to the Refinancing Indebtedness shall have a priority no more senior than, and be at least as subordinated, if subordinated (on terms and conditions substantially similar to the subordination provisions applicable to the Indebtedness so extended, refinanced, replaced or substituted for or as is otherwise acceptable to Agent) as the security interest with respect to the Indebtedness so extended, refinanced, replaced or substituted for, and (ix) Borrowers and Guarantors may only make payments of principal, interest and fees, if any, in respect of such Indebtedness to the extent such payments would have been permitted hereunder in respect of the Indebtedness so extended, refinanced, replaced or substituted for.

For purposes of determining any particular amount of Indebtedness hereunder, Guaranty Obligations in respect of the same Indebtedness otherwise included in the determination of such particular amount shall not be included. In the event that specific Indebtedness meets the criteria of more than one of the categories of Indebtedness described above or is otherwise permitted to be incurred hereunder, the Borrower Agent shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness in any manner that complies with such covenant. Indebtedness permitted hereby need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions hereof permitting such Indebtedness. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the payment of dividends on Disqualified Equity Interests in the form of additional shares of the same class of Disqualified Equity Interests, the classification of preferred stock as Indebtedness under GAAP and change in the amount outstanding due solely to the result of fluctuations in the exchange rates of currencies will not be deemed to be an incurrence of Indebtedness for purposes hereof. For purposes of determining compliance with any dollar-denominated restriction on the incurrence of Indebtedness denominated in a foreign currency, the dollar-equivalent principal amount of such Indebtedness incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the date that such Indebtedness was incurred. The amount of Indebtedness issued at a price less than the amount of the liability thereof shall be determined in accordance with GAAP.

 

10.4 Investments.

Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, directly or indirectly, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary immediately prior to such merger) any Equity Interests, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, or make or permit to exist any capital contribution or other investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit or all or a substantial part of the assets or property of any other Person (whether through purchase of assets, merger or otherwise), or form or acquire any Subsidiaries, or agree to do any of the foregoing (each of the foregoing an “Investment”), except:

(a) Permitted Investments;

(b) Permitted Acquisitions;

(c)  the Investments consisting of loans and advances set forth on Schedule 10.4 to the Information Certificate which are not otherwise permitted by the other clauses of this Section 10.4.

 

10.5 Restricted Payments.

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Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except:

(a)  each Borrower and Guarantor, and each Subsidiary, may declare and make dividend payments or other distributions payable solely in the Equity Interests of such Person (other than Disqualified Equity Interests);

(b) any Subsidiary of Parent may pay dividends or other distributions to a Borrower or Guarantor, provided, that, as to any such dividends or distributions by a Borrower, as of the date of such dividends or other distributions, and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, except as Agent may otherwise hereafter agree;

(c)  any Subsidiary of Parent may pay or make dividends or other distributions to CPG I or Parent the proceeds of which are used to make substantially contemporaneous payments to the AEA Group to the extent such payments are permitted pursuant to Section 10.5(d) below;

(d) Borrowers and Guarantors may pay (i) up to $1,500,000 each year to the AEA Group pursuant to the first paragraph of Section 2 of the Management Agreement (as in effect on the date hereof), (ii) any transactional fees payable to the AEA Group pursuant to such Management Agreement and (iii) reasonable expenses payable to the AEA Group pursuant to such Management Agreement; provided, that, as of the date of any payment of such amounts under clauses (i) through (iii) and after giving effect thereto, (A) using the most recent calculation of the Borrowing Base prior to the date of any such Investment and payment, on a pro forma basis, the aggregate amount of the Excess Availability of Borrowers shall be not less than $10,000,000 and (B) no Default or Event of Default shall exist or have occurred and be continuing;

(e)  any Subsidiary of Parent may pay or make distributions to CPG I or Parent or any direct or indirect parent entity of Parent that are used to make substantially contemporaneous payments of any of the following (i) accounting, legal, administrative and other general corporate and overhead expenses, franchise or similar taxes and other fees required to maintain the corporate existence of CPG I or Parent or such direct or indirect parent entity and to pay other operating costs, including customary salary, bonus and other benefits payable to, and indemnities provided on behalf of, officers and employees of any such parent entity, in each case as to any of the foregoing only to the extent related to, and required for, the existence or operation of Parent or any of its Subsidiaries, and as are reasonably and in good faith allocable to the operation of Parent and its Subsidiaries (ii) reasonable directors fees and to reimburse reasonable out-of-pocket expenses of the board of directors of Parent and any direct or indirect parent entity of Parent, in each case in an amount not more than the portion of such fees and expenses as are reasonably and in good faith allocable to the operation of Parent and its Subsidiaries and (iii) fees and expenses, as incurred, of an offering of securities or indebtedness of Parent or CPG I that is not consummated, or of a registered public offering or of an acquisition which is not consummated; provided, that, as of the date of any payment of such amounts under clauses (i) through (iii) to or for the benefit of any direct or indirect parent of Parent, and after giving effect thereto, using the most recent calculation of the Borrowing Base prior to the date of any such Investment and payment, on a pro forma basis, the aggregate amount of the Excess Availability of Borrowers shall be not less than $10,000,000 and as of the date of any payment of such amounts and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(f)  any Subsidiary of Parent may pay or make distributions to Parent or any direct or indirect parent entity of Parent that are used to make substantially contemporaneous payments of any Permitted Tax Distributions;

(g) any Subsidiary of Parent may pay or make distributions to Parent that are used to make substantially contemporaneous payments to, and Parent may make payments to, repurchase or redeem Equity

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Interests and options to purchase Equity Interests of Parent held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates) of Parent pursuant to any management equity subscription agreement, employee agreement or stock option agreement or other agreement with such officer, director or employee or former officer, director or employee; provided, that, the aggregate cash consideration paid for all such payments, repurchases or redemptions shall not in any fiscal year of Parent exceed the sum of: (i) $5,000,000 plus amount equal to the amount by which any such repurchases, redemptions or other payments not made pursuant to this clause (h) in the immediately preceding fiscal year of Parent are less than $5,000,000; plus (ii) in the case of any such officer, director, employee or former officer, director or employee, an amount equal to the Net Cash Proceeds received by CPG I (whether directly or from Parent) of any resales or new issuances of Equity Interests of Parent, and options in respect of Equity Interests of Parent, to such any such officer, director, employee or former officer, director or employee at any time after the initial issuances thereof to such officer, director, employee or former officer, director or employee, together with the aggregate amount of deferred compensation due and owing by Parent or any of its Subsidiaries to such officer, director, employee or former officer, director or employee that is cancelled, waived or exchanged at any time after the initial issuances of any such Equity Interests and options for the grant to such officer, director, employee or former officer, director or employee of the right to receive or acquire other Equity Interests of Parent or CPG I, plus (iii) in the case of any such officer, director, employee or former officer, director or employee, an amount equal to the Net Cash Proceeds received by CPG I (whether directly or from Parent), of key man life insurance policies on the life of such officer, director, employee or former officer, director or employee that have been received by Parent or any of its Subsidiaries;

(h) Borrowers and Guarantors may make payments to redeem the Equity Interests of Parent owned by Christopher Bardasian, Kevin Sloan and Larry Sloan as of the date hereof as required, and in accordance with, the terms of the Procell Unit Purchase Agreement (as in effect on the date hereof), provided, that, as to any such payment and after giving effect thereto, each of the following conditions is satisfied: (i) the aggregate amount of all such payments shall not exceed $5,400,000 and all such payments shall be made prior to July 1, 2008, except as Agent may otherwise hereafter agree, (ii) using the most recent calculation of the Borrowing Base prior to the date of any such payment, on a pro forma basis, the aggregate amount of the Excess Availability of Borrowers shall be not less than $10,000,000 and (iii) as of the date of making any payment in respect of any such payment and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(i)  Borrowers and Guarantors may make other Restricted Payments not otherwise expressly provided for in this Section 10.5 in the case of any such Restricted Payments provided, that, each of the following conditions is satisfied:

(i)      in the case of any such Restricted Payment in excess of $1,750,000 or at any time that the aggregate amount of such Restricted Payments made in any fiscal year are in excess of $1,750,000, then as to all such Restricted Payments in such fiscal year thereafter, (A) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of such Borrower or Guarantor to make such Restricted Payment, which notice shall set forth in reasonable detail satisfactory to Agent the amount of any such payments, the nature and purpose of such Restricted Payment, the date such payments are to be made and such other information as Agent may request with respect thereto, (B) Agent shall have received a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, the Fixed Charge Coverage Ratio for Parent and its Subsidiaries is equal to or greater than 1.0 to 1.0 as of the most recent fiscal month end for which Agent has received financial statements pursuant to Section 9.6 hereof, (C) for any such Restricted Payment in excess of $5,000,000, Agent shall have received, not less than ten (10) Business Days prior to the making of any such Restricted Payment, the Permitted Transaction Projections showing that: (1) the aggregate amount of the Excess Availability of Borrowers at all times during the period subject to such projections commencing after such Indebtedness is incurred, will be

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not less than $10,000,000 and (2) the Fixed Charge Coverage Ratio for Parent and its Subsidiaries is projected to be equal to or greater than 1.0 to 1.0 at all times during such period; (D) the daily average of the aggregate amount of the Excess Availability of Borrowers for the period of sixty (60) consecutive days immediately preceding the date of such payment shall not be less than $10,000,000, and as of the date of any such payment and after giving effect thereto, using the most recent calculation of the Borrowing Base prior to the date of any such payment, on a pro forma basis, the aggregate amount of the Excess Availability of Borrowers shall be not less than such amount, and (E) as of the date of making any payment in respect of any such redemption, retirement or repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(ii)     in the case of any such Restricted Payments that are equal to or less than $1,750,000 and so long as the aggregate amount of such Restricted Payments made in any fiscal year is equal to or less than $1,750,000, then as to all such Restricted Payments in such fiscal year (A) as of the date of any such Restricted Payment and after giving effect thereto, using the most recent calculation of the Borrowing Base prior to the date of any such sale or other disposition, on a pro forma basis, there shall be Excess Availability, and (B) as of the date of any such Restricted Payment, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(j)  Parent may pay any dividend or redeem any of its Equity Interests within sixty (60) days after the date of the declaration of such dividend or the mailing of such irrevocable redemption notice if the dividend or redemption payment, as the case may be, would have otherwise been permitted under the terms of this Section 10.5 on the date of such declaration or the date of the mailing of such notice;

(k) Parent may repurchase its Equity Interests to the extent such repurchase is deemed to occur upon (i) the non-cash exercise of stock options to the extent such Equity Interests represents a portion of the exercise price of such options and (ii) the withholding of a portion of such Equity Interests to pay taxes associated therewith, and the purchase of fractional shares of Equity Interests of Parent or any Subsidiary arising out of stock dividends, splits or combinations or business combinations.

 

10.6 Transactions with Affiliates.

Each Borrower and Guarantor shall not, directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, any officer, director or other Affiliates of such Borrower or Guarantor, except pursuant to the reasonable requirements of such Borrower’s or Guarantor’s business (as the case may be) and upon fair and reasonable terms no less favorable to such Borrower or Guarantor than such Borrower or Guarantor would obtain in a comparable arm’s length transaction with an unaffiliated person, except for the following:

(a)  any employment or compensation arrangement or agreement, employee benefit plan or arrangement, officer or director indemnification agreement or any similar arrangement or other compensation arrangement entered into by Parent or any of its Subsidiaries in the ordinary course of business and payments, issuance of securities or awards pursuant thereto, and including the grant of stock options, restricted stock, stock appreciation rights, phantom stock awards or similar rights to employees and directors in each case approved by the Board of Directors of such Borrower or Guarantor;

(b) transactions exclusively between or among Parent and any of its Subsidiaries or exclusively between or among such Subsidiaries (including any Person that becomes a Subsidiary as a result of such transaction), provided that such transactions are not otherwise prohibited by this Agreement;

(c)  to the extent permitted under Section 10.5(d) hereof, up to $1,500,000 each year to the AEA Group pursuant to the first paragraph of Section 2 of the Management Agreement (as in effect on the date

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hereof), (B) any transactional fees payable to the AEA Group pursuant to such Management Agreement and (C) reasonable expenses payable to the AEA Group pursuant to such Management Agreement;

(d) Restricted Payments permitted under Section 10.5 hereof; and

(e)  loans and investments permitted under clauses (g) and (j) of the definition of Permitted Investments;

(f)  the issuance of Qualified Equity Interests to Affiliates to the extent such issuance is permitted under clause (g) of the definition of Permitted Dispositions;

(g) any merger or consolidation of Parent or its Subsidiaries with Affiliates of Parent or such Subsidiaries (i) to the extent permitted under Section 10.1(a), solely for the purpose of reorganizing to facilitate an initial public offering of securities of Parent or any direct or indirect parent entity of Parent or (ii) to the extent permitted under Section 9.1, solely to reincorporate the Parent or such Subsidiary in a new jurisdiction;

(h) transactions pursuant to or contemplated by the Partnership Agreement as in effect on the date hereof.

 

10.7 Change in Business.

Each Borrower and Guarantor shall not engage in any business other than the business of such Borrower or Guarantor on the date hereof and any business reasonably related, ancillary or complimentary to the business in which such Borrower or Guarantor is engaged on the date hereof.

 

10.8 Limitation of Restrictions Affecting Subsidiaries.

Each Borrower and Guarantor shall not, directly, or indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction which prohibits or limits the ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or make other distributions or pay any Indebtedness owed to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or advances to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor, (c) transfer any of its properties or assets to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor; except for encumbrances and restrictions arising under (i) applicable law, rule, regulation or order, including of any regulatory body, (ii) this Agreement, the other Financing Agreements, the Term Loan Agreement (if applicable) and the Senior Note Documents or an agreement governing any other Indebtedness permitted hereby provided that, with respect to any agreement governing such other Indebtedness, the provisions relating to such encumbrance or restriction are no less favorable to the Parent and its Subsidiaries in any material respect, taken as a whole, than the provisions contained in this Agreement as in effect on the date hereof, (d) customary provisions restricting subletting or assignment of (i) any lease governing a leasehold interest of such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor or (ii) any contracts and licenses (including, without limitation, those relating to intellectual property), in each case entered into in the ordinary course of business, (e) customary restrictions on real property interests found in easement agreements of such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor, (f) any agreement relating to permitted Indebtedness incurred by, or Equity Interests of, a Subsidiary of such Borrower or Guarantor prior to the date on which such Subsidiary was acquired by such Borrower or such Guarantor and outstanding on such acquisition date, (g) restrictions on the transfer of assets subject to any Lien permitted hereunder imposed by the holder of such Lien, (h) restrictions imposed by any agreement to sell assets or Equity Interests permitted hereunder to any Person pending the closing of such sale, (i) purchase money Indebtedness or Capitalized Lease Obligations that impose restrictions on the property

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purchased or leased, (j) provisions in joint venture agreements, partnership agreements, limited liability company organizational governance documents, asset sale and stock sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements that restrict the transfer of ownership interests in such entity, (k) restrictions on cash or other deposits or net worth imposed by customers or suppliers under contracts entered into in the ordinary course of business, (l) encumbrances pursuant to the subordination provisions of any Indebtedness permitted to be incurred hereunder, (m) encumbrances on the assets or capital stock of Foreign Subsidiaries pursuant to Indebtedness of Foreign Subsidiaries permitted to be incurred hereunder that are not expected to make the Borrowers unable to make principal or interest payments hereunder, as determined in good faith by the Borrower Agent, and (n) agreements existing on the date hereof and amendments, restatements, modifications, renewals, supplements, refundings, replacements, refinancings, extensions or continuations of contracts, instruments or contractual obligations in existence on the date hereof or those referred to above; provided, that, any such encumbrances or restrictions contained in such extension or continuation are no less favorable to the Parent and Subsidiaries than those encumbrances and restrictions under or pursuant to the contracts, instruments or contractual obligations so extended or continued.

 

10.9 Certain Payments of Indebtedness, Etc.

Borrowers and Guarantors shall not, and shall not permit any Subsidiary to, make or agree to make any payment, prepayment, redemption, retirement, defeasance, purchase or sinking fund payment or other acquisition for value of any of its Indebtedness other than the Indebtedness under the Financing Agreements (including, without limitation, by way of depositing money or securities with the trustee therefor before the date required for the purpose of paying any portion of such Indebtedness when due), or otherwise set aside or deposit or invest any sums for such purpose, exceptthat:

(a)  Parent may make regularly scheduled payments of principal and interest in respect of Indebtedness evidenced by the Senior Fixed Rate Notes, the Senior Floating Rate Notes and regularly scheduled payments of principal and interest and mandatory prepayments (to the extent permitted under the Term Loan Intercreditor Agreement) in respect of the Term Loans and in addition, may make prepayments of, or redemptions of, principal in respect thereof; provided, that, as to any such prepayment or redemption, each of the following conditions is satisfied:

(i)      in the case of any such payments or redemptions in excess of $1,000,000 or at any time that the aggregate amount of such payments made in any fiscal year are in excess of $1,00,000, then as to all such payments in such fiscal year thereafter, (A) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of a Borrower or Guarantor to make such prepayment or redemption, (B) Agent shall have received a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, the Fixed Charge Coverage Ratio for Parent and its Subsidiaries is equal to or greater than 1.0 to 1.0 as of the most recent fiscal month end for which Agent has received financial statements pursuant to Section 9.6 hereof, (C) for any such prepayment in excess of $5,000,000, Agent shall have received, not less than ten (10) Business Days prior to the making of such prepayment or redemption, the Permitted Transaction Projections showing that: (1) the aggregate amount of the Excess Availability of Borrowers at all times during the period subject to such projections, commencing after such payment is made, will be not less than $10,000,000 and (2) the Fixed Charge Coverage Ratio for Parent and its Subsidiaries is projected to be equal to or greater than 1.0 to 1.0 at all times during such period; (D) the daily average of the aggregate amount of the Excess Availability of Borrowers for the period of sixty (60) consecutive days immediately preceding the date of such payment shall not be less than $10,000,000, and as of the date of any such prepayment or redemption and after giving effect thereto, using the most recent calculation of the Borrowing Base prior to the date of any such payment, on a pro forma

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basis, the aggregate amount of the Excess Availability of Borrowers shall be not less than such amount, and (E) as of the date of any such payment or redemption, and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(ii)     in the case of any such payments or redemptions that are equal to or less than $1,000,000 and so long as the aggregate amount of such payments made in any fiscal year is equal to or less than $1,000,000, then as to all such payments in such fiscal year, (A) as of the date of such payment ore redemption and after giving effect thereto, using the most recent calculation of the Borrowing Base prior to the date of any such sale or other disposition, on a pro forma basis, there shall be Excess Availability and (B) as of the date of any such payment or redemption, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(b) Borrowers and Guarantors may make payments in respect of the Indebtedness owing to Christopher Bardasian, Kevin Sloan and Larry Sloan constituting the earn-out consideration payable to them under the Procell Unit Purchase Agreement to the extent due and payable in accordance with the terms of such agreement as in effect on the date hereof not to exceed $6,900,000 in the aggregate; provided, that, as to any such payments and after giving effect thereto, each of the following conditions shall be satisfied: (i) all such payments shall be made prior to July 1, 2008, except as Agent may otherwise hereafter agree, (ii) using the most recent calculation of the Borrowing Base prior to the date of any such payment, on a pro forma basis, the aggregate amount of the Excess Availability of Borrowers shall be not less than $10,000,000 and (iii) no Default or Event of Default shall exist or have occurred and be continuing;

(c)  Borrowers and Guarantors may make payments in respect of Indebtedness owing by them in exchange for substantially contemporaneous issuance of Qualified Equity Interests of Parent permitted hereunder or with Net Cash Proceeds from the substantially contemporaneous sale of Qualified Equity Interests of Parent;

(d) Borrowers and Guarantors may make payments in respect of Indebtedness permitted under Sections 10.3(b), (c), (j) and (l) in each case with proceeds of Refinancing Indebtedness as permitted under Section 10.3(m); and

(e)  as to payments in respect of any other Indebtedness permitted under Section 10.3 hereof not subject to the provisions above in this Section 10.9, Borrower and Guarantors may make payments of regularly scheduled principal and interest or other mandatory payments as and when due in respect of such Indebtedness in accordance with the terms thereof (and in the case of Subordinated Debt, subject to the terms of subordination set forth therein or applicable thereto).

10.10 Modifications of Indebtedness, Organizational Documents and Certain Other Agreements.

Borrowers and Guarantors shall not, and shall not permit any Subsidiary to:

(a)  amend, modify or otherwise change its certificate of incorporation, articles of association, certificate of formation, limited liability agreement, limited partnership agreement or other organizational documents, as applicable, including, without limitation, entering into any new agreement with respect to any of its Equity Interests, except for amendments, modifications or other changes that do not affect the rights and privileges of any Borrower or Guarantor, or its Subsidiaries and do not affect the ability of a Borrower, Guarantor or such Subsidiary to amend, modify, renew or supplement the terms of this Agreement or any of the other Financing Agreements, or otherwise affect the interests of Agent or Lenders and so long as at the time of any such amendment, modification or change, no Default or Event of Default shall exist or have occurred and be continuing;

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(b) amend, modify or otherwise change (or permit the amendment, modification or other change in any manner of) any of the provisions of the Senior Note Documents or any agreements, documents or instruments in respect of any Subordinated Debt or any agreements related to the Indebtedness permitted under Sections 10.3(j)(except to the extent permitted under the Term Loan Intercreditor Agreement), (k), (l), and (m) hereof, except, that, Borrowers and Guarantors, and any Subsidiary, may, after prior written notice to Agent, amend, modify, alter or change the terms thereof to forgive, or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or to make the terms thereof less restrictive or burdensome to Borrowers, Guarantors or such Subsidiary.

10.11 Inactive Subsidiaries; Parent Holding Company.

(a)  Except as otherwise provided in Section 10.11(b) below, Borrowers and Guarantors will not permit any Inactive Subsidiary to (i) engage in any business or conduct any operations, (ii) own assets with a book value of more than $100,000 in the aggregate and (iii) incur any obligations or liabilities in respect of any Indebtedness or otherwise.

(b) In the event that a Borrower or Guarantor intends to have any then Inactive Subsidiary commence any business or operations or own assets with a book value of more than $100,000 in the aggregate or incur any obligations or liabilities in respect of any Indebtedness or otherwise, (i) Borrowers and Guarantors shall give Agent not less than ten (10) Business Days’ prior written notice thereof with reasonable detail and specificity and such other information with respect thereto as Agent may request and (ii) at any time thereafter, promptly upon the request of Agent, Borrowers and Guarantors shall cause such Inactive Subsidiary to execute and deliver to Agent, in form and substance satisfactory to Agent, a joinder agreement to the Financing Agreements in order to, among other things, make such Subsidiary a party to this Agreement as a “Guarantor” and a party to any guarantee as a “Guarantor” or pledge agreement as a “Pledgor”, and without limitation, supplements and amendments hereto and to any of the other Financing Agreements, authorization to file UCC financing statements, Collateral Access Agreements (to the extent required under Section 9.2 hereof), other agreements, documents or instruments contemplated under Section 5.3 hereof and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem reasonably necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets of such Subsidiary, corporate resolutions and other organization and authorizing documents of such Person, and favorable opinions of counsel to such person; provided, that such Inactive Subsidiary is not a Foreign Subsidiary and (iii) upon the satisfaction of each of the conditions set forth in this Section 10.11(b), such Inactive Subsidiary shall cease to be deemed an Inactive Subsidiary for purposes of this Agreement.

(c)  Except for any Guaranty Obligations in respect of Indebtedness of CPG I evidenced by the Senior Fixed Rate Notes and the Senior Floating Rate Notes permitted hereunder and as otherwise provided in Sections 10.3(d), 10.3(f), 10.3(g), 10.3(h), 10.3(i), 10.3(j) and 10.3(k), Parent shall not incur any Indebtedness nor grant any security interests, liens or other encumbrances upon any of its properties or assets nor engage in any operations, business or activity other than holding one hundred (100%) percent of the Equity Interests of CPG I and each of any administrative, management or other activities incidental to such holdings, pledging its interests therein to Agent and executing and delivering the Financing Agreements to which it is a party and fulfilling its obligations thereunder.

10.12 Sale and Leasebacks.

Borrowers and Guarantors shall not, and shall not permit any Subsidiary to, enter into any Sale and Leaseback Transaction, unless the sale of such property is permitted under Section 10.1 hereof and the lease back of the property gives rise to Indebtedness permitted under Section 10.3 hereof.

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10.13 Designation of Designated Senior Debt.

Borrowers and Guarantors shall not, and shall not permit any Subsidiary to, designate any Indebtedness, other than the Obligations and the obligations under the Term Loan Agreement (if applicable), as “Designated Senior Debt”, or any similar term under and as defined in the agreements relating to any Indebtedness of Borrowers or Guarantors, including Subordinated Debt or Indebtedness of any Borrower or Guarantor evidenced by any of the Senior Note Documents or Senior Floating Rate Note Documents, which contains such designation. Borrowers and Guarantors shall, and shall cause any Subsidiary to, designate the Obligations as “Designated Senior Debt” or any similar term under and as defined in the agreements relating to any Indebtedness (including any Subordinated Debt) of any Borrower or Guarantor which contains such designation.

10.14 Foreign Assets Control Regulations, Etc.

None of the requesting or borrowing of the Loans or the requesting or issuance, extension or renewal of any Letter of Credit or the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. §1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or executive order relating thereto (including, but not limited to (a) Executive order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56). None of Borrowers or any of their Subsidiaries or other Affiliates is or will become a Sanctioned Entity or Sanctioned Person” as described in the Executive Order, the Trading with the Enemy Act or the Foreign Assets Control Regulations or engages or will engage in any dealings or transactions, or be otherwise associated, with any such Sanctioned Entity or Sanctioned Person.

 

SECTION 11. FINANCIAL COVENANT

11.1 Fixed Charge Coverage Ratio.

At any time that Excess Availability is less than $7,500,000 and at all times thereafter (except as otherwise provided below), the Fixed Charge Coverage Ratio of Parent and its Subsidiaries (on a consolidated basis) determined as of the end of the fiscal month most recently ended for which Agent has received financial statements shall be not less than 1.0 to 1.0 for the period of the immediately preceding twelve (12) consecutive fiscal months prior to such fiscal month end; provided, that, if, at any time after Excess Availability shall be less than $7,500,000, then Excess Availability shall be greater than $7,500,000 for ninety (90) consecutive days, Parent and its Subsidiaries shall not thereafter be required to comply with the Fixed Charge Coverage Ratio as set forth above up to two (2) times in any twelve (12) consecutive month period until such time as Excess Availability shall again be less than $7,500,000, except if after the second time in such period, Excess Availability has been greater than such amount for each day of any one hundred eighty (180) consecutive day period thereafter, then Parent and its Subsidiaries shall not thereafter be required to comply with the Fixed Charge Coverage Ratio as set forth above until the next time that Excess Availability shall be less than $7,500,000.

 

SECTION 12. EVENTS OF DEFAULT AND REMEDIES

 

12.1 Events of Default.

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The occurrence or existence of any one or more of the following events are referred to herein individually as an “Event of Default”, and collectively as “Events of Default”:

(a)  (i) any Borrower fails to make any principal payment hereunder when due or fails to pay interest, fees or any of the other Obligations within three (3) Business Days after the due date thereof, or (ii) any Borrower or Guarantor fails to perform any of the covenants contained in Sections 2.3, 2.7, 2.8, 3, 5, 7, 9.5, 9.6, 10 and 11, or (iii) any Borrower or Guarantor fails to perform any of the terms, covenants, conditions or provisions contained in this Agreement or any of the other Financing Agreements other than those described in Sections 12.1(a)(i) and 12.1(a)(ii) above and such failure shall continue for thirty (30) days; provided, that, such thirty (30) day period shall not apply in the case of any failure to observe any such covenant which is not capable of being cured at all or within such thirty (30) day period or which has been the subject of a prior failure within a six (6) month period;

(b) any representation, warranty or statement of fact made by any Borrower or Guarantor to Agent in this Agreement, the other Financing Agreements or any other written agreement, schedule, confirmatory assignment or otherwise that are qualified as to materiality or Material Adverse Effect shall when made or deemed made be incorrect, false or misleading and any other such representation, warranty or statement of fact made by any Borrower or Guarantor to Agent shall when made or deemed made be incorrect, false or misleading in any material respect;

(c)  any Guarantor revokes or terminates or purports to revoke or terminate any guarantee of such party in favor of Agent or any Lender, except as a result of a transaction permitted under Section 10.1 hereof;

(d) any judgment for the payment of money is rendered against any Borrower or Guarantor in excess of $7,000,000 in the aggregate (to the extent not covered by independent third party insurance where the insurer has not declined or disputed coverage) and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against any Borrower or Guarantor or any of the Collateral having a value in excess of $1,000,000;

(e)  any Borrower or Guarantor makes an assignment for the benefit of creditors or makes or sends notice of a bulk transfer;

(f)  a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed against any Borrower or Guarantor other than the Inactive Subsidiaries or all or any part of its properties and such petition or application is not dismissed within sixty (60) days after the date of its filing or any Borrower or Guarantor other than the Inactive Subsidiariesshall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner;

(g) a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed by any Borrower or Guarantor (other than the Inactive Subsidiaries) or for all or any part of its property;

(h) any default in respect of any Indebtedness of any Borrower or Guarantor in any case in an amount in excess of $7,000,000(including Subordinated Debt or any Indebtedness evidenced by or arising under any of the Senior Note Documents or the Term Loan Agreement), which default continues for more

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than the applicable cure period, if any, with respect thereto, including any default by any Borrower or Guarantor under any Material Contract, which default continues for more than the applicable cure period, if any, with respect thereto and/or is not waived in writing by the other parties thereto or the subordination provisions contained in any agreement related to any Subordinated Debt shall cease to be in full force and effect or to give Agent or Lenders the rights, powers and privileges purported to be created thereby,

(i)  any material provision hereof or of any of the other Financing Agreements shall for any reason cease to be valid, binding and enforceable with respect to any party hereto or thereto (other than Agent) in accordance with its terms, or any such party shall challenge the enforceability hereof or thereof, or shall assert in writing, or take any action or fail to take any action based on the assertion that any provision hereof or of any of the other Financing Agreements has ceased to be or is otherwise not valid, binding or enforceable in accordance with its terms, or any security interest provided for herein or in any of the other Financing Agreements shall cease to be a valid and perfected first priority security interest in any of the Collateral purported to be subject thereto (except as otherwise permitted herein or therein);

(j)  an ERISA Event shall occur which results in or could reasonably be expected to result in liability of any Borrower in an aggregate amount in excess of $2,500,000;

(k) any Borrower or Guarantor shall be prohibited or otherwise restrained from conducting the business theretofore conducted by it in any manner that has or could reasonably be expected to result in a Material Adverse Effect by virtue of any determination, ruling, decision, decree or order of any court or Governmental Authority of competent jurisdiction;

(l) any Change of Control.

 

12.2 Remedies.

(a)  At any time an Event of Default exists or has occurred and is continuing, Agent and Lenders shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by any Borrower or Guarantor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Agent and Lenders hereunder, under any of the other Financing Agreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Agent’s discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by any Borrower or Guarantor of this Agreement or any of the other Financing Agreements. Subject to Section 14 hereof, Agent may, and at the direction of the Required Lenders shall, at any time or times an Event of Default exists or has occurred and is continuing, proceed directly against any Borrower or Guarantor to collect the Obligations without prior recourse to the Collateral.

(b) Without limiting the generality of the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, at its option and shall upon the direction of the Required Lenders, (i) upon notice to Borrower Agent, accelerate the payment of all Obligations and demand immediate payment thereof to Agent for itself and the benefit of Lenders (provided, that, upon the occurrence of any Event of Default described in Sections 12.1(g) and 12.1(h), all Obligations shall automatically become immediately due and payable), and (ii) terminate the Commitments whereupon the obligation of each Lender to make any Loan and an Issuing Bank to issue any Letter of Credit shall immediately terminate (provided, that, upon the occurrence of any Event of Default described in Sections 12.1(g) and 12.1(h), the Commitments and any other obligation of the Agent or a Lender or Issuing Bank hereunder shall automatically terminate).

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(c)  Without limiting the foregoing, at any time an Event of Default exists or has occurred and is continuing and only at such time or times, Agent may, in its discretion (i) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, (ii) require any Borrower or Guarantor, at Borrowers’ expense, to assemble and make available to Agent any part or all of the Collateral at any place and time designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (iv) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker’s board, at any office of Agent or elsewhere) at such prices or terms as Agent may deem reasonable, for cash, upon credit or for future delivery, with the Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of any Borrower or Guarantor, which right or equity of redemption is hereby expressly waived and released by Borrowers and Guarantors and/or (vi) terminate this Agreement. If any of the Collateral is sold or leased by Agent upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Agent. If notice of disposition of Collateral is required by law, ten (10) days prior notice by Agent to Borrower Agent designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and, subject to applicable law, Borrowers and Guarantors waive any other notice. In the event Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, each Borrower and Guarantor waives the posting of any bond which might otherwise be required. At any time an Event of Default exists or has occurred and is continuing, upon Agent’s request, Borrowers will either, as Agent shall specify, furnish cash collateral to each Issuing Bank to be used to secure and fund the reimbursement obligations to such Issuing Bank in connection with any Letter of Credit Obligations or furnish cash collateral to Agent for the Letter of Credit Obligations. Such cash collateral shall be in the amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Obligations and any such cash collateral then in possession of Agent (and not applied or to be applied to any of the Letter of Credit Obligations) shall be returned to Borrower Agent, upon its written request, within ten (10) Business Days after the end of the latest expiration date of the Letters of Credit giving rise to such Letter of Credit Obligations (so long as Agent has received evidence satisfactory to it and the Issuing Bank that no unpaid draw has been made under the Letters of Credit prior to its expiration).

(d) At any time or times that an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, enforce the rights of any Borrower or Guarantor against any account debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables. Without limiting the generality of the foregoing, Agent may, in its discretion, at such time or times (i) notify any or all account debtors, secondary obligors or other obligors in respect thereof that the Receivables have been assigned to Agent and that Agent has a security interest therein and Agent may direct any or all account debtors, secondary obligors and other obligors to make payment of Receivables directly to Agent, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other obligations included in the Collateral and thereby discharge or release the account debtor or any secondary obligors or other obligors in respect thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Agent and Lenders shall not be liable for any failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto and (iv) take whatever other action Agent may deem necessary or desirable for the protection of its interests and the interests of Lenders. At any time that an Event of Default exists or has occurred and is continuing, at Agent’s request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Agent and are payable directly and only to Agent and Borrowers and

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Guarantors shall deliver to Agent such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Agent may require. In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Borrowers shall, upon Agent’s request, hold the returned Inventory in trust for Agent, segregate all returned Inventory from all of its other property, dispose of the returned Inventory solely according to Agent’s instructions, and not issue any credits, discounts or allowances with respect thereto without Agent’s prior written consent.

(e)  To the extent that applicable law imposes duties on Agent or any Lender to exercise remedies in a commercially reasonable manner (which duties cannot be waived under such law), each Borrower and Guarantor acknowledges and agrees that it is not commercially unreasonable for Agent or any Lender (i) to fail to incur expenses reasonably deemed significant by Agent or any Lender to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain consents of any Governmental Authority or other third party for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against account debtors, secondary obligors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other persons, whether or not in the same business as any Borrower or Guarantor, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insure Agent or Lenders against risks of loss, collection or disposition of Collateral or to provide to Agent or Lenders a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Agent in the collection or disposition of any of the Collateral. Each Borrower and Guarantor acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Agent or any Lender would not be commercially unreasonable in the exercise by Agent or any Lender of remedies against the Collateral and that other actions or omissions by Agent or any Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation of the foregoing, nothing contained in this Section shall be construed to grant any rights to any Borrower or Guarantor or to impose any duties on Agent or Lenders that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

(f)  For the purpose of enabling Agent to exercise the rights and remedies hereunder, each Borrower and Guarantor hereby grants to Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable at any time an Event of Default shall exist or have occurred and for so long as the same is continuing and only at such time or times) without payment of royalty or other compensation to any Borrower or Guarantor, to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and general intangibles now owned or hereafter acquired by any Borrower or Guarantor, wherever the same maybe located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof.

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(g) At any time an Event of Default exists or has occurred and is continuing, Agent may apply the cash proceeds of Collateral actually received by Agent from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in accordance with the terms hereof, whether or not then due or may hold such proceeds as cash collateral for the Obligations. Borrowers and Guarantors shall remain liable to Agent and Lenders for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including attorneys’ fees and expenses.

(h) Without limiting the foregoing, upon the occurrence of a Default or an Event of Default, (i) Agent and Lenders may, at Agent’s option, and upon the occurrence of an Event of Default at the direction of the Required Lenders, Agent and Lenders shall, without notice, (A) cease making Loans or arranging for Letters of Credit or reduce the lending formulas or amounts of Loans and Letters of Credit available to Borrowers and/or (B) in the case of an Event of Default, terminate any provision of this Agreement providing for any future Loans to be made by Agent and Lenders or Letters of Credit to be issued by an Issuing Bank and (ii) Agent may, at its option, establish such Reserves as Agent determines, without limitation or restriction, notwithstanding anything to the contrary contained herein.

SECTION 13. JURY TRIAL WAIVER; OTHER WAIVERS

CONSENTS; GOVERNING LAW

 

13.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

(a)  The validity, interpretation and enforcement of this Agreement and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

(b) Borrowers, Guarantors, Agent, Lenders and each Issuing Bank irrevocably consent and submit to the non-exclusive jurisdiction of the of the Supreme Court of the State of New York, New York County and the United States District Court for the Southern District of New York, whichever Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Agent and Lenders shall have the right to bring any action or proceeding against any Borrower or Guarantor or its or their property in the courts of any other jurisdiction which Agent deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against any Borrower or Guarantor or its or their property).

(c)  Each Borrower and Guarantor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Agent’s option, by service upon any Borrower or Guarantor (or Borrower Agent on behalf of such Borrower or Guarantor) in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, such Borrower or Guarantor shall appear in answer to such process, failing which such Borrower or Guarantor shall be deemed in default and judgment may be entered by Agent against such Borrower or Guarantor for the amount of the claim and other relief requested.

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(d) BORROWERS, GUARANTORS, AGENT, LENDERS AND EACH ISSUING BANK EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS, GUARANTORS, AGENT, LENDERS AND ANY ISSUING BANK EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR, AGENT, ANY LENDER OR ISSUING BANK MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e)  Agent and Secured Parties shall not have any liability to any Borrower or Guarantor (whether in tort, contract, equity or otherwise) for losses suffered by such Borrower or Guarantor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Agent, such Lender and Issuing Bank, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. Each Borrower and Guarantor: (i) certifies that neither Agent, any Lender, any Issuing Bank nor any representative, agent or attorney acting for or on behalf of Agent, any Lender or Issuing Bank has represented, expressly or otherwise, that Agent, Lenders and each Issuing Bank would not, in the event of litigation, seek to enforce any of the waivers provided for in this Agreement or any of the other Financing Agreements and (ii) acknowledges that in entering into this Agreement and the other Financing Agreements, Agent, Lenders and each Issuing Bank are relying upon, among other things, the waivers and certifications set forth in this Section 11.1 and elsewhere herein and therein.

 

13.2 Waiver of Notices.

Each Borrower and Guarantor hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and chattel paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and this Agreement, except such as are expressly provided for herein or required by applicable law and cannot be waived thereunder. No notice to or demand on any Borrower or Guarantor which Agent or any Lender may elect to give shall entitle such Borrower or Guarantor to any other or further notice or demand in the same, similar or other circumstances.

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13.3 Amendments and Waivers.

(a)  Neither this Agreement nor any other Financing Agreement nor any terms hereof or thereof may be amended, waived, discharged or terminated unless such amendment, waiver, discharge or termination is in writing signed by Agent and the Required Lenders or at Agent’s option, by Agent with the authorization or consent of the Required Lenders, and as to amendments to any of the Financing Agreements (other than with respect to any provision of Section 14 hereof), by any Borrower and such amendment, waiver, discharger or termination shall be effective and binding as to all Lenders and each Issuing Bank only in the specific instance and for the specific purpose for which given; except, that, no such amendment, waiver, discharge or termination shall:

(i)      reduce the interest rate or any fees or extend the time of payment of principal, interest or any fees or reduce the principal amount of any Loan or Letters of Credit, in each case without the consent of each Lender directly affected thereby,

(ii)     increase the Commitment of any Lender over the amount thereof then in effect or provided hereunder, in each case without the consent of the Lender directly affected thereby,

(iii)    increase the amount of the Maximum Credit without the consent of all Lenders (provided, that, the increase provided for in Section 2.5 hereof shall not be deemed an increase requiring the consent of any Lender) without the consent of Agent and all of Lenders;

(iv)    release all or substantially all of the Collateral (except as expressly required hereunder or under any of the other Financing Agreements or applicable law and except as permitted under Section 14.11(b) hereof), or release of any Guarantor, or agree to the subordination of any of the Obligations, or alter the order of application set forth in Section 6.7(b), in each case without the consent of Agent and all of Lenders,

(v)     consent to the assignment or transfer by any Borrower or Guarantor of any of their rights and obligations under this Agreement, without the consent of Agent and all of Lenders,

(vi)    amend, modify or waive any terms of this Section 13.3, without the consent of Agent and all of Lenders;

(vii)   reduce any percentage specified in the definition of Required Lenders or Supermajority Lenders, without the consent of Agent and all of Lenders, and

(viii)  increase the advance rates constituting part of the Borrowing Base (in each case other than as provided for in the definition of such terms), or amend, modify or waive any provisions of the definition of the term Borrowing Base or any of the defined terms referred to in the definition of the term Borrowing Base, in each case as to any of the foregoing if the effect thereof increases the amount of the Borrowing Base, without the consent of Agent and the Supermajority Lenders.

(b) Agent, Lenders and each Issuing Bank shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its or their rights, powers and/or remedies unless such waiver shall be in writing and signed as provided herein. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Agent, any Lender or Issuing Bank of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Agent, any Lender or Issuing Bank would otherwise have on any future occasion, whether similar in kind or otherwise.

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(c)  Notwithstanding anything to the contrary contained in Section 13.3(a) above, in connection with any amendment, waiver, discharge or termination, in the event that any Lender whose consent thereto is required shall fail to consent or fail to consent in a timely manner (such Lender being referred to herein as a “Non-Consenting Lender”), but the consent of any other Lenders to such amendment, waiver, discharge or termination that is required are obtained, if any, then Wachovia or Borrower Agent shall have the right, but not the obligation, at any time within one hundred twenty (120) days thereafter, and upon the exercise by Wachovia or Borrower Agent of such right, such Non-Consenting Lender shall have the obligation, to sell, assign and transfer to Wachovia or such Eligible Transferee as Wachovia may specify, the Commitment of such Non-Consenting Lender and all rights and interests of such Non-Consenting Lender pursuant thereto. Wachovia shall provide the Non-Consenting Lender with prior written notice of its intent to exercise its right under this Section (or if Wachovia does not exercise such right, Borrower Agent shall provide Agent and the Non-Consenting Lender with prior written notice of its intent to exercise its right under this Section), which notice shall specify the date on which such purchase and sale shall occur, which date shall be within thirty (30) days after such notice. Such purchase and sale shall be pursuant to the terms of an Assignment and Acceptance (whether or not executed by the Non-Consenting Lender), except that on the date of such purchase and sale, Wachovia, or such Eligible Transferee specified by Wachovia shall pay to the Non-Consenting Lender (except as Wachovia and such Non-Consenting Lender may otherwise agree) the amount equal to: (i) the principal balance of the Loans held by the Non-Consenting Lender outstanding as of the close of business on the business day immediately preceding the effective date of such purchase and sale, plus (ii) amounts accrued and unpaid in respect of interest and fees payable to the Non-Consenting Lender to the effective date of the purchase (including amounts payable under Section 3.9 as if the Non-Consenting Lender’s Eurodollar Rate Loans were being prepaid on the purchase date, but in no event shall the Non-Consenting Lender be deemed entitled to any early termination fee). Such purchase and sale shall be effective on the date of the payment of such amount to the Non-Consenting Lender and the Commitment of the Non-Consenting Lender shall terminate on such date.

(d) The consent of Agent shall be required for any amendment, waiver or consent affecting the rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section and the exercise by Agent of any of its rights hereunder with respect to Reserves or Eligible Accounts or Eligible Inventory shall not be deemed an amendment to the advance rates provided for in this Section 13.3. The consent of an Issuing Bank shall be required for any amendment, waiver or consent affecting the rights or duties of such Issuing Bank hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section; provided, that, the consent of any Issuing Bank shall not be required for any other amendments, waivers or consents. The consent of Swing Line Lender shall be required for any amendment, waiver or consent affecting the rights or duties of Swing Line Lender hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section. Notwithstanding anything to the contrary contained in Section 13.3(a) above, (i) in the event that Agent shall agree that any items otherwise required to be delivered to Agent as a condition of the initial Loans and Letters of Credit hereunder may be delivered after the date hereof, Agent may, in its discretion, agree to extend the date for delivery of such items or take such other action as Agent may deem appropriate as a result of the failure to receive such items as Agent may determine or may waive any Event of Default as a result of the failure to receive such items, in each case without the consent of any Lender and (ii) Agent may consent to any change in the type of organization, jurisdiction of organization or other legal structure of any Borrower, Guarantor or any of their Subsidiaries and amend the terms hereof or of any of the other Financing Agreements as may be necessary or desirable to reflect any such change, in each case without the approval of any Lender.

(e)  The consent of Agent and any Bank Product Provider that is providing Bank Products and has outstanding any such Bank Products at such time that are secured hereunder shall be required for any

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amendment to the priority of payment of Obligations arising under or pursuant to any Hedge Agreements of a Borrower or Guarantor or other Bank Products as set forth in Section 6.7(b) hereof.

(f)  Notwithstanding anything to the contrary herein, (i) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto, (ii) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender, (iii) each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code of the United States supersedes the unanimous consent provisions set forth herein and (iv) Agent and the Required Lenders shall determine whether or not to allow a Borrower or Guarantor to use cash collateral in the context of a bankruptcy or insolvency proceeding and such determination shall be binding on all of the Lenders.

(g) Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by Borrowers and Agent with the express consent of the Required Lenders (and, if its rights or obligations are affected thereby, the Issuing Bank or Swing Line Lender) if (i) by the terms of such agreement the Commitment of each Lender not consenting to the amendment provided for therein shall terminate upon the effectiveness of such amendment and (ii) at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement.

 

13.4 Waiver of Counterclaims.

Each Borrower and Guarantor waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other then compulsory counterclaims) in any action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.

 

13.5 Indemnification.

Each Borrower and Guarantor shall, jointly and severally, indemnify and hold Agent, each Lender and Issuing Bank, and their respective officers, directors, agents, employees, advisors and counsel and their respective Affiliates (each such person being an “Indemnitee”), harmless from and against any and all losses, claims, damages, penalties, liabilities, costs or expenses (including attorneys’ fees and expenses) imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel except that Borrowers and Guarantors shall not have any obligation under this Section 13.5 to indemnify an Indemnitee with respect to a matter covered hereby resulting from the gross negligence or willful misconduct of such Indemnitee as determined pursuant to a final, non-appealable order of a court of competent jurisdiction (but without limiting the obligations of Borrowers or Guarantors as to any other Indemnitee). To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrowers and Guarantors shall pay the maximum portion which it is permitted to pay under applicable law to Agent and Lenders in satisfaction of indemnified matters under this Section. To the extent permitted by applicable law, no Borrower or Guarantor shall assert, and each Borrower and Guarantor hereby waives, any claim against any Indemnitee, on any theory of liability for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any of the other

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Financing Agreements or any undertaking or transaction contemplated hereby. No Indemnitee referred to above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or any of the other Financing Agreements or the transaction contemplated hereby or thereby. All amounts due under this Section shall be payable upon demand. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.

 

SECTION 14. THE AGENT

 

14.1 Appointment, Powers and Immunities.

Each Secured Party irrevocably designates, appoints and authorizes Wachovia to act as Agent hereunder and under the other Financing Agreements with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Financing Agreements, together with such other powers as are reasonably incidental thereto. Agent (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Financing Agreements, and shall not by reason of this Agreement or any other Financing Agreement be a trustee or fiduciary for any Secured Party; (b) shall not be responsible to Secured Parties for any recitals, statements, representations or warranties contained in this Agreement or in any of the other Financing Agreements, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Financing Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Financing Agreement or any other document referred to or provided for herein or therein or for any failure by any Borrower or any Guarantor or any other Person to perform any of its obligations hereunder or thereunder; and (c) shall not be responsible to Secured Parties for any action taken or omitted to be taken by it hereunder or under any other Financing Agreement or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Agent may employ agents and attorneys in fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys in fact selected by it in good faith. Agent may deem and treat the payee of any note as the holder thereof for all purposes hereof unless and until the assignment thereof pursuant to an agreement (if and to the extent permitted herein) in form and substance satisfactory to Agent shall have been delivered to and acknowledged by Agent.

 

14.2 Reliance by Agent.

Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy or other electronic means) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent. As to any matters not expressly provided for by this Agreement or any other Financing Agreement, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders or all of Lenders as is required in such circumstance, and such instructions of such Agents and any action taken or failure to act pursuant thereto shall be binding on all Lenders.

 

14.3 Events of Default.

(a)  Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or an Event of Default or other failure of a condition precedent to the Loans and Letters of Credit hereunder, unless and until Agent has received written notice from a Lender, or a Borrower specifying such Event of Default or any unfulfilled condition precedent, and stating that such notice is a “Notice of Default or Failure of

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Condition”. In the event that Agent receives such a Notice of Default or Failure of Condition, Agent shall give prompt notice thereof to the Lenders. Agent shall (subject to Section 14.7) take such action with respect to any such Event of Default or failure of condition precedent as shall be directed by the Required Lenders to the extent provided for herein; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to or by reason of such Event of Default or failure of condition precedent, as it shall deem advisable in the best interest of Lenders. Without limiting the foregoing, and notwithstanding the existence or occurrence and continuance of an Event of Default or any other failure to satisfy any of the conditions precedent set forth in Section 4 of this Agreement to the contrary, unless and until otherwise directed by the Required Lenders, Agent may, but shall have no obligation to, continue to make Loans and an Issuing Bank may, but shall have no obligation to, issue or cause to be issued any Letter of Credit for the ratable account and risk of Lenders from time to time if Agent believes making such Loans or issuing or causing to be issued such Letter of Credit is in the best interests of Lenders.

(b) Except with the prior written consent of Agent, no Secured Party may assert or exercise any enforcement right or remedy in respect of the Loans, Letter of Credit Obligations or other Obligations, as against any Borrower or Guarantor or any of the Collateral or other property of any Borrower or Guarantor or otherwise under any of the Financing Agreements.

 

14.4 Wachovia in Its Individual Capacity.

With respect to its Commitment and the Loans made and Letters of Credit issued or caused to be issued by it (and any successor acting as Agent), so long as Wachovia shall be a Lender hereunder, it shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates, include Wachovia in its individual capacity as Lender hereunder. Wachovia (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of business with Borrowers (and any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and Wachovia and its Affiliates may accept fees and other consideration from any Borrower or Guarantor and any of its Subsidiaries and Affiliates for services in connection with this Agreement or otherwise without having to account for the same to Lenders.

 

14.5 Indemnification.

Lenders agree to indemnify Agent and each Issuing Bank (to the extent not reimbursed by Borrowers hereunder and without limiting any obligations of Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any and all claims of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Financing Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Agent is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents; provided, that, no Lender shall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the party to be indemnified as determined by a final non-appealable judgment of a court of competent jurisdiction. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.

 

14.6 Non-Reliance on Agent and Other Lenders.

(a)  Each Secured Party agrees that it has, independently and without reliance on Agent or any other Secured Party, and based on such documents and information as it has deemed appropriate, made its

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own credit analysis of Borrowers and Guarantors and has made its own decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Secured Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Financing Agreements. Agent shall not be required to keep itself informed as to the performance or observance by any Borrower or Guarantor of any term or provision of this Agreement or any of the other Financing Agreements or any other document referred to or provided for herein or therein or to inspect the properties or books of any Borrower or Guarantor. Agent will use reasonable efforts to provide Lenders with any information received by Agent from any Borrower or Guarantor which is required to be provided to Lenders or deemed to be requested by Lenders hereunder and with a copy of any Notice of Default or Failure of Condition received by Agent from any Borrower or any Lender; provided, that, Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent’s own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Except for notices, reports and other documents expressly required to be furnished to Lenders by Agent or deemed requested by Lenders hereunder (including the documents provided for in Section 14.10 hereof), Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of any Borrower or Guarantor that may come into the possession of Agent.

 

14.7 Failure to Act.

Except for action expressly required of Agent hereunder and under the other Financing Agreements, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Lenders of their indemnification obligations under Section 14.5 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.

 

14.8 Additional Loans.

Agent and Swing Line Lender (or Agent on behalf of Swing Line Lender) shall not make any Loans or an Issuing Bank provide any Letter of Credit to any Borrower on behalf of Lenders intentionally and with actual knowledge that such Loans or Letter of Credit would cause the aggregate amount of the total outstanding Loans and Letters of Credit to exceed the Borrowing Base, without the prior consent of all Lenders, except, that, Agent may make such additional Revolving Loans or an Issuing Bank may provide such additional Letter of Credit on behalf of Lenders, intentionally and with actual knowledge that such Revolving Loans or Letter of Credit will cause the total outstanding Revolving Loans, Swing Line Loans and Letters of Credit to exceed the Borrowing Base, as Agent may deem necessary or advisable in its discretion; provided, that: (a) the aggregate principal amount of the additional Revolving Loans or additional Letters of Credit that Agent may make or Issuing Bank provide after obtaining actual knowledge that the aggregate principal amount of the Loans equal or exceed the Borrowing Base shall not cause such additional Loans and Letters of Credit, plus the amount of Special Agent Advances made pursuant to Section 14.11(a)(ii) hereof then outstanding, to exceed the aggregate amount equal to ten (10%) percent of the then most current Borrowing Base available to Agent as of the date such additional Loans are made or Letters of Credit provided and shall not cause the total principal amount of the Loans and Letters of Credit to exceed the Maximum Credit and (b) no such additional Revolving Loan or Letter of Credit shall be outstanding more than ninety (90) days after the date such additional Revolving Loan or Letter of Credit is made or issued (as the case may be), except as the Required Lenders may otherwise agree. Each Lender shall be obligated to pay Agent the amount of its Pro Rata Share of any such additional Loans or Letters of Credit.

 

14.9 Concerning the Collateral and the Related Financing Agreements.

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(a)  Each Secured Party authorizes and directs Agent to enter into this Agreement and the other Financing Agreements. Each Secured Party agrees that any action taken by Agent or Required Lenders (or such greater percentage as may be required hereunder) in accordance with the terms of this Agreement or the other Financing Agreements and the exercise by Agent or Required Lenders (or such greater percentage as may be required hereunder) of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all Secured Parties.

(b) Without limiting the generality of the foregoing, each Secured Party authorizes Agent to enter into the Term Loan Intercreditor Agreement on behalf of such Secured Party and agrees that it will be bound by the terms of the Term Loan Intercreditor Agreement as if it were a direct signatory thereto, whether or not such Secured Party executes the Term Loan Intercreditor Agreement.

14.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders.

By signing this Agreement, each Lender:

(a)  is deemed to have requested that Agent furnish such Lender (and Agent agrees that it will furnish to such Lender), promptly after it becomes available, a copy of each field audit or examination report and Borrowing Base Certificate prepared or received by Agent (each field audit or examination report and Borrowing Base Certificate being referred to herein as a “Report” and collectively, “Reports”), appraisals with respect to the Collateral and financial statements with respect to Parent and its Subsidiaries received by Agent;

(b) expressly agrees and acknowledges that Agent (i) does not make any representation or warranty as to the accuracy of any Report, appraisal or financial statement or (ii) shall not be liable for any information contained in any Report, appraisal or financial statement;

(c)  expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or any other party performing any audit or examination will inspect only specific information regarding Borrowers and Guarantors and will rely significantly upon Borrowers’ and Guarantors’ books and records, as well as on representations of Borrowers’ and Guarantors’ personnel; and

(d) agrees to keep all Reports confidential and strictly for its internal use in accordance with the terms of Section 15.5 hereof, and not to distribute or use any Report in any other manner.

14.11 Collateral Matters.

(a)  Agent may, at its option, from time to time, at any time on or after an Event of Default and for so long as the same is continuing or upon any other failure of a condition precedent to the Loans and Letters of Credit hereunder, make such disbursements and advances (“Special Agent Advances”) which Agent, in its sole discretion, (i) deems necessary or desirable either to preserve or protect the Collateral or any portion thereof or (ii) to enhance the likelihood or maximize the amount of repayment by Borrowers and Guarantors of the Loans and other Obligations, provided, that, (A) the aggregate principal amount of the Special Agent Advances pursuant to clause (i) of this subsection (a), plus the Special Agent Advances pursuant to this clause (ii) of this subsection (a), outstanding at any time, plus the then outstanding principal amount of the additional Loans and Letters of Credit which Agent may make or provide as set forth in Section 14.8 hereof, shall not exceed the aggregate amount equal to ten (10%) percent of the then most current Borrowing Base available to Agent as of the date such Special Agent Advances are made and (B)the aggregate principal amount of the Special Agent Advances pursuant to clause (i) of this subsection (a), plus the Special Agent Advances pursuant to this clause (ii) of subsection (a), outstanding at any time, plus the then outstanding principal amount of the Loans and the Letter of Credit Obligations, shall not exceed the

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Maximum Credit, and (C) no such Special Agent Advances under clause (i) or clause (ii) of this subsection (a) shall be outstanding more than ninety (90) days after the date such Special Agent Advance is made, except as the Required Lenders may otherwise agree or (iii) to pay any other amount chargeable to any Borrower or Guarantor pursuant to the terms of this Agreement or any of the other Financing Agreements consisting of (A) costs, fees and expenses and (B) payments to Issuing Bank in respect of any Letter of Credit Obligations. The Special Agent Advances shall be repayable on demand and together with all interest thereon shall constitute Obligations secured by the Collateral. Special Agent Advances shall not constitute Loans but shall otherwise constitute Obligations hereunder. Interest on Special Agent Advances shall be payable at the Interest Rate then applicable to Base Rate Loans and shall be payable on demand. Without limitation of its obligations pursuant to Section 6.13, each Lender agrees that it shall make available to Agent, upon Agent’s demand, in immediately available funds, the amount equal to such Lender’s Pro Rata Share of each such Special Agent Advance. If such funds are not made available to Agent by such Lender, such Lender shall be deemed a Defaulting Lender and Agent shall be entitled to recover such funds, on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m on that day by each of the three leading brokers of Federal funds transactions in New York selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Base Rate Loans.

(b) Lenders hereby irrevocably authorize Agent, at its option and in its discretion to release any security interest in, mortgage or lien upon, any of the Collateral (i) upon termination of the Commitments and payment and satisfaction of all of the Obligations and delivery of cash collateral to the extent required under Section 15.1 below, or (ii) constituting property being sold or disposed of if Borrower Agent or any Borrower or Guarantor certifies to Agent that the sale or disposition is made in compliance with Section 10.1 hereof (and Agent may rely conclusively on any such certificate, without further inquiry), or (iii) constituting property in which any Borrower or Guarantor did not own an interest at the time the security interest, mortgage or lien was granted or at any time thereafter, or (iv) having a value in the aggregate in any twelve (12) month period of less than $10,000,000, and to the extent Agent may release its security interest in and lien upon any such Collateral pursuant to the sale or other disposition thereof, such sale or other disposition shall be deemed consented to by Lenders, or (v) if required or permitted under the terms of any of the other Financing Agreements, including any intercreditor agreement, or (vi) subject to Section 13.3, if the release is approved, authorized or ratified in writing by the Required Lenders. Except as provided above, Agent will not release any security interest in, mortgage or lien upon, any of the Collateral without the prior written authorization of all of Lenders. Upon request by Agent at any time, Lenders will promptly confirm in writing Agent’s authority to release particular types or items of Collateral pursuant to this Section. In no event shall the consent or approval of an Issuing Bank to any release of Collateral be required. Nothing contained herein shall be construed to require the consent of any Bank Product Provider to any release of any Collateral or termination of security interests in any Collateral.

(c)  Without any manner limiting Agent’s authority to act without any specific or further authorization or consent by the Required Lenders, each Lender agrees to confirm in writing, upon request by Agent, the authority to release Collateral conferred upon Agent under this Section. Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the security interest, mortgage or liens granted to Agent upon any Collateral to the extent set forth above; provided, that, (i) Agent shall not be required to execute any such document on terms which, in Agent’s opinion, would expose Agent to liability or create any obligations or entail any consequence other than the release of such security interest, mortgage or liens without recourse or warranty and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any security interest, mortgage or lien

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upon (or obligations of any Borrower or Guarantor in respect of) the Collateral retained by such Borrower or Guarantor.

(d) Agent shall have no obligation whatsoever to any Secured Party or any other Person to investigate, confirm or assure that the Collateral exists or is owned by any Borrower or Guarantor or is cared for, protected or insured or has been encumbered, or that any particular items of Collateral meet the eligibility criteria applicable in respect of the Loans or Letters of Credit hereunder, or whether any particular reserves are appropriate, or that the liens and security interests granted to Agent pursuant hereto or any of the Financing Agreements or otherwise have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Financing Agreements, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, subject to the other terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its discretion, given Agent’s own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any other Lender or Issuing Bank.

14.12 Agency for Perfection.

Each Secured Party hereby appoints Agent and each other Secured Party as agent and bailee for the purpose of perfecting the security interests in and liens upon the Collateral of Agent in assets which, in accordance with Article 9 of the UCC can be perfected only by possession (or where the security interest of a secured party with possession has priority over the security interest of another secured party) and Agent and each Secured Party hereby acknowledges that it holds possession of any such Collateral for the benefit of Agent as secured party. Should any Secured Party obtain possession of any such Collateral, such Secured Party shall notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver such Collateral to Agent or in accordance with Agent’s instructions.

14.13 Agent May File Proofs of Claim.

(a)  In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Borrower or Guarantor, Agent (irrespective of whether the principal of any Loan or Letter of Credit Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Agent shall have made any demand on the Borrowers) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(i)      to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Letter of Credit Obligations and all other Obligations (other than obligations under Bank Products to which Agent is not a party) that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of Lenders, Issuing Bank and Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders, Issuing Bank and Agent and their respective agents and counsel and all other amounts due Lenders, Issuing Bank and Agent allowed in such judicial proceeding; and

(ii)     to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and Issuing Bank to make such payments to Agent and, in the event that Agent shall consent to the making of such payments directly to Lenders and Issuing Bank, to pay to Agent any amount due for the reasonable compensation,

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expenses, disbursements and advances of Agent and its agents and counsel, and any other amounts due Agent.

(b) Nothing contained herein shall be deemed to authorize Agent to authorize or consent to or accept or adopt on behalf of any Lender or Issuing Bank any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize Agent to vote in respect of the claim of any Lender in any such proceeding.

14.14 Successor Agent.

Agent may resign as Agent upon thirty (30) days’ notice to Lenders and Parent. If Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for Lenders. If no successor agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with Lenders and Parent, a successor agent from among Lenders. Upon the acceptance by the Lender so selected of its appointment as successor agent hereunder, such successor agent shall succeed to all of the rights, powers and duties of the retiring Agent and the term “Agent” as used herein and in the other Financing Agreements shall mean such successor agent and the retiring Agent’s appointment, powers and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 14 shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is thirty (30) days after the date of a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nonetheless thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

14.15 Legal Representation of Agent.

In connection with the negotiation, drafting, and execution of this Agreement and the other Financing Agreements, or in connection with future legal representation relating to loan administration, amendments, modifications, waivers, or enforcement of remedies, Otterbourg, Steindler, Houston & Rosen, P.C. has only represented and shall only represent Wachovia in its capacity as Issuing Bank, Agent and as a Lender. Each other Lender hereby acknowledges that such firm does not represent it in connection with any such matters.

14.16 Other Agent Designations.

Agent may at any time and from time to time determine that a Lender may, in addition, be a “Co-Agent”, “Syndication Agent”, “Documentation Agent” or similar designation hereunder and enter into an agreement with such Lender to have it so identified for purposes of this Agreement. Any such designation shall be effective upon written notice by Agent to Borrower Agent of any such designation. Any Lender that is so designated as a Co-Agent, Syndication Agent, Documentation Agent or such similar designation by Agent shall have no right, power, obligation, liability, responsibility or duty under this Agreement or any of the other Financing Agreements other than those applicable to all Lenders as such. Without limiting the foregoing, the Lenders so identified shall not have or be deemed to have any fiduciary relationship with any Lender and no Lender shall be deemed to have relied, nor shall any Lender rely, on a Lender so identified as a Co-Agent, Syndication Agent, Documentation Agent or such similar designation in deciding to enter into this Agreement or in taking or not taking action hereunder.

 

SECTION 15. TERM OF AGREEMENT; MISCELLANEOUS

 

15.1 Term.

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(a)  This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on the Maturity Date, unless sooner terminated pursuant to the terms hereof. In addition, Borrowers may terminate this Agreement at any time upon ten (10) Business Days’ prior written notice to Agent (which notice shall be irrevocable) and Agent may, at its option, and shall at the direction of Required Lenders, terminate this Agreement at any time an Event of Default exists or has occurred and is continuing. Upon the Maturity Date or any other effective date of termination of the Financing Agreements, Borrowers shall pay to Agent all outstanding and unpaid Obligations and shall furnish cash collateral to Agent (or at Agent’s option, a letter of credit issued for the account of Borrowers and at Borrowers’ expense, in form and substance satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as beneficiary) in such amounts as Agent determines are reasonably necessary to secure Agent and Lenders from loss, cost, damage or expense, including attorneys’ fees and expenses, in connection with any contingent Obligations, including issued and outstanding Letter of Credit Obligations and checks or other payments provisionally credited to the Obligations and/or as to which Agent or any Lender has not yet received final and indefeasible payment (and including any contingent liability of Agent to any bank at which deposit accounts of Borrowers and Guarantors are maintained under any Deposit Account Control Agreement) and for any of the Obligations arising under or in connection with any Bank Products in such amounts as the party providing such Bank Products may require (unless such Obligations arising under or in connection with any Bank Products are paid in full in cash and terminated in a manner satisfactory to such other party). The amount of such cash collateral (or letter of credit, as Agent may determine) as to any Letter of Credit Obligations shall be in the amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Obligations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of the then outstanding Letters of Credit. Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in Federal funds to the Agent Payment Account or such other bank account of Agent, as Agent may, in its discretion, designate in writing to Borrower Agent for such purpose. Interest shall be due until and including the next Business Day, if the amounts so paid by Borrowers to the Agent Payment Account or other bank account designated by Agent are received in such bank account later than 2:00 p.m. The cash collateral in respect of Letter of Credit Obligations received by Agent as provided above then in possession of Agent (and not applied or to be applied to any of the Letter of Credit Obligations) shall be returned to Borrower Agent, upon its written request, within ten (10) Business Days after the end of the latest expiration date of the Letters of Credit giving rise to such Letter of Credit Obligations (so long as Agent has received evidence satisfactory to it and the Issuing Bank that no unpaid draw has been made under the Letters of Credit prior to its expiration).

(b) No termination of the Commitments, this Agreement or any of the other Financing Agreements shall relieve or discharge any Borrower or Guarantor of its respective duties, obligations and covenants under this Agreement or any of the other Financing Agreements until all Obligations have been fully and finally discharged and paid, and Agent’s continuing security interest in the Collateral and the rights and remedies of Agent and Lenders hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finally discharged and paid, other than the contingent Obligations for which Agent has received cash collateral, or at its option, a letter of credit, in accordance with Section 15.1(a) above. Accordingly, each Borrower and Guarantor waives any rights it may have under the UCC to demand the filing of termination statements with respect to the Collateral and Agent shall not be required to send such termination statements to Borrowers or Guarantors, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations paid and satisfied in full in immediately available funds, other than the contingent Obligations for which Agent has received cash collateral, or at its option, a letter of credit, in accordance with Section 15.1(a) above.

 

15.2 Interpretative Provisions.

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(a)  All terms used herein which are defined in Article 1, Article 8 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement.

(b) All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires.

(c)  All references to any Borrower, Guarantor, Agent and Lenders pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns.

(d) The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(e)  The word “including” when used in this Agreement shall mean “including, without limitation” and the word “will” when used in this Agreement shall be construed to have the same meaning and effect as the word “shall”.

(f)  An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 13.3 or is cured. Reference herein to a Default or Event of Default that “exists” shall only include a Default or Event of Default, as the case may be, that has not been cured or waived in accordance with the terms hereof, so that such Default or Event of Default, as the case may be, shall cease to exist and shall not be deemed to be continuing if it has been so cured or waived.

(g) All references to the term “good faith” used herein when applicable to Agent or any Lender shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty-in-fact in the conduct or transaction concerned and observance of reasonable commercial standards of fair dealing based on how an asset-based lender with similar rights providing a credit facility of the type set forth herein would act in similar circumstances at the time with the information then available to it. All references to the term “reasonably” or “reasonable” as applied to any conduct or determination by Agent shall be based on how an asset-based lender with similar rights providing a credit facility of the type set forth herein would act in similar circumstances.

(h) Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP applied on a basis consistent with the most recent audited consolidated financial statements of Parent delivered to the Lenders; provided, that, in the event of any change in GAAP after the date hereof that affects the covenants in Section 11 hereof, Borrower Agent may by notice to Agent, or Agent may, and at the request of Required Lenders shall, by notice to Borrower Agent require that such covenants be calculated in accordance with GAAP as in effect, and as applied by Parent and its Subsidiaries, immediately before the applicable change in GAAP became effective, until either the notice from the applicable party is withdrawn or such covenant is amended in a manner satisfactory to Parent, Agent and the Required Lenders. Parent shall deliver to Agent and upon Agent’s request, to each Lender at the same time as the delivery of any financial statements given in accordance with the provisions of Section 9.6 hereof (i) a description in reasonable detail of any material change in the application of accounting principles employed in the preparation of such financial statements from those applied in the most recently preceding monthly, quarterly or annual financial statements and (ii) a reasonable estimate of the effect on the financial statements on account of such changes in application. Notwithstanding the above, all calculations of the financial covenants in Section 11 shall be made on a Pro Forma Basis.

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(i)  Unless otherwise indicated herein, all references to time of day refer to Eastern Standard Time or Eastern daylight saving time, as in effect in New York City on such day. For purposes of the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to and including”; provided, that, with respect to a computation of fees or interest payable to Agent or any Lender, such period shall in any event consist of at least one full day.

(j)  Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation.

(k) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

(l)  This Agreement and other Financing Agreements may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.

(m)This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Agent and the other parties, and are the products of all parties. Accordingly, this Agreement and the other Financing Agreements shall not be construed against Agent or Lenders merely because of Agent’s or any Lender’s involvement in their preparation.

 

15.3 Notices.

(a)  All notices, requests and demands hereunder shall be in writing and deemed to have been given or made: if delivered in person, immediately upon delivery; if by facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing. Notices delivered through electronic communications shall be effective to the extent set forth in Section 15.3(b) below. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section):

If to any Borrower or Guarantor:	CPG International Inc. 801 Corey Street Scranton, Pennsylvania 18505 Attention: Scott Harrison Telephone No.: (570) 558-8000 Telecopy No. (570) 558-8201
with a copy to:	Fried, Frank, Harris, Shriver & Jacobson LLP One New York Plaza New York, New York 10004 Attention: Emil Buchman, Esq. Telephone No.: (212) 859-8298 Telecopy No. (212) 859-4000

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If to Agent or Issuing Bank: Wachovia Bank, National Association 301 S. College Street – NC0479 Charlotte, North Carolina 28202 Philadelphia, Pennsylvania 19107 Attention: Portfolio Manager Telephone No. (704) 383-1893 Telecopy No. (704) 374-2703

(b) Notices and other communications to Lenders and an Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Agent or as otherwise determined by Agent; provided, that, the foregoing shall not apply to notices to any Lender or Issuing Bank pursuant to Section 2 hereof if such Lender or Issuing Bank, as applicable, has notified Agent that it is incapable of receiving notices under such Section by electronic communication. Unless Agent otherwise requires, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided, that, if such notice or other communication is not given during the normal business hours of the recipient, such notice shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communications is available and identifying the website address therefor. In no event shall Agent or any of its officers, directors, agents, employees, advisors and counsel and their respective Affiliates have any liability to Borrowers, Guarantors, any Lender, the Issuing Bank or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrowers’ or Agent’s transmission of materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Person; provided, that, in no event shall Agent or any of its officers, directors, agents, employees, advisors and counsel and their respective Affiliates have any liability to Borrowers, Guarantors, any Lender, the Issuing Bank or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

 

15.4 Partial Invalidity.

If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

 

15.5 Confidentiality.

(a)  Each Agent, Lenders and Issuing Bank agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors, trustees and representatives and to any pledgee referred to in Section 15.7 hereof and to any direct or indirect contractual counterparty (or such contractual counterparty’s professional advisor) or other party under or in connection with any Bank

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Product (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), or otherwise in accordance with its compliance with applicable regulations, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party hereto, (v) in connection with the exercise of any remedies hereunder or under any of the other Financing Agreements or any action or proceeding relating to this Agreement or any of the other Financing Agreements or applicable law or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction or any other party in connection with any Bank Product, (vii) with the consent of Borrower Agent, or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to Agent, any Lender, the Issuing Bank or any of their respective Affiliates on a nonconfidential basis from a source other than Borrower Agent.

(b) For purposes of this Section, “Information” means all information received from a Borrower or Guarantor or any Subsidiary relating to Borrowers, Guarantors or any Subsidiary or any of their respective businesses, other than any such information that is available to Agent, any Lender or the Issuing Bank on a nonconfidential basis prior to disclosure by such Borrower or Guarantor or any Subsidiary, provided that, in the case of information received from a Borrower, Guarantor or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

(c)  Each of Agent, the Lenders and the Issuing Bank acknowledges that (i) the Information may include material non-public information concerning a Borrower or a Subsidiary, as the case may be, (ii) it has developed compliance procedures regarding the use of material non-public information and (iii) it will handle such material non-public information in accordance with applicable laws and regulations, including Federal and state securities laws. The obligations of Agent, Lenders and Issuing Bank under this Section 15.5 shall supersede and replace the obligations of Agent, Lenders and Issuing Bank under any confidentiality letter signed prior to the date hereof or any other arrangements concerning the confidentiality of information provided by any Borrower or Guarantor to Agent or any Lender.

(d) Agent, Syndication Agent and Documentation Agent may share with their respective Affiliates any information relating to the Credit Facility and Parent and its Subsidiaries. Agent and Syndication Agent may disclose information relating to the Credit Facility to Gold Sheets and other publications with such information to consist of deal terms and other information customarily found in such publications. In addition, Agent and Syndication Agent may otherwise use the corporate names and logos of Borrowers and Guarantors and such information in “tombstones” or other advertisements, public statements or other marketing materials, and in connection with obtaining a published CUSIP from the Standard & Poor’s CUSIP Service Bureau.

 

15.6 Successors.

This Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable by Agent, Secured Parties, Borrowers, Guarantors and their respective successors and assigns, except that no Borrower may assign its rights under this Agreement, the other Financing Agreements and any other document referred to herein or therein

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without the prior written consent of Agent and Lenders. Any such purported assignment without such express prior written consent shall be void. No Secured Party may assign its rights and obligations under this Agreement without the prior written consent of Agent, except as provided in Section 15.7 below. The terms and provisions of this Agreement and the other Financing Agreements are for the purpose of defining the relative rights and obligations of Borrowers, Guarantors, Agent and Secured Parties with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or any of the other Financing Agreements.

 

15.7 Assignments; Participations.

(a)  Each Lender may assign all or, if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Lender, of such rights and obligations under this Agreement to one or more Eligible Transferees (but not including for this purpose any assignments in the form of a participation), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Acceptance; provided, that, (i) such transfer or assignment will not be effective without the prior written consent of Agent, which consent shall not be unreasonably withheld, conditioned or delayed, provided, that, the consent of Agent shall not be required in connection with an assignment to another Lender, to any Affiliate of a Lender, or to any Approved Fund, (ii) so long as no Event of Default has occurred and is continuing, such transfer or assignment will not be effective without the prior written consent of Borrower Agent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, that, the consent of Borrower Agent shall not be required in connection with an assignment to another Lender, to any Affiliate of a Lender, or to any Approved Fund or prior to the completion of the primary syndication as determined by Agent, (iii) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned, (iv) such transfer or assignment will not be effective until recorded by Agent on the Register, and (v) Agent shall have received for its sole account payment of a processing fee from the assigning Lender or the assignee in the amount of $3,500.

(b) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and to the other Financing Agreements and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations (including, without limitation, the obligation to participate in Letter of Credit Obligations) of a Lender hereunder and thereunder and the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement.

(c)  By execution and delivery of an Assignment and Acceptance, the assignor and assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Financing Agreements or the execution, legality, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Financing Agreements furnished pursuant hereto, (ii) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower, Guarantor or any of their Subsidiaries or the performance or observance by any Borrower or Guarantor of any of the Obligations; (iii) such assignee confirms that it has received a copy of this Agreement and the other Financing Agreements, together with such other documents and information it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (iv) such assignee will, independently and without reliance upon the assigning Lender, Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and

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the other Financing Agreements, (v) such assignee appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Financing Agreements as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Financing Agreements are required to be performed by it as a Lender. Agent and Lenders may furnish any information concerning any Borrower or Guarantor in the possession of Agent or any Lender from time to time to assignees and Participants.

(d) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Financing Agreements (including, without limitation, all or a portion of its Commitments and the Loans owing to it and its participation in the Letter of Credit Obligations, without the consent of Agent or the other Lenders); provided, that, (i) such Lender’s obligations under this Agreement (including, without limitation, its Commitment hereunder) and the other Financing Agreements shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and Borrowers, Guarantors, the other Lenders and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Financing Agreements, (iii) the Participant shall not have any rights under this Agreement or any of the other Financing Agreements (the Participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by any Borrower or Guarantor hereunder shall be determined as if such Lender had not sold such participation, (iv) each Lender shall retain the sole right to vote, approve or consent, or to not approve or not consent, to or in connection with any amendment, waiver or other modifications of any of the terms and provisions hereof or of any of the other Financing Agreements or to otherwise act or refrain from acting hereunder or thereunder within its exclusive discretion and without any vote, approval or consent of any Participant, other than for the forgiveness of principal, interest or fees, reductions in the interest rate or fees payable with respect to any Loan or Commitment in which such Participant has an interest, the extension of the Maturity Date for a Loan or Commitment in which such Participant has an interest, or any date fixed for any regularly scheduled payment of principal, interest or fees in such Loan or Commitment, or the release of a Borrower or Guarantor or all or substantially all of the Collateral and in the case of any Participant that may be an Affiliate of a Borrower or Guarantor, (A) no such Participant shall have any of the rights to vote, approve or consent to any amendment, waiver or modification hereof or of any of the other Financing Agreements or the right to vote, approve or consent to any vote, approval of consent or other action or refraining from action of the Lender in whose Loans and Commitments such Participant has an interest, and (B) such Participant shall not, and shall not have the right to, attend any meeting (whether conducted by telephone or in person) with any Agent or Lender or receive any information from Agent or any Lender in connection with the Credit Facility.

(e)  Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans hereunder to a Federal Reserve Bank or other Federal banking authority or institution in support of borrowings made by such Lenders from such Federal Reserve Bank or other such banking authority or institution; provided, that, no such pledge shall release such Lender from any of its obligations hereunder or substitute any such pledgee for such Lender as a party hereto.

(f)  Any Lender that is an Issuing Bank may at any time assign all of its Commitments pursuant to this Section 15.7. If such Issuing Bank ceases to be Lender, it may, at its option, resign as Issuing Bank and such Issuing Bank’s obligations to issue Letters of Credit shall terminate but it shall retain all of the rights and obligations of Issuing Bank hereunder with respect to Letters of Credit outstanding as of the effective date of its resignation and all Letter of Credit Obligations with respect thereto (including the right to require Lenders to make Revolving Loans or fund risk participations in outstanding Letter of Credit Obligations), shall continue.

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(g) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to Agent and Borrower Agent (an “SPC”) the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof or, if it fails to do so, to make such payment to Agent as are required hereunder. Each party hereto hereby agrees that (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of any Borrower or Guarantor under this Agreement or otherwise, (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder. The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the laws of the United States or any State thereof. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of Borrower Agent and Agent and with the payment of a processing fee in the amount of $3,500, assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.

 

15.8 Entire Agreement.

This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern.

 

15.9 USA Patriot Act.

Each Lender subject to the USA PATRIOT Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001) (the “Act”) hereby notifies Borrowers and Guarantors that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies each person or corporation who opens an account and/or enters into a business relationship with it, which information includes the name and address of Borrowers and Guarantors and other information that will allow such Lender to identify such person in accordance with the Act and any other applicable law. Borrowers and Guarantors are hereby advised that any Loans or Letters of Credit hereunder are subject to satisfactory results of such verification.

15.10 No Advisory or Fiduciary Responsibility.

In connection with all aspects of each transaction contemplated hereby, Borrowers and Guarantors each acknowledge and agree, and acknowledge their respective Affiliates’ understanding, that: (a) the Credit Facility provided for hereunder and any related arranging or other services in connection therewith

134

(including in connection with any amendment, waiver or other modification hereof or of any of the other Financing Agreements) are an arm’s-length commercial transaction between Borrowers and Guarantors and their respective Subsidiaries, on the one hand, and Agent and Arranger, on the other hand, and each of Borrowers and Guarantors is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Financing Agreements (including any amendment, waiver or other modification hereof or thereof); (b) in connection with the process leading to such transaction, Agent and Arranger is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for any Borrower or Guarantor or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (c) neither Agent nor Arranger has assumed or will assume an advisory, agency or fiduciary responsibility in favor of any Borrower or Guarantors or any of their respective Affiliates with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any of the other Financing Agreements (irrespective of whether Agent or Arranger has advised or is currently advising any Borrower or Guarantor or any of their respective Affiliates on other matters) and neither Agent nor Arranger has any obligation to any Borrower or Guarantor or any of their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Financing Agreements; (d) Agent and the Arranger and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of Borrowers and Guarantors and their respective Affiliates, and neither Agent nor Arranger has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (e) Agent and the Arranger have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any of the other Financing Agreements) and each Borrower and Guarantor has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. Each Borrower and Guarantor hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against Agent and the Arranger with respect to any breach or alleged breach of agency or fiduciary duty.

15.11 Counterparts, Etc.

This Agreement or any of the other Financing Agreements may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement or any of the other Financing Agreements by telefacsimile or other electronic method of transmission shall have the same force and effect as the delivery of an original executed counterpart of this Agreement or any of such other Financing Agreements. Any party delivering an executed counterpart of any such agreement by telefacsimile or other electronic method of transmission shall in a timely manner also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of such agreement.

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IN WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have caused these presents to be duly executed as of the day and year first above written.

BORROWERS:

	SCRANTON PRODUCTS INC.
	/s/ SCOTT HARRISON
By:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

	AZEK BUILDING PRODUCTS, INC.
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President

	PROCELL DECKING INC.
	/s/ SCOTT HARRISON
By:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

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953600.10 [Loan and Security Agreement]

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GUARANTORS:

	CPG INTERNATIONAL I INC.
	/s/ SCOTT HARRISON
By:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

	CPG INTERNATIONAL INC.
	/s/ SCOTT HARRISON
By:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

	VYCOM CORP.
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President

	SANTANA PRODUCTS INC.
	/s/ SCOTT HARRISON
By:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

	CPG SUB I CORPORATION
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President

	SANATEC SUB I CORPORATION
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President

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953600.10 [Loan and Security Agreement]

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	AGENTS AND LENDERS:
	WACHOVIA BANK, NATIONAL
	ASSOCIATION, as Agent, Issuing Bank and as Lender
By:	ANWAR S. YOUNG
	Anwar S. Young
	Vice President

	GENERAL ELECTRIC CAPITAL, as Agent CORPORATION
	/s/ PAMELA ESKRA
By:	Pamela Eskra
Title:

953600.10

EX-10

Exhibit 10.14

AMENDMENT NO. 1 TO

LOAN AND SECURITY AGREEMENT

AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT, dated as of February 29, 2008 (this “Amendment No. 1”), is by and among Wachovia Bank, National Association, a national banking association, in its capacity as agent for the Lenders (as hereinafter defined) pursuant to the Loan and Security Agreement defined below (in such capacity, “Agent”), the parties to the Loan Agreement as lenders (individually, each a “Lender” and collectively, “Lenders”), Scranton Products, Inc., a Delaware corporation (“Scranton”), AZEK Building Products, Inc., a Delaware corporation (“AZEK”), Procell Decking Inc., a Delaware corporation (“Procell”, and together with Scranton and AZEK, each individually a “Borrower” and collectively, “Borrowers”), CPG International Inc., a Delaware corporation (“Parent”), CPG International I Inc., a Delaware corporation (“CPG I”) Santana Products Inc., a Delaware corporation (“Santana”), CPG Sub I Corporation, a Delaware Corporation (“Sub I”), Vycom Corp., a Delaware corporation (“Vycom”) and Sanatec Sub I Corporation, a Delaware corporation (“Sanatec”, and together with Parent, CPG I, Santana, Sub I, Vycom, each individually a “Guarantor” and collectively “Guarantors”).

WITNESSETH :

WHEREAS, Agent, Lenders, Borrowers and Guarantors have entered into financing arrangements pursuant to which Lenders (or Agents on behalf of Lenders) may make loans and advances and provide other financial accommodations to Borrowers as set forth in the Loan and Security Agreement, dated February 13, 2008, by and among Agent, Lenders, Borrowers and Guarantors (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and other agreements, documents and instruments referred to therein or at any time executed or delivered in connection therewith or related thereto, including, without limitation, this Amendment No. 1 (all of the foregoing, including the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”);

WHEREAS, Borrowers have requested that Agent and Lenders agree to make certain amendments to the Loan Agreement, and Agents and Lenders are willing to make such amendments, subject to the terms and conditions set forth herein; and

WHEREAS, by this Amendment No. 1, Agent, Lenders, Borrowers and Guarantors intend to evidence such amendments;

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements and covenants contained herein, the parties hereto agree as follows:

1. Definitions.

(a)   Additional Definition. As used herein or in the Financing Agreements, the term “Amendment No. 1” shall mean Amendment No. 1 to Loan Agreement, dated as of

February 29, 2008 by and among Borrowers, Guarantors, Agents and Lenders, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, and the Loan Agreement and the other Financing Agreements shall be deemed and are hereby amended to include, in addition and not in limitation, such definition.

(b)   Interpretation. For purposes of this Amendment No. 1, all terms used herein which are not otherwise defined herein, including but not limited to, those terms used in the recitals hereto, shall have the respective meanings assigned thereto in the Loan Agreement as amended by this Amendment No. 1.

(c)   Permitted Liens. The definition of “Permitted Liens” in Section 1.118(n) of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting the following therefor:

“(n) the liens of the Term Loan Agent for itself and the benefit of the Secured Parties (as defined in the Term Loan Agreement), securing the Obligations of the Term Loans pursuant to the Term Loan Agreement (as in effect on February 29, 2008), subject to and in accordance with the Intercreditor Agreement (as in effect on February 29, 2008);”

(d)   Term Loan Agreement. The definition of “Term Loan Agreement” in Section 1.161 of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting the following therefor:

““Term Loan Agreement” shall mean the Term Loan and Security Agreement, dated February 29, 2008, by and among Borrowers, Guarantors, Term Loan Agent and Term Loan Lenders, as the same now exists or may thereafter be amended, modified, supplemented, extended, renewed, restated or replaced.”

(e)   Term Loan Intercreditor Agreement. The definition of “Term Loan Intercreditor Agreement” in Section 1.162 of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting the following therefor:

““Term Loan Intercreditor Agreement” shall mean the ABL/Term Loan Intercreditor Agreement, dated February 29, 2008, by and among Borrowers, Guarantors, Agent, Term Loan Agent and Wachovia in its capacity as control agent for the Agent and the Term Loan Agent.”

2.     Grant and Perfection of Security Interest. Section 5 of the Loan Agreement is hereby amended by inserting the following immediately after Section 5.3 of such Section:

“5.4 Intercreditor Provisions.

Notwithstanding anything herein to the contrary, the lien and security interest granted to Agent pursuant to this Agreement and the exercise of any right or remedy by Agent hereunder are subject to the provisions of the Intercreditor Agreement, as the same may be amended, supplemented, modified or replaced from time to time. In the event of any conflict between the terms of the

2

Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern.”

3.     Certain Payments of Indebtedness, Etc. Section 10.9(a) of the Loan Agreement is hereby amended by deleting such definition up to but not including clause “(i)” thereof and substituting the following therefor:

“(a) any Borrower or Guarantor may make regularly scheduled payments of principal and interest in respect of Indebtedness evidenced by the Senior Fixed Rate Notes, the Senior Floating Rate Notes and regularly scheduled payments of principal and interest and mandatory prepayments (to the extent such mandatory prepayments are permitted under the Term Loan Intercreditor Agreement) in respect of the Term Loans and in addition, may make prepayments of, or redemptions of, principal in respect thereof; provided, that, as to any such prepayment or redemption, each of the following conditions is satisfied:”

4.     Term of Agreement; Miscellaneous. Section 14 of the Loan Agreement is hereby amended by inserting the following immediately after Section 14.16 of such Section:

“14.17 Intercreditor Agreement.

Each Lender and Agent acknowledge and agree that (i) the rights and remedies of Agent and the Lenders hereunder and under the other Financing Agreements are subject to the Intercreditor Agreement and (ii) in the event of a conflict the provisions of the Interecreditor Agreement shall control.”

5.     Remedies. Sections 12.2(b)(i) and 12.2(b)(ii) of the Loan Agreement are hereby amended by deleting such definitions in their entirety and substituting the following therefor:

“(i) upon notice to Borrower Agent, accelerate the payment of all Obligations and demand immediate payment thereof to Agent for itself and the benefit of Lenders (provided, that, upon the occurrence of any Event of Default described in Sections 12.1(f) and 12.1(g), all Obligations shall automatically become immediately due and payable), and (ii) terminate the Commitments whereupon the obligation of each Lender to make any Loan and an Issuing Bank to issue any Letter of Credit shall immediately terminate (provided, that, upon the occurrence of any Event of Default described in Sections 12.1(f) and 12.1(g), the Commitments and any other obligation of the Agent or a Lender or Issuing Bank hereunder shall automatically terminate).”

6.     Representations, Warranties and Covenants. Each Borrower and Guarantor, jointly and severally, represents and warrants to Agents and Lenders as follows, which representations and warranties are continuing and shall survive the execution and delivery hereof, the truth and accuracy which are a continuing condition of the making or providing of any Loans to Borrowers:

(a)   this Amendment No. 1 has been duly authorized, executed and delivered by all necessary action of each Borrower and Guarantor, and is in full force and effect, and the

3

agreements and obligations of each Borrower and Guarantor contained herein constitute legal, valid and binding obligations of Borrowers and Guarantors enforceable against Borrowers and Guarantors in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar law limiting creditors’ rights generally and by general equitable principles;

(b)   no action of, or filing with, or consent of any Governmental Authority, and no approval or consent of any other Person, is or will be required to authorize, or is or will be otherwise required in connection with, the execution, delivery and performance by any Borrower or Guarantor of this Amendment No. 1; and

(c)   on the date hereof, no Default or Event of Default exists or has occurred and is continuing.

7.     Conditions Precedent. The amendments contained herein shall only be effective upon the satisfaction of each of the following conditions precedent in a manner satisfactory to Agent:

(a)   Agent shall have received counterparts of this Amendment No. 1, duly authorized, executed and delivered by Borrowers, Guarantors and Lenders; and

(b) no Default or Event of Default shall exist or have occurred and be continuing.

8. General.

(a)   Effect of this Amendment. Except as expressly provided herein, no other changes or modifications to the Financing Agreements are intended or implied, and in all other respects the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. To the extent any conflict exists between the terms of this Amendment No. 1 and the other Financing Agreements, the terms of this Amendment No. 1 shall control.

(b)   Governing Law. The validity, interpretation and enforcement of this Amendment No. 1 and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

(c)   Jury Trial Waiver. BORROWERS, GUARANTORS, AGENTS AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AMENDMENT NO. 1 OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AMENDMENT NO. 1 OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS, GUARANTORS, AGENTS AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH

4

CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR, ANY AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AMENDMENT NO. 1 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(d)   Binding Effect. This Amendment No. 1 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

(e)   Waiver, Modification, Etc. No provision or term hereof may be modified, altered, waived, discharged or terminated orally, but only by an instrument in writing executed by the party against whom such modification, alteration, waiver, discharge or termination is sought to be enforced.

(f)    Further Assurances. Borrowers and Guarantors shall execute and deliver such additional documents and take such additional action as may be reasonably requested by Agent to effectuate the provisions and purposes of this Amendment No. 1.

(g)   Entire Agreement. This Amendment No. 1 represents the entire agreement and understanding concerning the subject matter hereof among the parties hereto, and supersedes all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written.

(h)   Counterparts, etc. This Amendment No. 1 may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Amendment No. 1 by telefacsimile or other electronic method of transmission shall have the same force and effect as delivery of an original executed counterpart of this Amendment No. 1. Any party delivering an executed counterpart of this Amendment No. 1 by telefacsimile or other electronic method of transmission shall also deliver an original executed counterpart of this Amendment No. 1, but the failure to do so shall not affect the validity, enforceability, and binding effect of this Amendment No. 1.

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Please indicate Borrowers' agreement to the terms of this Amendment No. 1 by countersigning it in the space provided below and returning it to Agent.

Very truly yours,

Agent:

	WACHOVIA BANK, NATOINAL ASSOCIATION
	/s/ ANWAR S. YOUNG
By:	Anwar S. Young
Title:	Vice President

Lenders:

	WACHOVIA BANK, NATIONAL ASSOCIATION
	/s/ ANWAR S. YOUNG
By:	Anwar S. Young
Title:	Vice President

	GENERAL ELECTRIC CAPITAL CORPORATION
	/s/ PAMELA ESKRA
By:	Pamela Eskra
Title:

Accepted and Agreed:

ACKNOWLEDGED AND AGREED:

	SCRANTON PRODUCTS INC.
	/s/ SCOTT HARRISON
By:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

	AZEK BUILDING PRODUCTS, INC.
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President

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[SIGNATURES CONTINUED FROM PRECEDING PAGE]

	PROCELL DECKING INC.
	/s/ SCOTT HARRISON
By:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

	CPG INTERNATIONAL INC.
	/s/ SCOTT HARRISON
By:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

	CPG INTERNATIONAL I INC.
	/s/ SCOTT HARRISON
By:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

	SANTANA PRODUCTS INC.
	/s/ SCOTT HARRISON
By:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

	CPG SUB I CORPORATION
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President

	VYCOM CORP.
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President

	SANATEC SUB I CORPORATION
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President

EX-10

EXHIBIT 10.15

TERM LOAN AND SECURITY AGREEMENT

by and among

CPG INTERNATIONAL I INC.

SCRANTON PRODUCTS INC.

AZEK BUILDING PRODUCTS, INC.

PROCELL DECKING INC.

as Borrowers

CPG INTERNATIONAL INC.

SANTANA PRODUCTS INC.

CPG SUB I CORPORATION

VYCOM CORP.

SANATEC SUB I CORPORATION

as Guarantors

THE LENDERS FROM TIME TO TIME PARTY HERETO

WACHOVIA BANK, NATIONAL ASSOCIATION

as Administrative Agent

WACHOVIA CAPITAL MARKETS, LLC

as Lead Arranger and Lead Bookrunner

Dated: February 29, 2008

TABLE OF CONTENTS

SECTION 1. DEFINITIONS 1

SECTION 2. CREDIT FACILITIES 38

2.1 Loans 38

2.2 Prepayments 39

2.3 Joint and Several Liability of Borrowers 41

SECTION 3. INTEREST AND FEES 44

3.1 Interest 44

3.2 Fees 45

3.3 Inability to Determine Applicable Interest Rate 45

3.4 Illegality 45

3.5 Increased Costs 46

3.6 Capital Requirements 46

3.7 Certificates for Reimbursement 46

3.8 Delay in Requests 46

3.9 Mitigation; Replacement of Lenders 47

3.10 Funding Losses 47

3.11 Maximum Interest 48

3.12 No Requirement of Match Funding 48

SECTION 4. CONDITIONS PRECEDENT 48

4.1 Conditions Precedent to Effectiveness of Agreement to Make the Loans 48

SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST 54

5.1 Grant of Security Interest 54

5.2 Exclusions from Collateral 56

5.3 Perfection of Security Interests 56

5.4 Control Collateral Held by Control Agent. 60

5.5 Intercreditor Provisions. 60

SECTION 6. COLLECTION AND ADMINISTRATION 60

6.1 Borrowers’ Loan Accounts 60

6.2 [Reserved] 60

6.3 Lenders’ Evidence of Debt 60

6.4 Register 61

6.5 [Reserved] 61

6.6 [Reserved] 61

6.7 Payments 61

6.8 Taxes 62

6.9 [Reserved] 65

6.10     Appointment of Borrower Agent as Agent for Requesting Loans and Receipts of Loans and Statements 65

6.11 Pro Rata Treatment 66

6.12 Sharing of Payments, Etc 66

6.13 [Reserved] 67

6.14 Obligations Several; Independent Nature of Lenders’ Rights 67

SECTION 7. COLLATERAL REPORTING AND COVENANTS 67

7.1 Collateral Reporting. 67

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7.2 Accounts Covenants 67

7.3 Inventory Covenants 68

7.4 Equipment and Real Property 69

7.5 Power of Attorney 70

7.6 Right to Cure 70

7.7 Access to Premises 70

SECTION 8. REPRESENTATIONS AND WARRANTIES 71

8.1 Existence, Power and Authority 71

8.2       Name; State of Organization; Chief Executive Office; Collateral Locations 71

8.3 Financial Statements; No Material Adverse Effect 72

8.4 Priority of Liens; Title to Properties 72

8.5 Tax Returns 72

8.6 Litigation 73

8.7 Compliance with Other Agreements and Applicable Laws 73

8.8 Environmental Compliance 73

8.9 Employee Benefits 74

8.10 Bank Accounts 75

8.11 Intellectual Property 75

8.12 Subsidiaries; Affiliates; Capitalization; Solvency 76

8.13 Labor Disputes 76

8.14 Restrictions on Subsidiaries 77

8.15 Material Contracts 77

8.16 Payable Practices 77

8.17 OFAC 77

8.18 Accuracy and Completeness of Information 77

8.19 Survival of Warranties; Cumulative 78

8.20 Compliance with FCPA 78

8.21 Anti-Terrorism Laws. 78

8.22 Regulation H 78

8.23 Insurance. 78

8.24 Brokers’ Fees. 78

8.25 Use of Proceeds. 78

8.26 Margin Regulations. 79

8.27 Investment Company Act; etc. 79

8.28 Consummation of Acquisition. 79

SECTION 9. AFFIRMATIVE COVENANTS 79

9.1 Maintenance of Existence 79

9.2 New Collateral Locations 80

9.3 Compliance with Laws, Regulations, Etc 80

9.4 Payment of Taxes and Claims 81

9.5 Insurance 82

9.6 Financial Statements and Other Information 82

9.7 Compliance with ERISA 87

9.8 End of Fiscal Years; Fiscal Quarters 87

9.9 License Agreements 87

9.10 Additional Guaranties and Collateral Security; Further Assurances 88

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9.11 Costs and Expenses 89

9.12 Collateral Access Agreements. 90

9.13 After Acquired Real Property. 90

9.14 Delivery of Reports. 90

9.15 Post-Closing Covenant. 90

SECTION 10. NEGATIVE COVENANTS 91

10.1 Sale of Assets, Consolidation, Merger, Dissolution, Etc 91

10.2 Encumbrances 93

10.3 Indebtedness 93

10.4 Investments 97

10.5 Restricted Payments 98

10.6 Transactions with Affiliates 101

10.7 Change in Business 102

10.8 Limitation of Restrictions Affecting Subsidiaries 102

10.9 Certain Payments of Indebtedness, Etc 103

10.10     Modifications of Indebtedness, Organizational Documents and Certain Other Agreements 104

10.11 Inactive Subsidiaries; Parent Holding Company 104

10.12 Sale and Leasebacks 105

10.13 Designation of Designated Senior Debt 105

10.14 Foreign Assets Control Regulations, Etc 105

SECTION 11. FINANCIAL COVENANT 106

11.1 Maximum Senior Secured Leverage Ratio 106

SECTION 12. EVENTS OF DEFAULT AND REMEDIES 106

12.1 Events of Default 106

12.2 Remedies 108

SECTION 13. JURY TRIAL WAIVER; OTHER WAIVERS CONSENTS; GOVERNING LAW 111

13.1     Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver 111

13.2 Waiver of Notices 112

13.3 Amendments and Waivers 113

13.4 Waiver of Counterclaims 115

13.5 Indemnification 116

SECTION 14. THE AGENT 116

14.1 Appointment, Powers and Immunities 116

14.2 Reliance by Agent 117

14.3 Events of Default 117

14.4 Wachovia in Its Individual Capacity 118

14.5 Indemnification 118

14.6 Non-Reliance on Agent and Other Lenders 118

14.7 Failure to Act 119

14.8 [Reserved] 119

14.9 Concerning the Collateral and the Related Financing Agreements 119

14.10 [Reserved] 119

14.11 Collateral Matters 119

14.12 Agency for Perfection 121

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14.13 Agent May File Proofs of Claim 121

14.14 Successor Agent 122

14.15 Legal Representation of Agent 122

14.16 Other Agent Designations 122

14.17 Intercreditor Agreement. 123

SECTION 15. TERM OF AGREEMENT; MISCELLANEOUS 123

15.1 Term 123

15.2 Interpretative Provisions 124

15.3 Notices 126

15.4 Partial Invalidity 127

15.5 Confidentiality 127

15.6 Successors 128

15.7 Assignments; Participations 129

15.8 Entire Agreement 132

15.9 USA Patriot Act 132

15.10 No Advisory or Fiduciary Responsibility 132

15.11 Counterparts, Etc 133

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INDEX

TO

EXHIBITS AND SCHEDULES

Exhibit A	Form of Assignment and Acceptance
Exhibit B	Form of Patriot Act Certificate
Exhibit C	Information Certificate
Exhibit D	Form of Compliance Certificate
Exhibit E	Commitment Percentages
Exhibit F	Form of Officer’s Certificate
Schedule 1.35	Historical EBITDA

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TERM LOAN AND SECURITY AGREEMENT

This Term Loan and Security Agreement (“Agreement”) dated February 29, 2008 is entered into by and among CPG International I Inc., a Delaware corporation (“CPG I”), Scranton Products, Inc., a Delaware corporation (“Scranton”), AZEK Building Products, Inc., a Delaware corporation (“AZEK”), Procell Decking Inc., a Delaware corporation (“Procell”, and together with CPG I, Scranton and AZEK, and any Subsidiaries that may become parties hereto after the date hereof as borrowers, each individually a “Borrower” and collectively, “Borrowers” as hereinafter defined), CPG International Inc., a Delaware corporation (“Parent”), Santana Products Inc., a Delaware corporation (“Santana”), CPG Sub I Corporation, a Delaware Corporation (“Sub I”), Vycom Corp., a Delaware corporation (“Vycom”) and Sanatec Sub I Corporation, a Delaware corporation (“Sanatec”, and together with Parent, Santana, Sub I, Vycom, and any Subsidiaries that are not Foreign Subsidiaries that may become parties hereto after the date hereof as guarantors, each individually a “Guarantor” and collectively “Guarantors” as hereinafter defined), the parties hereto from time to time as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders” as hereinafter further defined), Wachovia Bank, National Association, a national banking association, in its capacity as agent for Lenders (in such capacity, “Agent” as hereinafter further defined).

W I T N E S S E T H:

WHEREAS, Borrowers and Guarantors have requested that Lenders provide a term loan to Borrowers and each Lender is willing to (severally and not jointly) make such term loan and provide such financial accommodations to Borrowers on a pro rata basis according to its Commitment Percentage (as defined below) on the terms and conditions set forth herein and in the other Financing Agreements (as defined below), and Agent is willing to act as agent for Lenders on the terms and conditions set forth herein and the other Financing Agreements;

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

SECTION 1.

DEFINITIONS

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

1.1      “ABL Agent” shall mean Wachovia, in its capacity as Agent under the ABL Credit Agreement and the other ABL Financing Agreements.

1.2      “ABL Credit Agreement” shall mean that certain Loan and Security Agreement dated as of February 13, 2008 as amended by that certain Amendment No. 1 dated as of the date hereof, by and among the Borrowers party thereto, the Guarantors party thereto, the ABL Lenders and the ABL Agent pursuant to which the ABL Lenders have agreed to provide revolving credit facilities to the Borrowers party thereto, as in effect on the date hereof and as amended or otherwise

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modified from time to time in accordance with the terms of this Agreement and the Intercreditor Agreement.

1.3      “ABL Financing Agreements” shall have the meaning specified for the term “Financing Agreements” in the ABL Credit Agreement, each as in effect on the date hereof and as amended or otherwise modified from time to time in accordance with the terms of this Agreement.

1.4      “ABL Lenders” shall mean those certain lenders and other financial institutions from time to time party to the ABL Credit Agreement.

1.5      “ABL Obligations” shall have the meaning specified for the term “Obligations” in the ABL Credit Agreement.

1.6      “ABL Priority Collateral” shall have the meaning specified for the term “ABLPriority Collateral” in the Intercreditor Agreement.

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

1.8      “Acquired Business” shall have the meaning given such term in the definition of the term “Permitted Acquisitions” contained herein.

1.9        “Acquired Company” shall mean Creative Composite Products, Inc., a corporation incorporated under the laws of the Province of Ontario.

1.10    “Acquired Indebtedness” shall mean Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Subsidiary of Parent or at the time it merges or consolidates with the Parent or any of its Subsidiaries or assumed in connection with the acquisition of assets from such Person and in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of a Borrower or such acquisition, merger or consolidation; provided, that, any Indebtedness of such Person that is extinguished, redeemed, defeased (other than through covenant defeasance), retired or otherwise repaid at the time of or immediately upon consummation of the transaction pursuant to which such Person becomes a Subsidiary of Parent will not be Acquired Indebtedness.

1.11      “Acquisition” shall mean the purchase of the outstanding Equity Interests of the Acquired Company by AZEK Canada Inc. (formerly known as 2162771 Ontario Inc.), which is a wholly-owned subsidiary of AZEK.

1.12      “Acquisition Documents” shall mean (a) that certain Share Purchase Agreementdated as of February 8, 2008 by and among 2162771 Ontario Inc., as the purchaser, the Acquired Company, and the holders of all Equity Interests of the Acquired Company, as the sellers, and (b) any other material agreement, document or instrument executed in connection with the foregoing, in each case as amended, modified, extended, restated, replaced, or supplemented from time to time.

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1.13    “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan comprising part of the same borrowing (including conversions, extensions and renewals), the rate per annum determined by dividing (a) the London Interbank Offered Rate for such Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not any Lender has any Eurocurrency liabilities subject to such reserve requirement at that time. Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets that may be available from time to time to a Lender. The Adjusted Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage.

1.14    “AEA Group” shall mean, collectively, AEA Investors LLC, AEA Management (Cayman) Ltd., AEA Investors LP and their Affiliates.

1.15      “Affiliate” shall mean, with respect to a specified Person, any other Person (excluding any Subsidiary) which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person. For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power either (a) to vote ten (10%) percent or more of the securities having ordinary voting power for the election of directors of such Person or (b) to direct or cause the direction of the management and policies, whether through the ownership of Equity Interests, by agreement or otherwise. Notwithstanding the foregoing, none of Wachovia Capital Markets, LLC, Agent or any Lender shall be deemed an Affiliate of Parent or any of its Subsidiaries solely by reason of the relationship created by the Financing Agreements. Furthermore, for purposes of Sections 8 and 10 (other than Section 10.6) hereof, neither the limited partners participating in the AEA Group's investment programs nor any mezzanine or other debt investment funds managed by the AEA Group nor portfolio companies of the AEA Group shall constitute an Affiliate of Parent or any of its Subsidiaries.

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

1.17      “Applicable Margin” shall mean (a) for Loans that are Base Rate Loans a rate equal to the sum of (i) the Base Rate plus (ii) 4.00% and (b) for Loans that are Eurodollar Rate Loans a rate equal to the sum of (i) the Eurodollar Rate plus (ii) 5.00%.

1.18      “Approved Fund” shall mean any Person (other than a natural Person), including, without limitation, any special purpose entity, that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary

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course of its business; provided, that, such Approved Fund must be administered by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

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

1.20      “Asset Disposition” shall mean the disposition of any or all of the assets (including, without limitation, the Equity Interests of a Subsidiary or any ownership interest in a joint venture) of any Borrower, any Guarantor or any of their Subsidiaries, whether by sale, lease, transfer or otherwise, in each case in excess of $1,000,000, individually or in the aggregate for all such dispositions for any fiscal year. The term “Asset Disposition” shall not include the sale, lease or transfer of assets permitted by subsections (a), (c) through (f), (g) (except as otherwise stated in said subsection (g)), and (h) through (p) of the definition of Permitted Dispositions.

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

1.22    “Bank Product Provider” shall have the meaning set forth in the ABL Credit Agreement.

1.23    “Base Rate” shall mean, on any date, the greater of (a) the rate from time to time publicly announced by Wachovia, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank or (b) the Federal Funds Rate in effect on such day plus one-half (1/2%) percent.

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

1.25  “Borrower Agent” shall mean CPG I in its capacity as Borrower Agent on behalf of itself and the other Borrowers and Guarantors pursuant to Section 6.10 hereof and its successors and assigns in such capacity.

1.26      “Borrowers” shall have the meaning set forth in the preamble hereto; each sometimes being referred to herein individually as a “Borrower”.

1.27 “Borrowing Base” shall have the meaning set forth in the ABL Credit Agreement.

1.28    “Borrowing Base Certificate” shall have the meaning set forth in the ABL Credit Agreement.

1.29    “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of New York, the State of Pennsylvania or the State of North Carolina, and a day on which Agent is open for the transaction of business, except that if a determination of a Business Day shall relate to

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any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market.

1.30    “Capital Expenditures” shall mean with respect to any Person for any period the aggregate of all expenditures by such Person and its Subsidiaries made during such period that in accordance with GAAP are or should be included in “property, plant and equipment” or in a similar fixed asset account on its balance sheet, whether such expenditures are paid in cash or financed and including all Capitalized Lease Obligations paid or payable during such period, other than the interest component of any Capitalized Lease Obligation (without duplication as to any period). No expenditures for assets purchased as part of a Permitted Acquisition will constitute Capital Expenditures for purposes hereof.

1.31    “Capitalized Lease Obligations” shall mean, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date on a balance sheet prepared in accordance with GAAP.

1.32    “Cash Dominion Event” shall have the meaning set forth in the ABL Credit Agreement.

1.33      “Cash Equivalents” shall mean (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within two years from the date of acquisition thereof; (b) marketable direct obligations issued by any state, commonwealth or territory of the United States of America or any political subdivision of any such state, commonwealth or territory or any public instrumentality thereof maturing within two years from the date of acquisition thereof and, at the time of acquisition, having an investment grade rating from either S&P or Moody's; (c) commercial paper or other indebtedness maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's (or, if at any time neither S&P nor Moody's shall be rating such obligations, then an equivalent rating from another nationally recognized rating service); (d) certificates of deposit, time deposits and Eurodollar time deposits or bankers' acceptances maturing within two years from the date of acquisition thereof and overnight bank deposits issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $250,000,000 in the case of domestic banks and $100,000,000 (or the dollar equivalent thereof) in the case of foreign banks; (e) repurchase obligations for underlying securities of the types described in clauses (a), (b) and (d) above entered into with any bank meeting the qualifications specified in clause (iv) above or securities dealers of recognized national standing; (f) United States dollars, euros, pounds sterling and local currencies held by Foreign Subsidiaries from time to time in the ordinary course of business; (g) in the case of any investment by a Foreign Subsidiary or investments made in a country outside the United States of America, "Cash Equivalents" will also include: (i) direct obligations of the sovereign nation (or any agency thereof) in which such Foreign Subsidiary is organized and is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or agency thereof) and (ii) other customarily utilized high-quality investments in the country where such Subsidiary is located or in which such investment is made; and (h) investments in money market funds or shares

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of investment companies that are registered under the Investment Company Act of 1940 that invest substantially all their assets in securities of the types described in clauses (a) through (g) above. Notwithstanding the foregoing, Cash Equivalents shall include amounts denominated in currencies other than those set forth in clauses (a), (b) and (f) above, provided, that, such amounts are converted into any currency listed in clauses (a), (b) and (f) above, as promptly as practicable and in any event within ten (10) Business Days following the receipt of such amounts.

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

1.35    “Change in Consolidated Working Capital” means for any period, a positive or negative number equal to the amount of Consolidated Working Capital at the beginning of such period minus the amount of Consolidated Working Capital at the end of such period.

1.36    “Change of Control” shall mean the occurrence of any of the following events: (a) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of Parent's assets (determined on a consolidated basis for Parent and its Subsidiaries) to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a “Group”), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Agreement), other than to the AEA Group and the Management Group; (b) the approval by the holders of Equity Interests of Parent or any Borrower, as the case may be, of any plan or proposal for the liquidation or dissolution of Parent or such Borrower, respectively (whether or not otherwise in compliance with the provisions of this Agreement); (c) any Person or Group, other than the AEA Group and the Management Group, shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than fifty (50%) percent of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Parent; (d) the replacement of a majority of the board of directors of Parent over a two-year period from the directors who constituted the board of directors of Parent at the beginning of such period, and such replacement shall not have been approved by a vote of at least a majority of the board of directors of Parent then still in office who either were members of any such board of directors at the beginning of such period or whose election as a member of any such board of directors was previously so approved; or (e) Parent at any time ceases to own, directly or indirectly, one hundred (100%) percent of the Equity Interests of any Borrower.

1.37 “Closing Date” shall mean the date of this Agreement.

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

1.39    “Collateral” shall mean a collective reference to all real and personal property pledged to Agent pursuant to terms of the Financing Agreements or otherwise, including, without limitation, the Priority Collateral and the ABL Priority Collateral.

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1.40    “Collateral Access Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, from any lessor of premises to any Borrower or Guarantor or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, in favor of Agent (and if applicable, the ABL Agent) with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other person.

1.41      “Commitment Percentage” shall mean, for each Lender, the percentage next to such Lender’s name on Exhibit E hereto or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 15.7 hereof, as the same may be adjusted from time to time in accordance with the terms hereof.

1.42      “Consolidated EBITDA” shall mean, for any period, the sum (without duplication) of: (a) Consolidated Net Income for such period; and (b) to the extent Consolidated Net Income has been reduced thereby, (i) all income taxes of Parent and its Subsidiaries paid or accrued in accordance with GAAP for such period, (ii) Interest Expense for such period, (iii) Consolidated Non-cash Items for such period less any non-cash items increasing Consolidated Net Income for such period, all as determined on a consolidated basis for Parent and its Subsidiaries in accordance with GAAP, (iv) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued), and (v) up to (A) $1,500,000 each year payable to the AEA Group pursuant to the first paragraph of Section 2 of the Management Agreement (as in effect on the date hereof), (B) any transactional fees payable to the AEA Group pursuant to such Management Agreement and (C) reasonable expenses payable to the AEA Group pursuant to such Management Agreement (provided, that, the aggregate amounts for purposes of clauses (B) and (C) of this subsection (v) shall not exceed $1,500,000 each year). Notwithstanding the foregoing, the EBITDA of Parent and its Subsidiaries on a consolidated basis for each period set forth on Schedule 1.35 hereto shall be deemed to be the amount set forth on Schedule 1.35 hereto opposite such period.

1.43      “Consolidated Net Income” shall mean, with respect to Parent and its Subsidiaries for any period, the aggregate net income (or loss) of Parent and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided, that, there shall be excluded therefrom: (a) after-tax gains or losses from asset sales or abandonment or reserves relating thereto; (b) after-tax extraordinary or nonrecurring gains or losses and any unusual or non-recurring charges (including severance, relocation costs and one-time compensation charges and including restructuring charges or reserves including costs related to closure of facilities), including any expenses, charges, gains or losses incurred in connection with any issuance of debt or equity; (c) the cumulative effect of a change in accounting principles; (d) the net income of any Person, other than Parent or a Subsidiary, except to the extent of cash dividends or distributions paid to Parent or to its Subsidiary by such Person; (e) in the case of a successor to Parent or any Borrower by consolidation or merger or as a transferee of the assets of Parent or such Borrower, as the case may be, any net income of the successor corporation prior to such consolidation, merger or transfer of assets; (f) the amortization of any premiums, fees or expenses incurred in connection with any Permitted Acquisition by Parent or any of its Subsidiaries of assets or Capital Stock or any amounts required or permitted by Accounting Principles Board Opinions Nos. 16 (including non-cash write-ups and non-cash charges relating to inventory and fixed assets, in each case arising in connection with such

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acquisition) and 17 (including non-cash charges relating to intangibles and goodwill) to be recorded on Parent’s consolidated balance sheet, in each case in connection with such Permitted Acquisitions; (g) any non-cash compensation charge arising from the grant of or issuance of stock, stock options or other equity based awards; (h) unrealized gains and losses with respect to Hedging Agreements or other derivative instruments pursuant to FASB 133, “Accounting for Derivative Instruments and Hedging Activities”, or otherwise; (i) any non-cash impact attributable to the application of the purchase method of accounting in accordance with GAAP, including, without limitation, the total amount of depreciation and amortization, cost of sales or other non-cash expense resulting from the write-up of assets for such period on a consolidated basis in accordance with GAAP to the extent such non-cash expense results from such purchase accounting adjustments; (j) fees, costs and expenses incurred by Parent or any of its Subsidiaries during any period in connection with any acquisition by Parent or any of its Subsidiaries (including, without limitation, amortization of debt issuance costs, debt discount or premium and other financing fees and expenses directly relating thereto and write-offs of any debt issuance costs relating to Indebtedness being retired or repaid in connection with such acquisition, as well as bonus payments paid to employees in connection with such acquisition); (k) any net after-tax income (loss) from the early extinguishment of Indebtedness or Hedging Agreements or other derivative instruments or amortization or write-off of deferred financing fees and any expenses of bridge or other financing fees; and (l) any impairment charge or asset write-off pursuant to Financial Accounting Standards Board Statement No. 142 and No. 144 and the amortization of intangibles arising pursuant to No. 141.

1.44      “Consolidated Non-cash Items” shall mean, for any period, the aggregate depreciation, amortization and all other non-cash expenses of Parent (including, without limitation, charges related to the impairment of intangibles) and its Subsidiaries reducing Consolidated Net Income of Parent and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (including deferred rent but excluding any such charge which requires an accrual of or a reserve for cash charges for any period).

1.45      “Consolidated Working Capital” means at the date of determination thereof, the aggregate amount of all current assets (excluding cash, Cash Equivalents and deferred taxes recorded as assets) minus the aggregate amount of all current liabilities (excluding, without duplication, Indebtedness under the ABL Credit Agreement and deferred taxes recorded as liabilities), in each case determined on a consolidated basis for the Parent and its Subsidiaries.

1.46 “Control Agent” shall have the meaning provided in the Intercreditor Agreement.

1.47      “Control Collateral” shall have the meaning provided in the Intercreditor Agreement.

1.48      “Debt Issuance” shall mean the issuance of any Indebtedness by any Borrower or Guarantor or any of their Subsidiaries (excluding any Equity Issuance or any Indebtedness of any Borrower or Guarantor or their Subsidiaries permitted to be incurred pursuant to Section 10.3 hereof (other than to the extent set forth in clause (k) thereof)).

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

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1.50    “Defaulting Lender” shall mean, at any time, any Lender that, at such time (a) has failed to make a Loan required pursuant to the terms of this Agreement and such default remains uncured, (b) has failed to pay to the Agent or any Lender an amount owed by such Lender pursuant to the terms of this Agreement and such default remains uncured, or (c) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar official.

1.51    “Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent (and if applicable, the ABL Agent or the Control Agent), any Borrower or any Guarantor that is the customer of the bank with respect to a deposit account at such bank and such bank, which, if required hereunder, is sufficient to perfect the security interests of Agent therein and provides such other rights with respect thereto as Agent requires.

1.52    “Disqualified Equity Interest” means, with respect to any Person, any Equity Interest in such Person that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, either mandatorily or at the option of the holder thereof) or upon the happening of any event or condition:

(a)       matures or is mandatorily redeemable (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interests and cash in lieu of fractional shares of such Equity Interests), whether pursuant to a sinking fund obligation or otherwise;

(b)       is convertible or exchangeable at the option of the holder thereof for Indebtedness or Equity Interests (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interest and cash in lieu of fractional shares of such Equity Interests); or

(c)       is redeemable (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interest and cash in lieu of fractional shares of such Equity Interests) or is required to be repurchased by such Person or any of its Affiliates, in whole or in part, at the option of the holder thereof;

in each case, on or prior to the date that is six (6) months after the Maturity Date; provided, that, an Equity Interest that would not constitute a Disqualified Equity Interest but for terms thereof giving holders thereof the right to require such Person to redeem or purchase such Equity Interest upon the occurrence of an “asset sale” or a “change of control” shall not constitute a Disqualified Equity Interest if any such requirement becomes operative only after repayment in full in cash of all of the Obligations.

1.53      “Engagement Letter” shall mean the letter agreement dated February 14, 2008, addressed to Parent from Wachovia and Arranger, as amended, modified, extended, restated, replaced, or supplemented from time to time.

1.54      “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or

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otherwise) that is an Approved Fund, and in each case is approved by Agent (provided, that, subject to Section 15.7, so long as no Event of Default exists or has occurred and is continuing, such person shall not include any person that has been designated in writing by Borrower Agent to Agent prior to the date hereof as unacceptable); and (d) any other commercial bank, financial institution or “accredited investor” (as defined in Regulation D under the Securities Act of 1933) approved by Agent, such approval not to be unreasonably withheld, conditioned or delayed, provided, that, (i) neither any Borrower nor any Guarantor or any Affiliate (other than any Sponsor Affiliated Lender or an Affiliate of a Sponsor Affiliated Lender) of any Borrower or Guarantor shall qualify as an Eligible Transferee and (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of any Borrower or Guarantor shall qualify as an Eligible Transferee, except as Agent and Required Lenders may otherwise specifically agree.

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

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

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

1.58    “Equity Issuance” shall mean any public offering by any Borrower or Guarantor or any Subsidiary pursuant to a registration statement under the Securities Act (other than a registration statement on Form S-8 (or any successor form)) to any Person which is not a Borrower

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or Guarantor of (a) shares of its capital stock (including, without limitation, any issuance of shares of its capital stock pursuant to the exercise of options or warrants or pursuant to the conversion of any debt securities to equity) or (b) warrants or options that are exercisable for shares of its capital stock.

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

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

1.61      “ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Pension Plan, other than events as to which the requirement of notice has been waived in regulations by the Pension Benefit Guaranty Corporation; (b) the adoption of any amendment to a Pension Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) a complete or partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Pension Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (f) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of $2,500,000.

1.62      “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof.

1.63 “Event of Default” shall have the meaning specified in Section 12.1 hereof.

1.64      “Excess Availability” shall have the meaning set forth in the ABL Credit Agreement.

1.65      “Excess Cash Flow” shall mean, with respect to any fiscal year of the Parent, for the Parent and its Subsidiaries on a consolidated basis, an amount equal to (a) Consolidated EBITDA for such period plus (b) all cash extraordinary or nonrecurring gains excluded from the definition of Consolidated Net Income plus (c) the Change in Consolidated Working Capital for such period minus (d) Capital Expenditures for such period (to the extent paid in cash and not financed with purchase money Indebtedness) and cash consideration paid in connection with Permitted Acquisitions permitted hereunder minus (e) Scheduled Indebtedness Payments and other prepayments (accompanied, in the case of any revolving Indebtedness, by the permanent reduction of commitments in respect thereof) of Indebtedness permitted to be made by Section 10.9, in each case, made during such period minus (f) Interest Expense (excluding any Interest Expense associated with intercompany indebtedness) for such period minus (g) amounts paid in cash in respect of federal, state, local and foreign income taxes of Parent and its Subsidiaries with respect to such period

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minus (h) all cash extraordinary or nonrecurring losses excluded from the definition of Consolidated Net Income and other cash charges included in the definition of Consolidated EBITDA minus (i) Restricted Payments made in cash during such period to the extent permitted by Sections 10.5(g), (h), (i), (j) or (k)and not financed minus (j) Permitted Investments made during such period to the extent permitted by clauses (j), (s) or (t) of the definition of Permitted Investments and not financed.

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

1.67 “Excluded Property” shall mean:

(a) leased Real Property;

(b)       Real Property with a fair market value of less than (i) $500,000 for any individual property or (ii) $1,000,000 in the aggregate for all excluded Real Property other than any Real Property is adjacent to, contiguous with or necessary or related to or used in connection with any Mortgaged Property;

(c)       motor vehicles subject to certificates of title in accordance with applicable State law;

(d)       any rights or interests in any contract, lease, permit, license, charter or license agreement covering real or personal property, as such, if under the terms of such contract, lease, permit, license, charter or license agreement, or applicable law with respect thereto, the valid grant of a security interest or lien therein to Agent is prohibited and such prohibition has not been or is not waived or the consent of the other party to such contract, lease, permit, license, charter or license agreement has not been or is not otherwise obtained or under applicable law such prohibition cannot be waived; provided, that, the foregoing exclusion shall in no way be construed (i) to apply if any such prohibition is unenforceable under Sections 9-406, 9-407 or 9-408 of the UCC or other applicable law or (ii) so as to limit, impair or otherwise affect Agent's unconditional continuing security interests in and liens upon any rights or interests of a Borrower in or to monies due or to become due under any such contract, lease, permit, license, charter or license agreement (including any Receivables);

(e)       any Equipment which is, or at the time of a Borrower's acquisition thereof shall be, subject to a purchase money mortgage or other purchase money lien or security interest (including such interest giving rise to Capitalized Lease Obligations) permitted under clause (e) of the definition of the term Permitted Liens hereof if: (i) the valid grant of a security interest or lien to Agent in such item of Equipment is prohibited by the terms of the agreement between such Borrower and the holder of such purchase money mortgage or other purchase money lien or security interest or under applicable law and such prohibition has not been or is not waived, or the consent of the holder of the purchase money mortgage or other purchase money lien or security interest has not been or is not otherwise obtained, or under applicable law such prohibition cannot be waived and (ii) the purchase money mortgage or other purchase money lien or security interest on such item of Equipment is or shall become valid and perfected;

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(f)        the Capital Stock of any Subsidiary organized under the laws of a jurisdiction outside the United States of America, its territories or its possessions that is a "controlled foreign corporation" (as such term is defined in Section 957(a) of the Code or a successor provision thereof) in excess of sixty five (65%) percent of all of the issued and outstanding shares of Capital Stock of such Subsidiary entitled to vote (within the meaning of Treasury Regulation Section 1.956-2);

(g)       trademark or servicemark applications that have been filed with the U.S. Patent and Trademark Office on the basis of an "intent-to-use" with respect to such marks, unless and until a statement of use or amendment to allege use is filed or any other filing is made or circumstances otherwise change so that the interests of any Borrower or Guarantor in such applications is no longer on an "intent-to-use" basis, at which time such applications shall automatically and without further action by the parties be subject to the security interests and liens granted by Borrowers or Guarantors to Agent hereunder.

1.68      “Extraordinary Receipt” shall mean any cash received by or paid to or for the account of any Person not in the ordinary course of business, including tax refunds, pension plan reversions, proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustments; provided, however, that an Extraordinary Receipt shall not include cash receipts from tax refunds, proceeds of insurance, condemnation awards (or payments in lieu thereof) or indemnity payments to the extent that such proceeds, awards or payments (a) in respect of loss or damage to equipment, fixed assets or real property are applied (or in respect of which expenditures were previously incurred) to replace or repair the equipment, fixed assets or real property in respect of which such proceeds were received in accordance with the terms of Section 2.2, (b) are received by any Person in respect of any third party claim against such Person and applied to pay (or to reimburse such Person for its prior payment of) such claim and the costs and expenses of such Person with respect thereto or (c) are, subject to the Intercreditor Agreement, required to be applied to reduce the ABL Obligations (and are so applied).

1.69      “Federal Funds Rate” shall mean, for any period, a fluctuating interest rate per annum equal, for each day during such period, to the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal Funds brokers of recognized standing selected by it.

1.70      “Financing Agreements” shall mean, collectively, this Agreement, the Pledge Agreement, the Guarantee and all notes, guarantees, security agreements, deposit account control agreements, investment property control agreements, intercreditor agreements (including the Intercreditor Agreement) and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by any Borrower or Guarantor in connection with this Agreement.

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1.71      “Fixed Charge Coverage Ratio” shall mean, with respect to the Parent and its Subsidiaries on a consolidated basis for the twelve-month period ending on the last day of any fiscal quarter, the ratio of (a) Consolidated EBITDA for such twelve month period to (b) Fixed Charges for such twelve month period, in each case calculated on a Pro Forma Basis.

1.72      “Fixed Charges” shall mean, with respect to the Parent and its Subsidiaries on a consolidated basis for the twelve-month period ending in the last day of any fiscal quarter, the sum of (a) Interest Expense for such period plus (b) the amount of all cash dividend payments (excluding items eliminated in consolidation) on any series of preferred stock of any Borrower or any of its Subsidiaries (other than dividends paid in Equity Interests that are not Disqualified Equity Interests) paid, accrued or scheduled to be paid or accrued during such period.

1.73      “Flood Hazard Property” shall mean any Mortgaged Property that is in an area designated by the Federal Emergency Management Agency as having special flood or mudslide hazards.

1.74      “Foreign Lender” shall mean any Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code).

1.75      “Foreign Subsidiary” shall mean a Subsidiary of Parent that is organized or incorporated under the laws of any jurisdiction outside of the United States of America that is treated as a corporation for U.S. federal income tax purposes and any direct or indirect Subsidiary of a Foreign Subsidiary; sometimes being referred to herein collectively as “Foreign Subsidiaries”.

1.76      “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, unless otherwise agreed by Agent, for purposes of Section 11 hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Agent prior to the date hereof, subject, however, in the case of determination of compliance with the financial covenant in Section 11, to the provisions of Section 15.2(h) hereof.

1.77      “Governmental Authority” shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

1.78      “Guarantee” shall mean the guarantee dated as of the Closing Date executed by the Guarantors in favor of Agent, for the benefit of the Secured Parties, as the same may from time to time be amended, modified, extended, restated, replaced, or supplemented from time to time in accordance with the terms hereof and thereof.

1.79      “Guarantors” shall have the meaning set forth in the preamble hereto and include any other Person other than a Foreign Subsidiary that any time after the date hereof becomes a Guarantor; each sometimes being referred to herein individually as a “Guarantor”.

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

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

1.82      “Hedge Agreement” shall mean an agreement between any Borrower or Guarantor and Agent or any Bank Product Provider that is a swap agreement as such term is defined in 11 U.S.C. Section 101, and including any rate swap agreement, basis swap, forward rate agreement, commodity swap, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement rate, floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, and any other similar agreement (including any option to enter into any of the foregoing or a master agreement for any the foregoing together with all supplements thereto) entered into for the purpose of protecting against or managing exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices; sometimes being collectively referred to herein as “Hedge Agreements”.

1.83      “Inactive Subsidiary” shall mean, collectively, (a) each Subsidiary of Parent listed on Schedule 1.74 to the Information Certificate and (b) a Subsidiary of Parent designated in writing by Borrower Agent to Agent after the date hereof as an Inactive Subsidiary and agreed to by Agent, provided, that, (i) such Subsidiary so designated after the date hereof shall only be considered an Inactive Subsidiary to the extent that the representations with respect thereto set forth in Section 8.12(e) hereof are true and correct with respect thereto and Agent shall have received such evidence thereof as it may reasonably require and (ii) such Subsidiaries are sometimes referred to herein collectively as “Inactive Subsidiaries”.

1.84      “Indebtedness” shall mean, with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by

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

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

1.86      “Intellectual Property” shall mean, as to each Borrower and Guarantor, such Borrower’s and Guarantor’s now owned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright applications, copyright registrations, trademarks, servicemarks, trade names, trade styles, trademark and service mark applications, and licenses and rights to use any of the foregoing and all applications, registrations and recordings relating to any of the foregoing as may be filed in the United States Copyright Office, the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, any political subdivision thereof or in any other country or jurisdiction, together with all rights and privileges arising under applicable law with respect to any Borrower’s or Guarantor’s use of any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating

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standards; goodwill (including any goodwill associated with any trademark or servicemark, or the license of any trademark or servicemark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship; software and contract rights relating to computer software programs, in whatever form created or maintained.

1.87      “Intercreditor Agreement” shall mean the intercreditor agreement by and among the Agent, the ABL Agent and the Control Agent and agreed to by Borrowers and Guarantors, providing for such parties' relative rights and priorities with respect to the assets and properties of Borrowers and Guarantors and related matters, as the same then exists or may thereafter be amended, modified, supplemented, extended, renewed, restated or replaced which shall be in form and substance satisfactory to Agent.

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

1.89      “Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one (1), two (2), three (3), or six (6) months duration (and, if acceptable to all Lenders, nine (9) or twelve (12) months duration)as any Borrower (or Borrower Agent on behalf of such Borrower) may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided, that, such Borrower (or Borrower Agent on behalf of such Borrower) may not elect an Interest Period which will end after the last day of the then-current term of this Agreement.

1.90 “Interest Rate” shall mean,

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

(b)       as to Eurodollar Rate Loans, a rate equal to the then Applicable Margin for Eurodollar Rate Loans on a per annum basis plus the Adjusted Eurodollar Rate.

(c)       Notwithstanding anything to the contrary contained herein, Agent may, at its option, and Agent shall, at the direction of the Required Lenders increase the Applicable Margin otherwise used to calculate the Interest Rate for Base Rate Loans and Eurodollar Rate Loans plus two percent (2%) per annum, for the period from and after the date of the occurrence of an Event of Default but only for so long as such Event of Default is continuing.

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1.91      “International” shall mean CPG International Holdings LP, a Delaware limited liability company, and its successors and assigns.

1.92      “Inventory” shall mean, as to each Borrower and Guarantor, all of such Borrower’s and Guarantor’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by such Borrower or Guarantor as lessor; (b) are held by such Borrower or Guarantor for sale or lease or to be furnished under a contract of service; (c) are furnished by such Borrower or Guarantor under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business.

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

1.94      “Investment Property Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent (and if applicable, ABL Agent or Control Agent), the applicable Borrower or Guarantor that is an account holder or customer (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of such account holder or customer, that is sufficient to perfect the security interests of Agent therein and provides such other rights with respect thereto as Agent requires.

1.95      “Last Twelve Month Period” shall mean, as of any date, the twelve (12) most recent immediately preceding fiscal months for which Agent has received financial statements in accordance with Section 9.6.

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

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

1.98      “Loans” or “Term Loan” shall mean the term loan provided to or for the benefit of any Borrower pursuant to Section 2.1 hereof.

1.99      “London Interbank Offered Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, , the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Successor Page 3750 (or any successor page) as the London interbank offered rate for deposits in U.S. Dollars at approximately 11:00 A.M. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, that, if more than one rate is specified on Telerate Successor Page 3750 for such comparable period, the applicable rate shall be the arithmetic mean of all such rates. If, for any reason, such rate is not available, the term “London Interbank Offered Rate” shall mean, with respect to any Eurodollar Rate Loan for the Interest Period applicable thereto, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 A.M. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate for such comparable period

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shall be the arithmetic mean of all such rates. Notwithstanding the foregoing, for purposes of this Agreement, the London Interbank Offered Rate shall in no event be less than 3.25% at any time.

1.100    “Management Agreement” shall mean the Management Agreement, dated as of May 10, 2005, by and between AEA Investors LLC and CPG I, as amended pursuant to Amendment No. 1 to Management Agreement, dated as of May 1, 2006, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.101    “Management Group” means the group consisting of the directors, executive officers and other management personnel of any Borrower or any direct or indirect parent entity of any Borrower, as the case may be, on the date hereof, together with (a) any new directors whose election by such boards of directors or whose nomination for election by the shareholders of any Borrower or any direct or indirect parent entity of any Borrower as applicable, was approved by a vote of a majority of the directors of such Borrower or any direct or indirect parent entity of such Borrower, as applicable, then still in office who were either directors on the date hereof or whose election or nomination was previously so approved and (b) executive officers and other management personnel of any Borrower or any direct or indirect parent entity of any Borrower, as applicable, hired at a time when the directors on the date hereof, together with the dⁱrectors so approved, constituted a majority of the directors of such Borrower or any direct or indirect parent entity of such Borrower, as applicable.

1.102    “Material Adverse Effect” shall mean a material adverse effect on (a) business, assets, liabilities, results of operations, property or financial condition of the Parent and its Subsidiaries taken as a whole; (b) the ability of any Borrower or any Guarantor to perform its obligations, when such obligations are required to be performed, under this Agreement or any of the other Financing Agreements or (c) the validity or enforceability of this Agreement, any of the Notes or any of the other Financing Agreements or the rights or remedies of the Agent or the Lenders hereunder or thereunder or the perfection or priority of any Lien in favor of the Agent.

1.103    “Material Contract” shall mean (a) any contract or other agreement (other than the Financing Agreements), written or oral, of any Borrower or Guarantor involving monetary liability of or to any Person in an amount in excess of $2,000,000 in any fiscal year (but excluding for this purpose contracts or other agreements for the purchase and sale of goods or services where the other party thereto has no obligation to purchase or sell such goods or services under such contract or other agreement) and (b) any other contract or other agreement (other than the Financing Agreements), whether written or oral, to which any Borrower or Guarantor is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect.

1.104    “Maturity Date” shall mean February 28, 2011 unless accelerated sooner in accordance with the terms hereof.

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

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1.106    “Mortgaged Property” shall mean any owned Real Property of a Borrower or Guarantor listed in the Information Certificate (other than Excluded Property) and any other Real Property of a Borrower or Guarantor subject to a Mortgage pursuant to Section 9.13.

1.107    “Mortgages” shall mean any mortgage, deed of trust or deed to secure debt executed by a Borrower or Guarantor in favor of the Agent, for the benefit of the Secured Parties, as the same may be amended, modified, extended, restated, replaced, or supplemented from time to time.

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

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

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

1.111    “Obligations” shall mean any and all Loans and all other obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrowers to Agent or any Lender, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under any of the Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to such Borrower under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, or secured or unsecured.

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

1.113 “Other Taxes” shall have the meaning given to such term in Section 6.8 hereof.

1.114    “Parent” shall mean CPG International Inc., a Delaware corporation, and its successors and assigns.

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

1.116    “Partnership Agreement” shall mean the Agreement of Limited Partnership in International, effective as of May 10, 2005, by and among CPH Holding I LLC, as General Partner and the persons who subscribe thereto as Limited Partners, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.117    “Patriot Act” shall mean The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)), as amended or modified from time to time.

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

1.119 “Permits” shall have the meaning set forth in Section 8.7.

1.120    “Permitted Acquisitions” shall mean the purchase by a Borrower or Guarantor after the date hereof of all or substantially all of the assets of any Person or a business or division of such Person (including pursuant to a merger with such Person or the formation of a wholly owned Subsidiary solely for such purpose that is merged with such Person) or of all or a majority of the Equity Interests (such assets or Person being referred to herein as the “Acquired Business”) and in one or a series of transaction that satisfies each of the following conditions:

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

(b)       as of the date of such acquisition and after giving effect thereto and to any payments in connection therewith and to any increase in the Borrowing Base as a result of such acquisition, using the most recent calculation of the Borrowing Base prior to the date of any such payment, on a pro forma basis, the sum of (i) the aggregate amount of the Excess Availability of Borrowers and (ii) cash on hand of Borrowers and Guarantors shall be not less than $10,000,000;

(c)       if the aggregate amount of the consideration payable with respect to such proposed acquisition or series of related acquisitions is greater than $5,000,000, Agent shall have received, not less than ten (10) Business Days’ prior to the acquisition, the Permitted Transaction Projections with respect to such acquisition showing that the Senior Secured Leverage Ratio for Parent and its Subsidiaries is projected to be equal to or less than 2.50 to 1.0 at all times during such period; provided, that, consideration for such purpose shall include the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Equity Interests, net of the applicable Acquired Business’ cash (including Cash

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Equivalents) balance as of the date of the acquisition) to be paid, issued or delivered in connection with any such Permitted Acquisition;

(d)       Agent shall have received a Pro Forma Compliance Certificate demonstrating that the Parent and its Subsidiaries shall be in compliance on a Pro Forma Basis with the financial covenant set forth in Section 11.1 both prior, and after giving effect, to such acquisition,

(e)       the Acquired Business shall be a company that engages in a line of business substantially similar to, or ancillary or related to, or used or useful to, the business that Borrowers are engaged in on the date hereof;

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

(g)       Agent shall have received, not less than ten (10) Business Days’ prior written notice of the proposed acquisition and such information with respect thereto as Agent may request, in each case with such information to include (i) parties to such acquisition, (ii) the proposed date and amount of the acquisition, (iii) a list and description of the assets or shares to be acquired, (iv) the total purchase price for the assets to be purchased (and the terms of payment of such purchase price);

(h)       if the aggregate amount of the consideration payable with respect to such proposed acquisition or series of related acquisitions is greater than $5,000,000, Agent shall have received either (i) the audited consolidated financial statements with respect to the Acquired Business for the three (3) fiscal years most recently ended for which financial statements are available, together with an unqualified opinion of independent certified public accountants, and interim unaudited consolidated financial statements with respect to the Acquired Business for each quarterly period ended since the last audited financial statements for which financial statements are available, or (ii) a “quality of earnings” review with respect to the Acquired Business, conducted by a third party reasonably acceptable to Agent, or (iii) such other historical financial statements with respect to the Acquired Business as may be acceptable to Agent; provided, that, (A) if the Acquired Business has not existed for the last three (3) fiscal years, Agent shall have received such satisfactory audited consolidated financial statements for the full fiscal years for which it existed and which are completed and in addition, at the option of the Agent, such satisfactory “quality of earnings” review and (B) consideration for such purpose shall include the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Equity Interests, net of the applicable Acquired Business’ cash (including Cash Equivalents) balance as of the date of the acquisition) to be paid, issued or delivered in connection with any such Permitted Acquisition;

(i)        if the aggregate amount of the consideration payable with respect to such proposed acquisition or series of related acquisitions is equal to or less than $5,000,000,

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Agent shall have received either (i) the audited consolidated financial statements with respect to the Acquired Business for the three (3) fiscal years most recently ended for which financial statements are available, together with an unqualified opinion of independent certified public accountants, and interim unaudited consolidated financial statements with respect to the Acquired Business for each quarterly period ended since the last audited financial statements for which financial statements are available, or (ii) if any of such audited financial statements and opinions are not available, such unaudited financial statements or reviewed financial statements with respect to the Acquired Business for such fiscal years as may have been prepared, or (iii) such other historical financial statements with respect to the Acquired Business as may be acceptable to Agent; provided, that, consideration for such purpose shall include the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Equity Interests, net of the applicable Acquired Business’ cash (including Cash Equivalents) balance as of the date of the acquisition) to be paid, issued or delivered in connection with any such Permitted Acquisition;

(j)        Agent shall have received a certificate of the chief financial officer or chief executive officer of Borrower Agent certifying to Agent and Lenders that such transaction complies with this definition;

(k)       upon Agent’s request, Agent shall have received (i) a reasonably detailed description of all material information relating to such acquisition and copies of all material documentation pertaining to such transaction, and (ii) all such other information and data relating to such transaction or the Acquired Business as may be reasonably requested by Agent; and

(l)        the total cash consideration (without taking into account the proceeds of Subordinated Debt, unsecured Indebtedness or Equity Interests to the extent used to pay a portion or all of the consideration for the Acquired Business) for (i) all such acquisitions made during any twelve month period shall not exceed $50,000,000 in the aggregate and (ii) all such acquisitions made during the term of this Agreement shall not exceed $100,000,000 in the aggregate.

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

(a) sales and leasing of Inventory in the ordinary course of business,

(b)       the sale or other disposition of used, worn-out, obsolete machinery, equipment and interests in real property (other than Mortgaged Property) or machinery, equipment and interests in real property (other than Mortgaged Property) no longer used or useful in the conduct of the business of Parent and its Subsidiaries, provided, that, subject to the Intercreditor Agreement, the Net Cash Proceeds thereof shall be applied in accordance with the provisions of Section 2.2(b);

(c)       the sale or other disposition of property by Parent or any Subsidiary thereof to a Borrower or Guarantor, provided, that, if the transferor of such property is a Borrower or Guarantor (i) the transferee thereof must be (A) a Borrower if the transferor is a Borrower or (B) a Borrower or Guarantor if the transferor is a Guarantor, (ii) to the extent such

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transaction constitutes an Investment, such transaction is permitted under Section 10.4 hereof and (iii) to the extent of any security interests and lien of Agent with respect to such property prior to its sale or other disposition, the security interest and lien of Agent on such property shall continue in all respects and shall not be deemed released or terminated as a result of such sale or other disposition and Borrowers and Guarantors shall execute and deliver such agreements, documents and instruments as Agent may request with respect thereto;

(d)       the sale or other disposition of property by any Subsidiary that is not a Borrower or Guarantor to any other Subsidiary that is not a Borrower or Guarantor;

(e)       the sale of accounts receivable in connection with the collection or compromise thereof in the ordinary course of business consistent with the practices of Parent and its Subsidiaries as of the date hereof;

(f)        the grant by Parent and its Subsidiaries after the date hereof of a license of any Intellectual Property owned by Parent and its Subsidiaries, provided, that, the rights of the licensee shall be subject to the rights of Agent, and shall not adversely affect, limit or restrict the rights of Agent to use any Intellectual Property of Parent and its Subsidiaries to sell or otherwise dispose of any Inventory or other Collateral or otherwise adversely limit or interfere in any respect with the use of any such trademarks by Agent in connection with the exercise of its rights or remedies hereunder or under any of the other Financing Agreements;

(g)       the issuance and sale by Parent and its Subsidiaries of Equity Interests of Parent and its Subsidiaries after the date hereof for cash; provided, that, (i) Parent and its Subsidiaries shall not be required to pay any cash dividends or repurchase or redeem such Equity Interests or make any other payments in respect thereof, except as otherwise permitted in Section 10.5 hereof, (ii) in the case of any Equity Issuance, subject to the Intercreditor Agreement, the Net Cash Proceeds of such issuance shall be applied to prepay the Loans in accordance with the provisions of Section 2.2(b), except as Agent may otherwise agree in writing, and (iii) as of the date of such issuance and sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

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

(i)        the issuance of Equity Interests of a Foreign Subsidiary to foreign nationals to the extent required by foreign law and in the ordinary course of business;

(j) the termination of Hedge Agreements permitted hereunder;

(k)       a transfer of Equipment by a Borrower or Guarantor to a manufacturer or dealer with respect to such Equipment pursuant to a trade-in of such Equipment; provided, that, such Equipment is replaced, substantially concurrently by like-kind equipment having

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the same or better value and without additional payments by such Borrower or Guarantor in respect thereof;

(l)        the abandonment or other disposition of Intellectual Property that (i) is not material and is no longer used or useful in any material respect in the business of any Borrower, Guarantor or their Subsidiaries, (ii) does not appear on or is not otherwise affixed to or incorporated in any Inventory, (iii) is not necessary in connection with the Records, or (iv) does not have any material value; provided, that, no Default or Event of Default shall exist or have occurred and be continuing as of the date of such abandonment or other disposition and after giving effect thereto;

(m)      the sale of any Equipment or Real Property that is otherwise permitted hereunder as a Permitted Disposition pursuant to a Sale and Leaseback Transaction;

(n)       any sale or other disposition of assets (other than Receivables and Inventory) subject to a security interest or lien permitted hereunder pursuant to the exercise by the holder of such security interest or lien of its remedies with respect to such assets, to the extent that the default that gave rise to the right of such holder to exercise its remedies is not a Default or Event of Default hereunder;

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

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

(q)       sales or other dispositions of assets of Parent and its Subsidiaries not otherwise subject to the provisions set forth in this definition, provided, that, as to any such sale or other disposition, each of the following conditions is satisfied:

(i)        such sales or other dispositions shall be in an amount not to exceed $5,000,000 in the aggregate in any fiscal year;

(ii)      in the case of any sale or other disposition where the amount of the consideration payable in connection with such sale or other disposition is in excess of $2,500,000 at any time that the aggregate amount of the consideration payable in connection with all such sales or other dispositions permitted under this clause (q) in any fiscal year are in excess of $2,500,000, then as to all sales or other dispositions in such fiscal year thereafter (and consideration for such purpose shall include the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Equity Interests, to be paid, issued or delivered in connection with any such sale or other disposition):

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(A)      not less than seventy-five (75%) percent of the consideration to be received by Borrowers and Guarantors shall be paid or payable in cash and shall be paid contemporaneously with consummation of the transaction;

(B)      the consideration paid or payable shall be in an amount not less than the fair market value of the property disposed of;

(C)      such transaction does not involve the sale or other disposition of any Equity Interest in any Subsidiary or of Receivables other than Receivables owned by or attributable to other property concurrently being disposed of in a transaction otherwise constituting a Permitted Disposition (but in no event constituting Accounts of a Borrower); and

(D)      as of the date of any such sale or other disposition, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(iii)      in the case of any sale or other disposition where the amount of the consideration payable in connection with such sale or other disposition is equal to or less than $2,500,000 and so long as the aggregate amount of the consideration payable in connection with all such sales or other dispositions permitted under this clause (q) in any fiscal year is equal to or less than $2,500,000, then as to all sales or other dispositions in such fiscal year (and consideration for such purpose shall include the aggregate amount of the purchase price (including, but not limited to, any assumed debt, earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Equity Interests, to be paid, issued or delivered in connection with any such sale or other disposition), as of the date of any such sale or other disposition, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing.

; provided further that with respect to any Asset Disposition permitted pursuant to this clause (q), the Net Cash Proceeds therefrom shall be reinvested or applied to prepay the Loans in accordance with the provisions of Section 2.2(b).

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

(a)       Investments consisting of accounts receivables owing to any Borrower or Guarantor if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary terms;

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

(c) Investments in cash or Cash Equivalents;

(d)       deposits of cash for leases, utilities, worker’s compensation and similar matters in the ordinary course of business;

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(e)       obligations under Hedge Agreements permitted under Section 10.3(e) hereof;

(f)        Investments the sole payment for which is Equity Interests of Parent that are otherwise permitted to be issued under the terms hereof and do not constitute Indebtedness;

(g)       receivables owing to Parent or any of its Subsidiaries if created or acquired in the ordinary course of business consistent with current practices as of the date hereof;

(h)       payroll, travel, commission and similar advances to cover matters that in good faith are expected at the time of such advances to be treated as expenses for accounting purposes in accordance with GAAP and that are made in the ordinary course of business consistent with current practices as of the date hereof;

(i)        the existing Investments of Parent and its Subsidiaries as of the date hereof in their respective Subsidiaries; provided, that, Parent and its Subsidiaries shall not have any further obligations or liabilities to make any capital contributions or other additional investments or other payments to or in or for the benefit of any of such Subsidiaries;

(j)        (i) loans and advances by Parent and its Subsidiaries to directors, officers and employees of Parent and its Subsidiaries in the ordinary course of business for bona fide (including, without limitation, in connection with the purchase of Equity Interests by such directors, officers and employees) business purposes not in excess of $5,000,000 at any time outstanding and (ii) Investments made in connection with split-dollar life insurance program for the benefit of directors, officers and employees of Parent and its Subsidiaries in the ordinary course of business consistent with the current practices of Parent and its Subsidiaries as of the date hereof;

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

(l)        obligations of account debtors to Parent and its Subsidiaries arising from Accounts which are past due evidenced by a promissory note made by such account debtor payable to Parent and its Subsidiaries; provided, that, promptly upon the receipt of the original of any such promissory note in an amount greater than $250,000 individually or in the aggregate from any single account debtor (or regardless of the amount after an Event of Default exists or has occurred and is continuing, at the request of Agent) by Parent and its Subsidiaries, such promissory note shall be endorsed to the order of Agent or Control Agent, as applicable by Parent and its Subsidiaries and promptly delivered to Agent or Control Agent, as applicable as so endorsed;

(m)      loans, advances and other Investments by a Borrower or Guarantor to or in a Borrower or Guarantor, or by a Subsidiary that is not a Guarantor in any other Subsidiary that is not a Guarantor, after the date hereof; provided, that, as to any such Investments, each

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of the following conditions is satisfied: (i) to the extent that such Investment gives rise to any Indebtedness, such Indebtedness is permitted hereunder, (ii) to the extent that such Investment gives rise to the issuance of any Equity Interests, such issuance is permitted hereunder and (iii) as of the date of any such Investment and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(n) Investments constituting Restricted Payments permitted by Section 10.5;

(o)       Investments by Parent or any of its Subsidiaries in the form of Equity Interests received as consideration for the sale of assets pursuant to a Permitted Disposition by Parent or such Subsidiary to the extent permitted under Section 10.1(b);

(p)       any indemnity, purchase price adjustment, earnout or similar obligation payable to Parent or any of its Subsidiaries arising pursuant to a Permitted Acquisition in each case permitted under Section 10.4 or a Permitted Disposition in each case to the extent permitted under Section 10.1(b);

(q)       Investments consisting of advance payments for the purchase of inventory, supplies, material or equipment or the licensing or contribution of Intellectual Property pursuant to joint marketing arrangements with other Persons and in respect of Capital Expenditures made in the ordinary course of business consistent with the current practices of Borrowers as of the date hereof, if any;

(r) Investments permitted under Section 10.6;

(s)       loans by a Borrower or Guarantor to International the proceeds of which are used to make a substantially contemporaneous payment of amounts permitted to be paid to the former owners of Procell under Section 10.9(b);

(t)        Investments after the date hereof by Parent and its Subsidiaries in or to any Person (including, without limitation, a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form) not otherwise subject to the provisions above or in Section 10.4; provided, that, as to any such Investment, each of the following conditions is satisfied:

(i)        such Investments shall be in an amount not to exceed $10,000,000 in the aggregate for each fiscal year;

(ii)      in the case of any such Investments that are in excess of $1,750,000 or at any time that the aggregate amount of such Investments in any fiscal year are in excess of $1,750,000, then as to all such Investments in such fiscal year thereafter:

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

(B)      as of the date of such Investment and after giving effect thereto and to any payments in connection therewith and to any increase in

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the Borrowing Base as a result of such Investment (if any), using the most recent calculation of the Borrowing Base prior to the date of any such Investment and payment, on a pro forma basis, the sum of (i) the aggregate amount of the Excess Availability of Borrowers and (ii) cash on hand of Borrowers and Guarantors shall be not less than $10,000,000;

(C)      for any such Investment where the amount of any or all payments in respect thereof exceeds $5,000,000, Agent shall have received, not less than ten (10) Business Days’ prior to the Investment, the Permitted Transaction Projections with respect to such Investment;

(E)      Agent shall have received a Pro Forma Compliance Certificate demonstrating that the Parent and its Subsidiaries shall be in compliance on a Pro Forma Basis with the financial covenant set forth in Section 11.1 both prior, and after giving effect, to such acquisition,

(F)      the Investment shall be in or to a company that engages in a line of business substantially similar to, or ancillary or related to, or used or useful to, the business that Borrowers are engaged in on the date hereof;

(G)      Agent shall have received not less than ten (10) Business Days’ prior written notice of the proposed Investment and such information with respect thereto as Agent may request, in each case with such information to include (1) parties to such Investment, (2) the proposed date and amount of the Investment, and (3) the total amount of the Investment; and

(H)      Agent shall have received a certificate of the chief financial officer or chief executive officer of Borrower Agent certifying to Agent and Lenders that such transaction complies with this definition; and

(I)        upon Agent’s request, Agent shall have received (1) a reasonably detailed description of all material information relating to such acquisition and copies of all material documentation pertaining to such transaction, and (2) all such other information and data relating to such transaction as may be reasonably requested by Agent;

(iii)      in the case of any such Investments that are equal to or less than $1,750,000 and so long as the aggregate amount of all such Investments in any fiscal year are equal to or less than $1,750,000, then as to all such Investments in such fiscal year, as of the date of any such Investment, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing.

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1.123 “Permitted Liens” shall mean:

(a)       the security interests and liens of Agent for itself and the benefit of the Secured Parties and the rights of setoff of Secured Parties provided for herein or under applicable law;

(b)       liens securing the payment of taxes, assessments or other governmental charges or levies either not yet overdue or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower, or Guarantor or Subsidiary, as the case may be, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien and with respect to which adequate reserves have been set aside on its books in accordance with GAAP;

(c)       non-consensual statutory liens (other than liens arising under ERISA or securing the payment of taxes) arising in the ordinary course of such Borrower’s, Guarantor’s or Subsidiary’s business that do not secure Indebtedness for borrowed money, such as carriers’, warehousemen’s, materialmen’s, landlords’, workmen’s suppliers’, repairmen’s and mechanics’ liens, to the extent: (i) such liens do not in the aggregate materially detract from the value of the property of Borrowers and Guarantors taken as a whole and do not materially impair the use thereof in the operation of Borrowers and Guarantors taken as a whole, (ii) such liens secure Indebtedness which is not overdue or is fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower, Guarantor or such Subsidiary, in each case prior to the commencement of foreclosure or other similar proceedings, which proceedings (or orders entered in connection with such proceeding) have the effect of preventing the forfeiture or sale of the property subject to any such lien and with respect to which adequate reserves have been set aside on its books in accordance with GAAP;

(d)       zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of Real Property which do not interfere in any material respect with the use of such Real Property or ordinary conduct of the business of such Borrower, Guarantor or such Subsidiary as presently conducted thereon or materially impair the value or marketability of the Real Property which may be subject thereto;

(e)       security interests in Equipment (excluding the Collateral) and Real Property (excluding the Collateral) arising after the date hereof to secure Indebtedness permitted under Section 10.3(b) hereof, whether such Indebtedness is assumed or incurred by a Borrower, Guarantor or Subsidiary;

(f)        pledges and deposits of cash by any Borrower, Guarantor or Subsidiary after the date hereof in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security benefits consistent with the current practices of such Borrower, Guarantor or Subsidiary as of the date hereof;

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(g)       pledges and deposits of cash by any Borrower, Guarantor or Subsidiary after the date hereof to secure the performance of tenders, bids, leases, trade contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations in each case in the ordinary course of business consistent with the current practices of such Borrower, Guarantor or Subsidiary as of the date hereof; provided, that, in connection with any performance bonds issued by a surety or other person, the issuer of such bond shall have waived in writing any rights in or to, or other interest in, any of the Collateral in an agreement, in form and substance reasonably satisfactory to Agent;

(h)       liens arising from (i) operating leases and the precautionary UCC financing statement filings in respect thereof and (ii) equipment or other materials which are not owned by any Borrower, Guarantor or Subsidiary located on the premises of such Borrower, Guarantor or Subsidiary (but not in connection with, or as part of, the financing thereof) from time to time in the ordinary course of business and consistent with current practices of such Borrower or Guarantor and the precautionary UCC financing statement filings in respect thereof;

(i)        statutory or common law liens or rights of setoff of depository banks with respect to funds of any Borrower, Guarantor or Subsidiary at such banks to secure fees and charges in connection with returned items or the standard fees and charges of such banks in connection with the deposit accounts maintained by such Borrower, Guarantor or Subsidiary at such banks (but not any other Indebtedness or obligations);

(j)        judgments and other similar liens arising in connection with court proceedings that do not constitute an Event of Default, provided, that, (i) such liens are being contested in good faith and by appropriate proceedings diligently pursued, (ii) adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefore and (iii) a stay of enforcement of any such liens is in effect;

(k)       leases or subleases of Real Property granted by any Borrower or Guarantor in the ordinary course of business and consistent with past practice to any Person so long as any such leases or subleases do not interfere in any material respect with the ordinary conduct of the business of such Borrower or Guarantor as presently conducted thereon or otherwise conflict with the term of the Mortgages;

(l)        licenses of Intellectual Property permitted under clause (f) of the definition of Permitted Disposition;

(m)      liens on goods in favor of customs and revenue authorities arising as a matter of law to secure custom duties in connection with the importation of such goods;

(n)       the liens of the ABL Agent for itself and the benefit of the Secured Parties (as defined in the ABL Credit Agreement), securing the ABL Obligations in accordance with the Intercreditor Agreement;

(o)       security interests and liens to secure Acquired Indebtedness permitted hereunder; provided that (i) such security interests and liens otherwise constitute Permitted Liens hereunder, (ii) the security interests and liens secured such Acquired Indebtedness at

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the time of and prior to the incurrence of such Acquired Indebtedness by the Parent or a Subsidiary and were not granted in connection with, or in anticipation of, the incurrence of such Acquired Indebtedness by the Parent or a Subsidiary, and (iii) such security interests and liens do not extend to or cover any property or assets of Parent or of any of its Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Parent or a Subsidiary and are no more favorable to the lienholders than those securing the Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by Parent or a Subsidiary;

(p)       the security interests and liens set forth on Schedule 8.4 to the Information Certificate which are not otherwise permitted under the other clauses of this definition and any security interests and liens to secure Refinancing Indebtedness of the Indebtedness secured by such security interests and liens to the extent permitted under Section 10.3(m) hereof.

1.124  “Permitted Tax Distributions” shall mean (a) in the event that International, the parent of Parent, is treated as a corporation for applicable Federal, State or local income tax purposes and is a member of a consolidated, combined or similar U.S. Federal, State or local income tax group of which it or another direct or indirect parent of Parent is the common parent, payments, dividends or distributions to International, or another direct or indirect parent of Parent, as the case may be, in order to pay the portion of any such consolidated, combined or similar income taxes that are attributable to the income of Parent and its Subsidiaries (to the extent such taxes are not payable directly by Parent or its Subsidiaries); provided, that, the amount of such payments, dividends or distributions, plus the amount of any such taxes payable directly by Parent and its Subsidiaries, do not exceed the taxes that Parent and its Subsidiaries would have paid as a stand-alone group; or (b) in the event that Parent is treated as a partnership for applicable U.S. Federal, State or local income tax purposes, aggregate payments, dividends or distributions to International, or any other direct parent entity of Parent, as the case may be, in an amount equal to, with respect to any taxable year of Parent, the product of (i) the highest combined U.S. Federal, State (or provincial) and local statutory tax rate (after taking into account the deductibility of State (or provincial) and local income tax for U.S. Federal income tax purposes) applicable to any direct (or, where the direct equity holder is a pass-through entity, indirect) equity holder of Parent, or any other direct parent entity of Parent, as the case may be, multiplied by (ii) the taxable income of Parent (to the extent such taxes are not payable directly by Parent or its Subsidiaries).

1.125  “Permitted Transaction Projections” shall mean, as to any proposed acquisition, Investment, disposition or other transaction, current, updated projections (including in each case, forecasted balance sheets and statements of income and loss, and statements of cash flow) for Parent and its Subsidiaries on such basis (whether monthly, quarterly, annually or otherwise) for such period as Agent may require after the acquisition, Investment or other transaction, giving effect thereto, all in reasonable detail and in a format consistent with the projections delivered by Parent to Agent prior to the date hereof, together with such supporting information as Agent may reasonably request, which projections shall have been prepared on the basis of the assumptions set forth therein which Borrowers believe are fair and reasonable as of the date of preparation in light of current and reasonably foreseeable business conditions and using such methodology as is consistent with the most recent financial statements delivered to Agent pursuant to Section 9.6 hereof.

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

1.127  “Plan” shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multiemployer Plan has made contributions at any time during the immediately preceding six (6) plan years or with respect to which any Borrower or Guarantor may incur liability.

1.128    “Pledge Agreement” shall mean the pledge agreement dated as of the Closing Date executed by Borrowers and Guarantors in favor of Agent, for the benefit of the Secured Parties, and the Control Agent, as the same may from time to time be amended, modified, extended, restated, replaced, or supplemented from time to time in accordance with the terms hereof and thereof.

1.129    “Priority Collateral” shall mean “Term Loan Priority Collateral” as defined in the Intercreditor Agreement, and shall include, upon payment in full of the ABL Obligations and the termination of the ABL Credit Agreement, all ABL Priority Collateral.

1.130  “Procell Unit Purchase Agreement” shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): (1) the Unit Purchase Agreement, dated as of December 13, 2006, by and among CPG I and Christopher Bardasian, Kevin Sloan and Larry Sloan, (2) that certain “side letter”, dated January 29, 2008, by and among CPG I, International, Christopher Bardasian, Kevin Sloan and Larry Sloan.

1.131  “Pro Forma Basis” shall mean, in connection with any calculation of Consolidated EBITDA and Indebtedness, after giving effect on a pro forma basis for the period of such calculation to: (a) the incurrence or repayment of any Indebtedness of Borrowers and Guarantors (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to the ABL Credit Agreement, occurring during the Last Twelve Month Period or at any time subsequent to the last day of the Last Twelve Month Period and on or prior to the date of such incurrence or repayment, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Last Twelve Month Period; and (b) any asset sales or asset acquisitions (including, without limitation, any Permitted Acquisition giving rise to the need to make such calculation as a result of Borrowers and Guarantors (including any Person who becomes a Borrower or Guarantor as a result of such Permitted Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA attributable to the assets that are the subject of the Permitted Acquisition or asset sale during the Last Twelve Month Period) occurring during the Last Twelve Month Period or at any time subsequent to the last day of the Last Twelve Month Period and on or prior to the date of such asset sale or Permitted Acquisition, as if such asset sale or Permitted Acquisition (including the incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Last Twelve Month Period, including giving effect to any Pro Forma Cost Savings; provided,

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that, such pro forma effect pursuant to this clause (b) shall be determined using the relevant financial statements of the business acquired or to be acquired if available and, in any event, shall be satisfactory to Agent.

1.132  “Pro Forma Compliance Certificate” shall mean, with respect to any event or transaction, or proposed event or transaction, a certificate of the chief financial officer, vice president of finance, treasurer or controller of Borrower Agent or Parent containing reasonably detailed calculations of the financial covenant set forth in Section 11 as of the most recent fiscal month end for which Agent has received financial statements pursuant to Section 9.6 based on the Last Twelve Month Period and certifying that the other conditions hereunder to the applicable event or transaction are satisfied, after giving effect to the applicable event or transaction on a Pro Forma Basis.

1.133    “Pro Forma Cost Savings” shall mean with respect to any period, the reductions in costs that (a) occurred during the Last Twelve Month Period that are directly attributable to a stock or an asset acquisition and calculated on a basis that is consistent with Article 11 of Regulation S-X under the Securities Act or (b) are implemented, committed to be implemented, the commencement of implementation of which has begun or reasonably expected to be implemented in good faith by the business that was the subject of any such a stock or asset acquisition within six (6) months of the date of the stock or asset acquisition and that are supportable and quantifiable, as if, in the case of each of clauses (a) and (b), all such reductions in costs had been effected as of the beginning of such period, decreased by any non-one-time incremental expenses incurred or to be incurred during the Last Twelve Month Period in order to achieve such reduction in costs.

1.134    “Pro Rata Share” shall mean, as to any Lender, the fraction (expressed as a percentage) the numerator of which shall be the unpaid amount of such Lender’s Loans and the denominator of which shall be the aggregate amount of all unpaid Loans.

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

1.136    “Qualified Equity Interests” shall mean any Equity Interests other than Disqualified Equity Interests.

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

1.138    “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of each Borrower and Guarantor: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of such Borrower or Guarantor; (d) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued payable to any Borrower or Guarantor or otherwise in favor of or delivered to any Borrower or Guarantor in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to any Borrower or

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Guarantor, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by any Borrower or Guarantor or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of any Borrower or Guarantor) or otherwise associated with any Accounts, Inventory or general intangibles of any Borrower or Guarantor (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to any Borrower or Guarantor in connection with the termination of any Plan or other employee benefit plan and any other amounts payable to any Borrower or Guarantor from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which any Borrower or Guarantor is a beneficiary).

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

1.140    “Refinancing Indebtedness” shall have the meaning set forth in Section 10.3(m) hereof.

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

1.142    “Required Lenders” shall mean, at any time, those Lenders to whom more than fifty (50%) percent of the then outstanding Loans are owing.

1.143    “Restricted Payment” shall mean any (a) dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests of Parent or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or on account of any return of capital to Parent or such Subsidiary’s stockholders, partners or members (or the equivalent Person thereof), or payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any Equity Interests of Parent or any of its Subsidiaries, or any setting apart of funds or property for any of the foregoing, (b) the payment by Parent or any of its Subsidiaries of any management, advisory or consulting fee to any Person or the payment of any extraordinary salary, bonus or other form of compensation to any Person who is directly or indirectly a significant partner, shareholder, owner or executive officer of any such Person, to the extent such extraordinary salary, bonus or other form of compensation is not included in the corporate overhead of Parent or such Subsidiary and (c) prepayment of or redemption of principal in respect of Indebtedness evidenced by the Senior Fixed Rate Notes and the Senior Floating Rate Note.

1.144    “Sale and Leaseback Transaction” shall mean, with respect to a Borrower or Guarantor, or any Subsidiary, any arrangement, directly or indirectly, with any Person whereby

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such Borrower or Guarantor or such Subsidiary shall sell or transfer any property used or useful in its business, whether now owned or hereafter acquired (other than transient ownership of equipment to be subject to any operating lease), and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred.

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

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

1.147    “S&P” shall mean Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and its successors and assigns.

1.148    “Scheduled Indebtedness Payments” shall mean all regularly scheduled (as determined at the beginning of the respective period) principal payments of Indebtedness for borrowed money, Indebtedness for the deferred purchase price of any property or services, including, without limitation, any indemnification, adjustment of purchase price, earn-outs or other similar obligations incurred in connection with a Permitted Acquisition or Permitted Disposition, and Indebtedness with respect to Capital Leases (including the interest component with respect to Indebtedness under Capital Leases)

1.149    “Secured Parties” shall mean, collectively, (a) Agent and (b) Lenders; provided, that, such parties are sometimes referred to herein individually as a “Secured Party”.

1.150    “Senior Fixed and Floating Rate Note Indenture” shall mean Indenture, dated as of July 5, 2005, by CPG I, as Issuer and the Senior Fixed and Floating Rate Note Trustee, with respect to the Senior Floating Rate Notes and Senior Fixed Rate Notes, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.151    “Senior Fixed and Floating Rate Note Trustee” shall mean Wells Fargo Bank, N.A., as Trustee and its successors and assigns, and any replacement trustee permitted pursuant to the terms and conditions of the Senior Fixed and Floating Rate Note Indenture.

1.152    “Senior Fixed Rate Notes” shall mean, collectively, the 10 ½% Senior Notes due 2013 in the original aggregate amount of $150,000,000 issued by CPG I pursuant to the Senior Fixed and Floating Rate Note Indenture, as the same now exist or may hereafter be amended, modified, supplemented, extended, modified, supplemented, extended, renewed, restated or replaced.

1.153    “Senior Floating Rate Notes” shall mean, collectively, the Senior Floating Rate Notes due 2012 in the original aggregate amount of $128,114,000 issued by CPG I pursuant to the

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Senior Fixed and Floating Rate Note Indenture, as the same now exist or may hereafter be amended, modified, supplemented, extended, modified, supplemented, extended, renewed, restated or replaced.

1.154    “Senior Note Documents” shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, modified, supplemented, extended, renewed, restated or replaced): (a) the Senior Floating Rate Notes, (b) the Senior Fixed Rate Notes, (c) the Senior Fixed and Floating Rate Note Indenture, and (d) any agreements, documents or instruments related to any of the foregoing.

1.155    “Senior Secured Leverage Ratio” shall mean, with respect to the Parent and its Subsidiaries on a consolidated basis for the twelve-month period ending in the last day of any fiscal quarter, the ratio of (a) secured Indebtedness on the last day of such period (other than Indebtedness expressly subordinated to the Loans and Indebtedness under clauses (d), (e), (f), (h) (but only with respect to the Guaranty Obligations of Indebtedness excluded from this definition of Senior Secured Leverage Ratio), (k) (except to the extent of drafts that have been drawn but are unreimbursed) and (l) of the definition thereof) to (b) Consolidated EBITDA for such twelve month period, in each case calculated on a Pro Forma Basis.

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

1.157 “Special Agent Advances” shall have the meaning set forth in Section 14.11 hereof.

1.158    “Sponsor Affiliated Lender” shall mean AEA Middle Market Debt Funding LLC or any of its Affiliates that may from time to time become a Lender hereunder in accordance with the terms of Section 15.7(a); provided, however in no event shall there be more than one Sponsor Affiliated Lender hereunder at any time.

1.159    “Subordinated Debt” shall mean any Indebtedness of a Borrower or Guarantor that is subject to, and subordinate in right of payment to, the right of Agent and Lenders to receive the prior final payment and satisfaction in cash in full of all of the Obligations and subject to such other terms and conditions as Agent may require with respect thereto and shall include the Cash Earn Out Consideration (if any), the Americhem Earn-Out Amount (if any) and the Tax Payment Consideration (if any), as each such terms is defined in the Procell Unit Purchase Agreement as in effect on the date hereof.

1.160    “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general

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

1.161 “Term Loan Committed Amount” shall have the meaning set forth in Section 2.1(a).

1.162    “Term Note” or “Term Notes” shall mean the promissory notes of Borrowers provided pursuant to Section 2.1 in favor of any of the Lenders evidencing the Term Loan provided by any such Lender pursuant to Section 2.1, individually or collectively, as appropriate, as such promissory notes may be amended, modified, extended, restated, replaced or supplemented from time to time.

1.163    “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York and any successor statute, as in effect from time to time (except that terms used herein which are not otherwise defined herein and defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Agent may otherwise determine).

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

1.165    “Wachovia” shall mean Wachovia Bank, National Association, and its successors and assigns.

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

SECTION 2.

CREDIT FACILITIES

 

2.1 Loans.

(a)Term Loan. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Agent on the Closing Datesuch Lender’s Commitment Percentage of a term loan in US Dollars in the aggregate principal amount of TWENTY-FIVE MILLION DOLLARS ($25,000,000) (the “Term Loan Committed Amount”) for the purposes hereinafter set forth. Upon receipt by the Agent of the proceeds of the Term Loan made on

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the Closing Date, such proceeds will then be made available to Borrowers by the Agent by crediting the account of Borrowers on the books of the office of the Agent, or at such other office as the Agent may designate in writing, with the aggregate of such proceeds made available to the Agent by the Lenders and in like funds as received by the Agent (or by crediting such other account(s) as directed by Borrowers). The Term Loan may consist of Base Rate Loans or Eurodollar Rate Loans, or a combination thereof, as Borrowers may request; provided that on the Closing Date the Term Loan may only consist of Base Rate Loans unless Borrowers deliver a completed notice of borrowing and a funding indemnity letter, each in form and substance satisfactory to the Agent, not less than three (3) Business Days prior to the Closing Date. Amounts repaid or prepaid on the Term Loan may not be reborrowed.

(b)Repayment of Term Loan. The principal amount of the Term Loan shall be repaid in consecutive quarterly installments as follows, unless accelerated sooner pursuant to Section 12.2.

Principal Amortization Payment Dates	Principal Amortization Payment
March 31, 2008	$62,500
June 30, 2008	$62,500
September 30, 2008	$62,500
December 31, 2008	$62,500
March 31, 2009	$62,500
June 30, 2009	$62,500
September 30, 2009	$62,500
December 31, 2009	$62,500
March 31, 2010	$62,500
June 30, 2010	$62,500
September 30, 2010	$62,500
December 31, 2010	$62,500
Maturity Date	$24,250,000 or the remaining outstanding principal amount of the Term Loan

(c)Term Notes. The Borrowers’ obligations to pay each Lender’s portion of the Term Loan shall be evidenced, upon such Lender’s request, by a Term Note made payable to such Lender.

 

2.2 Prepayments.

(a)       Optional Prepayments. The Borrowers shall have the right to repay Loans in whole or in part from time to time; provided, however, that each partial repayment of a Loan shall be in a minimum principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof. The Borrower Agent shall give three Business Days’ irrevocable notice in the case of Eurodollar Rate Loans and same-day irrevocable notice on any Business Day in the case of Base Rate Loans, to Agent (which shall notify the Lenders thereof as soon as practicable). Payments shall be applied ratably to the remaining principal installments

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thereof as Borrowers may elect. All repayments under this Section 2.2(a) shall be subject to Section 2.2(c) and Section 3.10, but otherwise without premium or penalty.Interest on the principal amount prepaid shall be payable on the next occurring interest payment date that would have occurred had such Loan not been prepaid or, at the request of Agent, interest on the principal amount prepaid shall be payable on any date that a repayment is made hereunder through the date of repayment. Within the foregoing parameters, prepayments under this Section shall be applied first to Base Rate Loans and then to Eurodollar Rate Loans in direct order of Interest Period maturities.

(b) Mandatory Prepayments.

(i)        Debt Issuances. Promptly, upon receipt by any Borrower or Guarantor or any of their Subsidiaries of proceeds from any Debt Issuance, Borrowers shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of such Debt Issuance (such prepayment to be applied as set forth in clause (vi)below).

(ii)      Issuances of Equity. Promptly, upon receipt by any Borrower or Guarantor or any of their Subsidiaries of proceeds from any Equity Issuance, Borrowers shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of such Equity Issuance (such prepayment to be applied as set forth in clause (vi)below).

(iii)      Asset Dispositions. Within three (3) Business Days following the receipt by any Borrower or any Guarantor of Net Cash Proceeds from any Asset Disposition, Borrowers shall prepay the Loans in an aggregate amount equal to 100% of such Net Cash Proceeds derived from such Asset Disposition (such prepayment to be applied as set forth in clause (vi) below); provided, however, in connection with any Asset Disposition, so long as no Default or Event of Default then exists, such Net Cash Proceeds shall not be required to be so applied to the extent Borrowers indicate in the compliance certificate required to be delivered pursuant to section 9.6(d)(v) that a Borrower or a Guarantor intends to use such Net Cash Proceeds to acquire fixed or capital assets in replacement of the disposed assets (A) one year of the receipt of such Net Cash Proceeds or (B) in the event a commitment to reinvest such Net Cash Proceeds has been entered into during the one year referred to in clause (A) above, 18 months of the receipt of such Net Cash Proceeds, it being expressly agreed that any Net Cash Proceeds not so reinvested shall be applied to repay the Loans immediately thereafter; providedfurther, in the case of the Net Cash Proceeds relating to the disposition of any ABL Priority Collateral, such Net Cash Proceeds shall only be required to prepay the Loans hereunder to the extent such proceeds are not required to prepay the ABL Obligations pursuant to the ABL Credit Agreement (and are so applied).

(iv)      Excess Cash Flow. Within 95 days after the end of the fiscal year ending December 31, 2009, Borrowers shall prepay the Loans in an aggregate amount equal to 50% of the Excess Cash Flow for such fiscal year minus the principal amount of any optional prepayments of the Loans made from the first day

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of the subject fiscal year through the date of prepayment pursuant to this clause (vi) (such prepayments to be applied as set forth in clause (vi) below).

(v)       Extraordinary Receipts. Promptly upon receipt by any Borrower or Guarantor or any of their Subsidiaries of proceeds from any Extraordinary Receipt, Borrowers shall prepay the Loans in an aggregate amount equal to one hundred percent (100%) of the Net Cash Proceeds of such Extraordinary Receipt (such prepayment to be applied as set forth in clause (vi) below); provided, however, that, so long as no Default or Event of Default has occurred and is continuing, Net Cash Proceeds from insurance or condemnation proceeds shall not be required to be so applied to the extent Borrowers deliver to the Agent a certificate stating that Borrowers and Guarantors intend to use such Net Cash Proceeds to acquire assets useful to the business of Borrowers and Guarantors within (a) one year of the receipt of such Net Cash Proceeds or (b) in the event a commitment to reinvest such Net Cash Proceeds has been entered into during the 12 month period referred to in clause (a) above, 18 months of the receipt of such Net Cash Proceeds, it being expressly agreed that any Net Cash Proceeds not so reinvested shall be applied to prepay the Loans immediately thereafter (such prepayment to be applied as set forth in clause (vi) below); and provided further, that Net Cash Proceeds from insurance or condemnation proceeds relating to ABL Priority Collateral shall only be required to prepay the Loans to the extent the proceeds thereof are not required to be applied to reduce the ABL Obligations pursuant to the ABL Credit Agreement (and are so applied).

(vi)      Application of Mandatory Prepayments. All amounts required to be paid pursuant to this clause (b) shall be applied to the outstanding Loans (to reduce scheduled installments under Section 2.1(b) on a pro rata basis) and to the holders thereof on a pro rata basis. All prepayments under this Section shall be subject to Section 3.10and be accompanied by interest on the principal amount prepaid through the date of prepayment.

(c)       Voluntary Prepayments Prior to the First Anniversary of the Closing Date. Notwithstanding the foregoing, any voluntary prepayment of any portion of the outstanding Loans made on or prior to the first anniversary of the Closing Date shall be subject to a premium equal to the principal amount of such prepayment multiplied by 1%.

 

2.3 Joint and Several Liability of Borrowers.

(a)       Notwithstanding anything in this Agreement or any other Financing Agreements to the contrary, each Borrower, jointly and severally, in consideration of the financial accommodations to be provided by Agent and Lenders under this Agreement and the other Financing Agreements, for the mutual benefit, directly and indirectly, of each Borrower and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations, it being the intention of the parties hereto that all of the Obligations shall be the joint and several obligations of each Borrower without preferences or distinction among them. Borrowers

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shall be liable for all amounts due to Agent and Lenders under this Agreement, regardless of which Borrower actually receives the Loans hereunder or the amount of such Loans received or the manner in which Agent or any Lender accounts for such Loans or other extensions of credit on its books and records. The Obligations of Borrowers with respect to Loans made to one of them, and the Obligations arising as a result of the joint and several liability of one of Borrowers hereunder, with respect to Loans made to the other of Borrowers hereunder, shall be separate and distinct obligations, but all such other Obligations shall be primary obligations of all Borrowers.

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

(c)       Except as otherwise expressly provided herein, to the extent permitted by law, each Borrower (in its capacity as a joint and several obligor in respect of the obligations of the other Borrowers) hereby waives notice of acceptance of its joint and several liability, notice of occurrence of any Default or Event of Default (except to the extent notice is expressly required to be given pursuant to the terms of this Agreement), or of any demand for any payment under this Agreement or the other Financing Agreements, notice of any action at any time taken or omitted by Agent or any Lender under or in respect of any of the obligations hereunder, any requirement of diligence and, generally, all demands, notices and other formalities of every kind in connection with this Agreement and the other Financing Agreements. Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Agent or any Lender at any time or times in respect of any default by the other Borrowers in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Agent or any Lender in respect of any of the obligations hereunder, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of such obligations or the addition, substitution or release, in whole or in part, of the other Borrowers. Without limiting the generality of the foregoing, each Borrower (in its capacity as a joint and several obligor in respect of the obligations of the other Borrowers) assents to any other action or delay in acting or any failure to act on the part of Agent or any Lender, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder which might, but for the provisions of this Section 2.3, afford grounds for terminating, discharging or relieving such Borrower, in whole or in part, from any of its obligations under this Section 2.3, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the obligations of such Borrower under this Section 2.3 shall not be discharged except by performance and then only to the extent of such performance. The obligations of each Borrower under this Section 2.3 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any Borrower or a Lender. The joint and several liability of Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any Borrower or any of the Lenders.

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(d)       The provisions of this Section 2.3 are made for the benefit of the Lenders and their successors and assigns, and subject to Section 14.3 hereof, may be enforced by them from time to time against any Borrower as often as occasion therefor may arise and without requirement on the part of Agent or any Lender first to marshal any of its claims or to exercise any of its rights against the other Borrowers or to exhaust any remedies available to it against the other Borrowers or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this Section 2.3 shall remain in effect until all the Obligations shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations is rescinded or must otherwise be restored or returned by Agent or any Lender upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of this Section 2.3 will forthwith be reinstated and in effect as though such payment had not been made.

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

(f)        With respect to the Obligations arising as a result of the joint and several liability of Borrowers hereunder with respect to Loans or other extensions of credit made to the other Borrowers hereunder, each of Borrowers waives, until the Obligations shall have been paid in full and this Agreement shall have been terminated, any right to enforce any right of subrogation or any remedy which Agent or any Lender now has or may hereafter have against any Borrower, any endorser or any guarantor of all or any part of the Obligations, and any benefit of, and any right to participate in, any security or collateral given to Agent or any Lender. Any claim which any Borrower may have against any other Borrower with respect to any payments to Agent or Lenders hereunder or under any of the other Financing Agreements are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations. Upon the occurrence of any Event of Default and for so long as the same is continuing, Agent and Lenders may proceed directly and at once, without notice, against (i) with respect to Obligations of Borrowers, either or both of them or (ii) with respect to Obligations of any Borrower, to collect and recover the full amount, or any portion of the applicable Obligations, without first proceeding against the other applicable Borrowers or any other Person, or against any security or collateral for the Obligations. Each Borrower consents and agrees that Agent and Lenders shall be under no obligation to marshal any assets in favor of Borrower(s) or against or in payment of any or all of the Obligations.

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SECTION 3.

INTEREST AND FEES

 

3.1 Interest.

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

(b)       Each Borrower (or Borrower Agent on behalf of such Borrower) may from time to time request Eurodollar Rate Loans or may request that Base Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an additional Interest Period. Such request from a Borrower (or Borrower Agent on behalf of such Borrower) shall specify the amount of the Eurodollar Rate Loans or the amount of the Base Rate Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans (and if it does not specify such Interest Period shall be deemed to be a one (1) month period). Subject to the terms and conditions contained herein, three (3) Business Days after receipt by Agent of such a request from a Borrower (or Borrower Agent on behalf of such Borrower), which may be telephonic (and followed by a confirmation in writing if requested by Agent) such Eurodollar Rate Loans shall be made or Base Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be; provided, that, (i) no Event of Default shall exist or have occurred and be continuing, (ii) no Borrower or Borrower Agent shall have sent any notice of termination of this Agreement, (iii) such Borrower (or Borrower Agent on behalf of such Borrower) shall have complied with such customary procedures as are established by Agent and specified by Agent to Borrower Agent from time to time for requests by Borrowers for Eurodollar Rate Loans, (iv) no more than three (3) Interest Periods may be in effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $1,000,000 or an integral multiple of $500,000 in excess thereof, and (vi) Agent and each Lender shall have determined that the Interest Period or Adjusted Eurodollar Rate is available to Agent and such Lender and can be readily determined as of the date of the request for such Eurodollar Rate Loan by such Borrower. Any request by or on behalf of a Borrower for Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Agent and Lenders had purchased such deposits to fund the Eurodollar Rate Loans.

(c)       Any Eurodollar Rate Loans shall automatically convert to Base Rate Loans upon the last day of the applicable Interest Period, unless Agent has received a request to continue such Eurodollar Rate Loan at least three (3) Business Days prior to such last day in accordance with the terms hereof and Borrowers are entitled to such Eurodollar Rate Loan under the terms hereof.

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(d)       Interest shall be payable by Borrowers to Agent, for the account of Lenders, (i) in connection with Base Rate Loans, in arrears on the last Business Day of each fiscal quarter, (ii) as to any Eurodollar Rate Loan having an Interest Period of three months or less, on the last day of such Interest Period, and (iii) as to any Eurodollar Rate Loan having an Interest Period longer than three (3) months, (A) each three (3) month anniversary following the first day of such Interest Period and (B) the last day of such Interest Period, and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed, other than for Base Rate Loans which shall be calculated on the basis of three hundred sixty-five (365) or three hundred sixty-six (366) day year, as applicable, and actual days elapsed. The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or decrease in the Base Rate effective on the date any change in such Base Rate is effective.

3.2Fees. Borrowers shall pay (a) to Agent and Arranger (i) all reasonable out-of-pocket costs and expenses (including the reasonable fees and disbursements of counsel) in connection with the preparation, execution and delivery of the Financing Agreements; and (ii) the other fees set forth in the Engagement Letter and (b) to Agent the annual administrative fee described in the Engagement Letter. To the extent payment in full of the applicable fee is received by Agent from Borrowers on or about the date hereof, Agent shall pay to each Lender its share of such fees in accordance with the terms of the arrangements of Agent with such Lender.

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

3.4Illegality. Notwithstanding anything to the contrary contained herein, if (a) any change in any law or interpretation thereof by any Governmental Authority makes it unlawful for a Lender to make or maintain a Eurodollar Rate Loan or (b) a Lender determines in good faith (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) has become impracticable as a result of a circumstance that adversely affects the London interbank market or the position of such Lender in such market, then such Lender shall give notice thereof to Agent and Borrower Agent and may (i) declare that Eurodollar Rate Loans will not thereafter be made by such Lender, such that any request for a Eurodollar Rate Loans from such Lender shall be deemed to be a request for a Base Rate Loan unless such Lender’s declaration has been withdrawn (and it shall be withdrawn promptly upon the cessation of the circumstances described in clause (a) or (b) above and (ii) require that all outstanding Eurodollar Rate Loans made by such Lender be converted to Base Rate Loans immediately, in which event all outstanding Eurodollar Rate Loans of such Lender shall be so converted.

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3.5Increased Costs. If any Change in Law shall: (a) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in the Adjusted Eurodollar Rate); (b) subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Taxes or Other Taxes covered by Section 6.8 and the imposition of, or any change in the rate of, any taxes payable by such Lender described in Sections 6.8(a)(i) and (ii)); or (c) impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan), or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, Borrowers will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

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

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

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

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3.9 Mitigation; Replacement of Lenders.

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

(b)       If any Lender requests compensation under Sections 3.4, 3.5 or 3.6, if Borrowers are required to pay any additional amount to any Lender or Governmental Authority pursuant to Section 6.8, then within sixty (60) days thereafter, Borrower Agent may, at its sole expense and effort, upon notice to such Lender and Agent, replace such Lender by requiring such Lender to assign and delegate (and such Lender shall be obligated to assign and delegate), without recourse, all of its interests, rights and obligations under this Agreement to an Eligible Transferee that shall assume such obligations, provided, that, (i) Borrower Agent has received the prior written consent of Agent, (ii) such Lender shall have received payment of an amount equal to the outstanding principal amount of its Loans that it has funded, if any, accrued interest thereon, accrued fees and other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal) and Borrower Agent (in the case of accrued interest, fees and other amounts, including amounts under Section 3.10), (iii) such assignment will result in a reduction in such compensation and payments, and (iv) such assignment does not conflict with applicable laws or regulations. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower Agent to require such assignment and delegation cease to apply.

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

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its behalf by Borrower Agent). This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations.

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

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

SECTION 4.

CONDITIONS PRECEDENT

4.1Conditions Precedent to Effectiveness of Agreement to Make the Loans. The agreement of Lenders to make the Loans shall become effective upon the satisfaction, or waiver, immediately prior to or concurrently therewith each of the following conditions precedent:

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(a)       Agent shall have received (i) counterparts of this Agreement, executed by a duly authorized officer of each party hereto, (ii) for the account of each Lender requesting a promissory note, a Term Loan Note, (iii) counterparts of the Intercreditor Agreement, Pledge Agreement, Guarantee, IP Security Agreement and each Mortgage, in each case conforming to the requirements of this Agreement and executed by duly authorized officers of the Borrowers, Guarantors or other Persons, as applicableand (iv) counterparts of any other Financing Agreements, executed by the duly authorized officers of the parties thereto;

(b)       the Agent shall have received evidence that all boards of directors (including without limitation, the board of directors of the Acquired Company), governmental, shareholder and material third party consents and approvals necessary in connection with the Term Loan, the ABL Credit Agreement and the Acquisition have been obtained and all applicable waiting periods have expired without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on such transactions or that could seek or threaten any of the foregoing;

(c) the Agent shall have received the following:

(i)        original certified articles of incorporation or other charter documents, as applicable, of each Borrower and Guarantor certified (A) by an officer of such Borrower or Guarantor as of the Closing Date to be true and correct and in force and effect as of such date, and (B) to be true and complete as of a recent date by the appropriate Governmental Authority of the state of its incorporation or organization, as applicable;

(ii)      copies of resolutions of the board of directors or comparable managing body of each Borrower and Guarantor approving and adopting the Financing Agreements, the transactions contemplated therein and authorizing execution and delivery thereof, certified by an officer of such Borrower or Guarantor as of the Closing Date to be true and correct and in force and effect as of such date;

(iii)      a copy of the bylaws or comparable operating agreement of each Borrower and Guarantor certified by an officer of such Borrower or Guarantor as of the Closing Date to be true and correct and in force and effect as of such date;

(iv)      original certificates of good standing, existence or its equivalent with respect to each Borrower and Guarantor certified as of a recent date by the appropriate Governmental Authorities of the state of incorporation or organization and each other state in which the failure to so qualify and be in good standing could reasonably be expected to have a Material Adverse Effect; and

(v)       an incumbency certificate of each Borrower and Guarantor certified by an officer to be true and correct as of the Closing Date;

(d)       the pro forma capital, ownership and management structure and shareholding arrangement of the Parent, the Borrowers and their respective Subsidiaries (and all agreements relating thereto) shall be reasonably satisfactory to the Agent.

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(e)       There shall not have been any material modification, amendment, supplement or waiver to the Acquisition Documents without the prior written consent of the Agent, and the Acquisition shall have been consummated in accordance with the terms of the Acquisition Documents (without waiver of any conditions precedent to the obligations of any party thereto material to the interests of the Lenders). The Agent shall have received copies of all consents or payoff letters required to be delivered in connection with the ABL Credit Agreement. The Agent shall have received a copy, certified by an officer of the Parent as true and complete, of each Acquisition Document as originally executed and delivered, together with all exhibits and schedules thereto;

(f)        since September 30, 2007, no change, development, effect, circumstance or occurrence shall have occurred that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(g)       there shall be no (i) bankruptcy or insolvency proceedings pending with respect to the Parent, the Borrowers, the Acquired Company or any of their respective Subsidiaries or (ii) pending or ongoing, action, suit, investigation, litigation or proceeding in any court or before any other Governmental Authority (A) affecting this Agreement or the other Financing Agreements, that has not been settled, dismissed, vacated, discharged or terminated prior to the Closing Date or (B) that purports to affect the Parent, the Borrowers, the Acquired Company or any of their respective Subsidiaries, or any transaction contemplated by the Financing Agreements, which action, suit, investigation, litigation or proceeding could reasonably be expected to have a Material Adverse Effect, that has not been settled, dismissed, vacated, discharged or terminated prior to the Closing Date;

(h)       all of the existing Indebtedness for borrowed money of the Parent, the Borrowers, the Acquired Company or any of their respective Subsidiaries (other than Indebtedness permitted to exist pursuant to Section 10.3) shall be repaid in full and all security interests related thereto shall be terminated on or prior to the Closing Date;

(i)        Agent shall have received, in form and substance reasonably satisfactory to the Agent, (i) copies of satisfactory audited consolidated financial statements for the Parent and its Subsidiaries and the Acquired Company and its Subsidiaries for fiscal years ended 2004, 2005, 2006 and 2007 (if available) and interim unaudited financial statements for each quarterly period ended since the last audited financial statements for which financial statements are available, (ii) copies of satisfactory unaudited consolidated financial statements for the Parent and its Subsidiaries and the Acquired Company for fiscal year ended 2007, (iii) proformaconsolidated statements of income and loss and statements of cash flow for the Parent and its Subsidiaries and the Acquired Company for the month ended immediately prior to the Closing Date, and (iv) annual projections for the fiscal years ending 2008 through 2012, prepared by management of balance sheets, income statements and cashflow statements of the Parent and its Subsidiaries and the Acquired Company.

(j)        The Agent (or Control Agent in the case of clauses (D) and (G) below) shall have received, in form and substance satisfactory to the Agent:

(A)      searches of UCC filings in the jurisdiction of incorporation or formation, as applicable, of each Borrower and Guarantor and each jurisdiction

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where any Collateral is located or where a filing would need to be made in order to perfect the Agent’s security interest in the Collateral, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens and tax lien, judgment and pending litigation searches;

(B)      searches of ownership of Intellectual Property in the appropriate governmental offices and such patent/trademark/copyright filings as requested by the Administrative Agent in order to perfect the Agent’s security interest in the Intellectual Property;

(C)      completed UCC financing statements for each appropriate jurisdiction as is necessary, in the Agent’s sole discretion, to perfect the Agent’s security interest in the Collateral (including any fixture filings requested by the Agent);

(D)      stock or membership certificates, if any, evidencing the Equity Interests pledged to the Agent pursuant to the Pledge Agreement and duly executed in blank undated stock or transfer powers;

(E)      duly executed consents as are necessary, in the Agent’s sole discretion, to perfect the Lenders’ security interest in the Collateral;

(F)      in the case of any personal property Collateral located at premises leased by a Borrower and Guarantor such Collateral Access Agreements from the landlords of such real property to the extent the applicable Borrower or Guarantor is able to secure such letters, consents and waivers after using commercially reasonable efforts;

(G)      all instruments and chattel paper in the possession of any of the Borrowers and Guarantors, together with allonges or assignments as may be necessary or appropriate to perfect the Agent’s and the Lenders’ security interest in the Collateral;

(H)      Deposit Account Control Agreements satisfactory to the Agent with respect to each deposit account, except payroll accounts and to the extent otherwise determined by the Agent; and

(I)        such documentation as may be required by the Administrative Agent to comply with the Federal Assignment of Claims Act; and each Borrower and Guarantor shall take such actions as may be required by the Administrative Agent to file such documentation with the appropriate Governmental Authorities.

(k)       The Administrative Agent shall have received in form and substance satisfactory to the Administrative Agent and the Lenders:

(A)      fully executed and notarized Mortgages encumbering the Mortgaged Property as to properties owned by the Borrowers and Guarantors;

(B) a title report in respect of each of the Mortgaged Properties;

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(C)      with respect to each Mortgaged Property, a mortgage policy assuring the Agent that the Mortgage with respect to such Mortgaged Property creates a valid and enforceable first priority mortgage lien on such Mortgaged Property, free and clear of all defects and encumbrances except Permitted Liens, which mortgage policy shall be in form and substance reasonably satisfactory to the Agent and shall provide for affirmative insurance and such reinsurance as the Agent may reasonably request, all of the foregoing in form and substance reasonably satisfactory to the Agent;

(D)      evidence as to (A) whether any Mortgaged Property is a Flood Hazard Property and (B) if any Mortgaged Property is a Flood Hazard Property, (x) whether the community in which such Mortgaged Property is located is participating in the National Flood Insurance Program, (y) the applicable Borrower or Guarantor’s written acknowledgment of receipt of written notification from the Agent (I) as to the fact that such Mortgaged Property is a Flood Hazard Property and (II) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program and (z) copies of insurance policies or certificates of insurance of the Borrowers and Guarantors and their Subsidiaries evidencing flood insurance reasonably satisfactory to the Agent and naming the Agent as loss payee on behalf of the Lenders;

(E)      maps or plats of an as-built survey of the sites of the Mortgaged Properties certified to the Agent and the Title Insurance Company in a manner reasonably satisfactory to them, dated a date satisfactory to each of the Agent and the Title Insurance Company by an independent professional licensed land surveyor reasonably satisfactory to each of the Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be sufficient to delete any standard printed survey exception contained in the applicable title policy and be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 2005, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (A) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines; (B) the lines of streets abutting the sites and width thereof; (C) all access and other easements appurtenant to the sites necessary to use the sites; (D) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (E) any encroachments on any adjoining property by the building structures and improvements on the sites; and (F) if the site is described as being on a filed map, a legend relating the survey to said map;

(F)      satisfactory third-party environmental reviews of all owned Mortgaged Properties, including but not limited to Phase I environmental assessments, together with reliance letters in favor of the Lenders;

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(G)      to the extent requested by the Agent, opinions of counsel to the Borrowers and Guarantors for each jurisdiction in which the Mortgaged Properties are located;

(H)      to the extent available, zoning letters from each municipality or other Governmental Authority for each jurisdiction in which the Mortgaged Properties are located;

(I)        an appraisal of each owned Mortgaged Property, in form and substance satisfactory to the Agent; and

(J)       legal descriptions for each leased Mortgaged Property to the extent requested by Agent.

(l)        (i) Borrowers shall have at least $40,000,000 of availability under the Borrowing Base and (ii) there shall be not less than $25,000,000 of Excess Availability. Agent shall have received a copy, certified by the chief financial officer of the Parent as true and complete, of each ABL Financing Agreement as originally executed and delivered, together with all exhibits and schedules thereto and all other ABL Financing Agreements;

(m)      the Agent shall have received a certificate satisfactory thereto, substantially in the form of Exhibit B, for benefit of itself and the Lenders, provided by the Parent that sets forth information required by the Patriot Act including, without limitation, the identity of the Borrowers and Guarantors, the name and address of the Borrowers and Guarantors and other information that will allow the Agent or any Lender, as applicable, to identify the Borrowers and Guarantors in accordance with the Patriot Act;

(n)       the Agent shall have received copies of insurance policies or certificates and endorsements of insurance evidencing liability, casualty, property and business interruption insurance meeting the requirements set forth herein or in any other Financing Agreement. Subject to the Intercreditor Agreement, Agent shall be named (i) as lender’s loss payee, as its interest may appear, with respect to any such insurance providing coverage in respect of any Collateral and (ii) as additional insured, as its interest may appear, with respect to any such insurance providing liability coverage, and the Borrowers and Guarantors will use their commercially reasonable efforts to have each provider of any such insurance agree, by endorsement upon the policy or policies issued by it or by independent instruments to be furnished to the Agent, that it will give the Administrative Agent thirty (30) days prior written notice before any such policy or policies shall be altered or cancelled;

(o)       the Agent shall have received an officer’s certificate prepared by the chief financial officer of the Parent certifying, after giving effect to the Acquisition, the borrowings under the ABL Financing Agreements and the funding of the Term Loan, (i) to the financial condition, solvency and related matters of the Borrowers and the Guarantors and (ii) that the Parent and the Borrowers are in pro forma compliance with the financial covenant set forth in Section 11.1(as evidenced through detailed calculations of such financial covenant on a schedule to such certificate) as of the last day of the month ending at least twenty (20) dayspreceding the Closing Date, in substantially the form of Exhibit F hereto;

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(p)       the Agent shall have received an opinion or opinions (including, if requested by the Agent, local counsel opinions) of counsel for the Borrowers and Guarantors, dated the Closing Date and addressed to the Agent and the Lenders, in form and substance acceptable to the Agent (which shall include, without limitation, opinions with respect to the due organization and valid existence of each Borrower and Guarantor, opinions as to perfection of the Liens granted to the Agent pursuant to the Financing Agreements and opinions as to the non-contravention of the Borrowers’ and Guarantors’ organizational documents and relevant Material Contracts).

(q)       the Agent shall have received evidence reasonably satisfactory thereto provided by the Parent that the Senior Secured Leverage Ratio is not greater than 1.0 to 1.0 after giving effect to the Acquisition, the initial borrowings hereunder and the other transactions contemplated hereby for the four quarter period ending as of the last day of the fiscal quarter ending prior to the Closing Date;

(r)        the Agent shall have received all fees and expenses owed to Agent, Arranger and Lenders;

(s)       the Agent shall have received evidence reasonably satisfactory thereto that the Term Loan is permitted under the ABL Credit Agreement and the Senior Note Documents;

(t)        the Agent shall have received evidence reasonably satisfactory thereto that the Acquisition is permitted under the ABL Credit Agreement and the Senior Note Documents;

(u)       the Agent shall have received evidence reasonably satisfactory thereto that, as of the Closing Date, no Cash Dominion Event shall exist under the ABL Credit Agreement; and

(v)       all other documents and legal matters in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in form and substance to the Agent and its counsel.

SECTION 5.

GRANT AND PERFECTION OF SECURITY INTEREST

5.1Grant of Security Interest. To secure payment and performance of all Obligations, each Borrower and Guarantor hereby grants to Agent, for itself and the benefit of the other Secured Parties, a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to Agent, for itself and the benefit of the other Secured Parties, as security, all personal and real property and fixtures, and interests in property and fixtures, of each Borrower and Guarantor, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Lender, collectively, the “Collateral”), including:

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(a) all Accounts;

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

(c) all goods, including, without limitation, Inventory and Equipment;

(d) all Mortgaged Property and fixtures;

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

(f) all instruments, including, without limitation, all promissory notes;

(g) all documents;

(h) all deposit accounts;

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

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

(k)       all (i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) and (ii) monies, credit balances, deposits and other property of any Borrower or Guarantor now or hereafter held or received by or in transit to Agent, any Lender or its Affiliates or at any other depository or other institution from or for the account of any Borrower or Guarantor, whether for safekeeping, pledge, custody, transmission, collection or otherwise;

(l)        all commercial tort claims, including, without limitation, those identified in the Information Certificate;

(m) to the extent not otherwise described above, all Receivables;

(n) all Records; and

(o)       all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral.

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To secure payment and performance of all Obligations, each Borrower and Guarantor hereby grants to the Control Agent, for itself and for the benefit of the Lenders and the Agent, a continuing security interest in, a lien upon, and a right of setoff against, and hereby assigns to the Control Agent, for itself and for the benefit of the Lenders and the Agent, all Control Collateral of each Borrower and Guarantor, whether now owned or hereafter acquired or existing, and wherever located.

5.2Exclusions from Collateral. Notwithstanding anything to the contrary contained in Section 5.1 above, the types or items of Collateral described in such Section shall not include Excluded Property.

 

5.3 Perfection of Security Interests.

(a)       So long as any Obligations are outstanding and this Agreement has not been terminated, each Borrower and Guarantor irrevocably and unconditionally authorizes Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent or its designee as the secured party and such Borrower or Guarantor as debtor, as Agent may require, and including any other information with respect to such Borrower or Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Each Borrower and Guarantor hereby ratifies and approves all financing statements naming Agent or its designee as secured party and such Borrower or Guarantor, as the case may be, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to the date hereof and ratifies and confirms the authorization of Agent to file such financing statements (and amendments, if any). Each Borrower and Guarantor hereby authorizes Agent to adopt on behalf of such Borrower and Guarantor any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and any Borrower or Guarantor as debtor includes assets and properties of such Borrower or Guarantor that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Borrower or Guarantor to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral. So long as any Obligations are outstanding and this Agreement has not been terminated, in no event shall any Borrower or Guarantor at any time file, or permit or cause to be filed, any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured party and such Borrower or Guarantor as debtor.

(b)       Each Borrower and Guarantor does not have any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth in the Information Certificate. In the event that any Borrower or Guarantor shall be entitled to or shall receive any chattel paper or instrument for obligations in excess of $250,000 in any one case or in the aggregate that constitutes Collateral after the date hereof, Borrowers and

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Guarantors shall promptly notify Agent thereof in writing. Promptly upon the receipt thereof by or on behalf of any Borrower or Guarantor (including by any agent or representative), such Borrower or Guarantor shall deliver, or cause to be delivered to Agent (or Control Agent, as applicable), all tangible chattel paper and instruments that such Borrower or Guarantor has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time reasonably specify, in each case except as Agent may otherwise agree. At Agent’s option, each Borrower and Guarantor shall, or Agent may at any time on behalf of any Borrower or Guarantor, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Agent with the following legend referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the security interest of Wachovia Bank, National Association, as Agent and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party.”

(c)       In the event that any Borrower or Guarantor shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction) that constitute Collateral, such Borrower or Guarantor shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, such Borrower or Guarantor shall take, or cause to be taken, such actions as Agent may reasonably request to give Agent or Control Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

(d)       Each Borrower and Guarantor does not have any deposit accounts as of the date hereof, except as set forth in the Information Certificate. Borrowers and Guarantors shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit account, unless each of the following conditions is satisfied: (i) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of any Borrower or Guarantor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom such Borrower or Guarantor is dealing and the purpose of the account, (ii) the bank where such account is opened or maintained shall be reasonably acceptable to Agent, and (iii) on or before the opening of such deposit account, such Borrower or Guarantor shall deliver to Agent a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by such Borrower or Guarantor and the bank at which such deposit account is opened and maintained; provided, that, Borrowers and Guarantors shall not be required to deliver a Deposit Account Control Agreement with a depository bank as to any deposit account that is specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Borrower’s or Guarantor’s salaried employees.

(e)       No Borrower or Guarantor owns or holds, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or have any

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investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate.

(i)        In the event that any Borrower or Guarantor shall be entitled to or shall at any time after the date hereof hold or acquire any certificated securities that constitute Collateral, such Borrower or Guarantor shall promptly deliver the original of same to Agent, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may specify. If any securities that constitute Collateral, now or hereafter acquired by any Borrower or Guarantor are uncertificated and are issued to such Borrower or Guarantor or its nominee directly by the issuer thereof, such Borrower or Guarantor shall immediately notify Agent thereof and shall as Agent may specify, either (A) cause the issuer to agree to comply with instructions from Agent as to such securities, without further consent of any Borrower or Guarantor or such nominee, or (B) arrange for Agent to become the registered owner of the securities.

(ii)      Borrowers and Guarantors shall not, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary that constitute or do or will at any time have any Collateral in them unless each of the following conditions is satisfied: (A) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of such Borrower or Guarantor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom such Borrower or Guarantor is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be reasonably acceptable to Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, such Borrower or Guarantor shall execute and deliver, and cause to be executed and delivered to Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by such Borrower or Guarantor and such securities intermediary or commodity intermediary.

(f)        Borrowers and Guarantors are not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker’s acceptance or similar instrument as of the date hereof, except as set forth in the Information Certificate. In the event that any Borrower or Guarantor shall be entitled to or shall receive any right to payment under any letter of credit, banker’s acceptance or any similar instrument, whether as beneficiary thereof or otherwise after the date hereof involving an amount in excess of $250,000in any one case or in the aggregate that constitute Collateral, such Borrower or Guarantor shall promptly notify Agent thereof in writing. Such Borrower or Guarantor shall promptly, as Agent may specify, either (i) deliver, or cause to be delivered to Agent, with respect to any

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such letter of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance reasonably satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by such Borrower or Guarantor and agreeing to make all payments thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent to become, at Borrowers’ expense, the transferee beneficiary of the letter of credit, banker’s acceptance or similar instrument (as the case may be).

(g)       Borrowers and Guarantors do not have any commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In the event that any Borrower or Guarantor shall at any time after the date hereof have any commercial tort claims involving a claim in excess of $100,000 that arise in connection with or are related to any other Collateral, such Borrower or Guarantor shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by such Borrower or Guarantor to Agent of a security interest in such commercial tort claim (and the proceeds thereof). In the event that such notice does not include such grant of a security interest, the sending thereof by such Borrower or Guarantor to Agent shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting the authorization of Agent provided in Section 5.3(a) hereof or otherwise arising by the execution by such Borrower or Guarantor of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Agent or its designee as secured party and such Borrower or Guarantor as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, each Borrower and Guarantor shall promptly upon Agent’s request, execute and deliver, or cause to be executed and delivered, to Agent such other agreements, documents and instruments as Agent may reasonably require in connection with such commercial tort claim.

(h)       Borrowers and Guarantors do not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date hereof, except as set forth in the Information Certificate and except for goods located in the United States in transit to a location of a Borrower or Guarantor permitted herein in the ordinary course of business of such Borrower or Guarantor in the possession of the carrier transporting such goods. In the event that any goods, documents of title or other Collateral are at any time after the date hereof having a value in excess of $250,000 in any one case or in the aggregate in the custody, control or possession of any other person not referred to in the Information Certificate or such carriers, Borrowers and Guarantors shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, Borrowers and Guarantors shall use their commercially reasonable efforts to deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and the Borrower or Guarantor that is the owner of such Collateral.

(i)        Borrowers and Guarantors shall take any other actions reasonably requested by Agent from time to time to cause the attachment, perfection and, with respect to the Priority Collateral, first priority and, with respect to the ABL Priority Collateral, second

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priority (behind only the liens in favor of the ABL Agent permitted by Section 10.3(j)) of, and the ability of Agent to enforce, the security interest of Agent in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that any Borrower’s or Guarantor’s signature thereon is required therefor, (ii) causing Agent’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, and(iv) obtaining the consents and approvals of any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and taking all actions required by any earlier versions of the UCC or by other law, as applicable in any relevant jurisdiction.

 

5.4 Control Collateral Held by Control Agent.

Notwithstanding any provision to the contrary herein, (a) any Collateral that constitutes Control Collateral that is held by Agent hereunder shall be deemed to be held by the Control Agent in accordance with the Intercreditor Agreement and (b) any Collateral that constitutes Control Collateral that is held by Control Agent pursuant to the terms of the Intercreditor Agreement shall be deemed to be held by Agent for purposes of compliance with the terms herein.

 

5.5 Intercreditor Provisions.

Notwithstanding anything herein to the contrary, the lien and security interest granted to Agent pursuant to this Agreement and the exercise of any right or remedy by Agent hereunder are subject to the provisions of the Intercreditor Agreement, as the same may be amended, supplemented, modified or replaced from time to time. In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern.

SECTION 6.

COLLECTION AND ADMINISTRATION

6.1Borrowers’ Loan Accounts. Agent shall maintain one or more loan account(s) on its books in which shall be recorded (a) all Loans and other Obligations and the Collateral, (b) all payments made by or on behalf of any Borrower or Guarantor and (c) all other appropriate debits and credits as provided in this Agreement, including fees, charges, costs, expenses and interest. All entries in the loan account(s) shall be made in accordance with Agent’s customary practices as in effect from time to time.

 

6.2 [Reserved].

6.3Lenders’ Evidence of Debt. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Obligations of each Borrower to such Lender,

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including the amounts of the Loans made by it and each repayment and prepayment in respect thereof, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. Any such records shall be presumptively correct, absent manifest error, provided, that, the failure to make any entry or any error in such records, shall not affect any Lender’s Pro Rata Share of the Loans hereunder or the Obligations in respect of any applicable Loans and in the event of any inconsistency between the Register and any Lender’s records, the Register shall govern.

 

6.4 Register.

(a)       Agent (or its agent or sub-agent appointed by it) shall maintain a register (the “Register”) for the recordation of the names and addresses of Lenders and principal amount of the Loans (the “Registered Loans”) owing to each Lender from time to time. The Register, as in effect at the close of business on the preceding Business Day, shall be available for inspection by Borrower Agent or any Lender (with respect to a Lender, solely with respect to the Obligations owing to such Lender) at a reasonable time and from time to time upon reasonable prior notice. Agent shall record, or cause to be recorded, in the Register the Loans in accordance with the provisions of Section 15.7 and Agent shall also maintain a copy of each Assignment and Acceptance delivered to and accepted by it and shall modify the Register to give effect to each Assignment and Acceptance, and any such recording shall be presumptively correct, absent manifest error; provided, that, the failure to make any entry or any error in such records, shall not affect any Lender’s Obligations in respect of any Loan. Borrowers, Guarantors, Agent and Lenders shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. Borrowers hereby designate and authorize Agent, and Agent agrees, to maintain, or cause to be maintained as agent for Borrowers’ solely for purposes of maintaining the Register as provided in this Section 6.4(a).

(b)       Each Lender that grants a participation shall maintain a register as a non-fiduciary agent of Borrowers on which it enters the name and address of each Participant and the principal and interest amount of each Participant’s interest in the Loans held by it (the “Participant Register”). The entries in the Participant Register shall be conclusive, absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

 

6.5 [Reserved].

 

6.6 [Reserved].

 

6.7 Payments.

(a)       All Obligations shall be payable to the account designated by the Agent or such other place as Agent may designate in writing to Borrower Agent from time to time.

(b)       Subject to the other terms and conditions contained herein, Agent shall apply payments received or collected from any Borrower or Guarantor or for the account of any Borrower or Guarantor (including the monetary proceeds of collections or of realization

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upon any Collateral) as follows: first, to the payment in full of any fees, indemnities or expense reimbursements then due to Agent from any Borrower or Guarantor; second, ratably, to the payment in full of any fees, indemnities, or expense reimbursements then due to Lenders from any Borrower or Guarantor; third, ratably, to the payment in full of interest due in respect of any Loans (and including any Special Agent Advances); fourth, to the payment in full of principal in respect of Special Agent Advances; fifth, ratably, to the payment in full of principal in respect of the Loans, and sixth, to pay or prepay any other Obligations, whether or not then due, in such order and manner as Agent directs. All references to the term “ratably” as used in this Section 6.7(b) shall mean prorata on the basis of the amount owing to any one Person in relationship to the amounts owing to all Persons of the same category of Obligations within the same level of priority.

(c)       Notwithstanding anything to the contrary contained in this Agreement, unless so directed by Agent, or unless a Default or an Event of Default shall exist or have occurred and be continuing, Agent shall not apply any payments which it receives to any Eurodollar Rate Loans, except (i) on the expiration date of the Interest Period applicable to any such Eurodollar Rate Loans or (ii) in the event that there are no outstanding Base Rate Loans.

(d)       At Agent’s option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan account(s) of any Borrower maintained by Agent. If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Agent, any Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Agent or such Lender. Borrowers and Guarantors shall be liable to pay to Agent, and do hereby agree to indemnify and hold Agent and Lenders harmless for the amount of any payments or proceeds surrendered or returned. This Section 6.7(d) shall remain effective notwithstanding any contrary action which may be taken by Agent or any Lender in reliance upon such payment or proceeds. This preceding two sentences of this Section 6.7(d) shall survive the payment of the Obligations and the termination of this Agreement.

 

6.8 Taxes.

(a)       Any and all payments by or on account of any of the Obligations shall be made free and clear of and without deduction or withholding for or on account of, duties, taxes, levies, imposts, fees, deductions, charges or withholdings of any kind imposed by any Governmental Authority with respect to such payments, excluding (i) in the case of each Lender and Agent (A) duties, taxes, levies, imposts, fees, deductions, charges, or withholdings of any kind measured by its net income, and franchise taxes imposed on it, by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender or Agent (as the case may be) is incorporated or otherwise organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located and (B) any United States withholding taxes due or payable with respect to payments under the Financing Agreements under laws (including any statute, treaty or regulation) in effect on the date hereof (or, in the case of an Eligible Transferee, the date of the Assignment and Acceptance) applicable to such Lender or Agent, as the case may be,

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but not excluding any United States withholding taxes payable as a result of any change in such laws occurring after the date hereof (or the date of such Assignment and Acceptance) and (ii) in the case of each Lender or Agent, duties, taxes, levies, imposts, fees, deductions, charges or withholdings of any kind imposed on it as a result of a present or former connection between such Lender or Agent (as the case may be) and the jurisdiction imposing such duties, taxes, levies, imposts, fees, deductions, charges or withholdings but excluding any such connection arising from the activities of such Lender or Agent (as the case may be) pursuant to or in respect of this Agreement or any of the other Financing Agreements including but not limited to, executing delivering or performing its obligations or receiving a payment under or enforcing this Agreement or any of the other Financing Agreements (all such non-excluded duties, taxes, levies, imposts, fees, deductions, charges, or withholdings and all interest, penalties or similar liabilities with respect thereto being hereinafter referred to as “Taxes”).

(b)       Subject to the last sentence of Section 6.8(g), if any Taxes shall be required by law to be deducted from or in respect of any sum payable in respect of the Obligations to any Lender or Agent (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 6.8), such Lender or Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the relevant Borrower or Guarantor shall make such deductions, (iii) the relevant Borrower or Guarantor shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law and (iv) the relevant Borrower or Guarantor shall deliver to Agent evidence of such payment.

(c)       In addition, each Borrower and Guarantor agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies of the United States or any political subdivision thereof or any applicable foreign jurisdiction, and all liabilities with respect thereto, in each case arising from any payment made hereunder or under any of the other Financing Agreements or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Financing Agreements (collectively, “Other Taxes”).

(d)       Subject to the last sentence of Section 6.8(g), each Borrower and Guarantor shall indemnify each Lender and Agent for the full amount of Taxes and Other Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 6.8) paid by such Lender or Agent (as the case may be) and any liability (including for penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within thirty (30) days from the date such Lender or Agent (as the case may be) makes written demand therefor. A certificate as to the amount of such payment delivered to Borrower Agent by a Lender or by Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(e)       As soon as practicable after any payment of Taxes or Other Taxes by any Borrower or Guarantor, such Borrower or Guarantor shall furnish to Agent, at its address referred to herein, the original or a certified copy of a receipt evidencing payment thereof.

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(f)        Without prejudice to the survival of any other agreements of any Borrower or Guarantor hereunder or under any of the other Financing Agreements, the agreements and obligations of such Borrower or Guarantor contained in this Section 6.8 shall survive the termination of this Agreement and the payment in full of the Obligations.

(g)       Each Foreign Lender shall deliver to Borrower Agent (with a copy to Agent) on or prior to the date hereof, or in the case of a Foreign Lender that is an assignee of an interest under this Agreement pursuant to Sections 15.7(b) or 15.7(f) (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of the applicable Assignment and Acceptance, or upon any change in lending office of a Foreign Lender: (i) two (2) duly completed original signed copies of Internal Revenue Service Form W-8BEN claiming exemption from, or a reduction to, withholding tax under an income tax treaty with respect to payments to be made under this Agreement and any of the other Financing Agreements, or any successor form, (ii) two (2) duly completed original signed copies of Internal Revenue Service Form W-8ECI claiming exemption from withholding tax with respect to payments to be made under this Agreement and any of the other Financing Agreements because the income is effectively connected with a U.S. trade or business or any successor form, or (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Sections 871(h) or 881(c) of the Code, (A) a certificate of the Lender to the effect that such Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code or a “controlled foreign corporation” with respect to which any Borrower is a related person within the meaning of Section 864(d)(4) of the Code and (B) two (2) duly completed original signed copies of Internal Revenue Service Form W-8BEN certifying to such Lender’s entitlement to an exemption from withholding tax with respect to payments of interest to be made under this Agreement and any of the other Financing Agreements or any successor form. Each Lender that is not a Foreign Lender and is not a person whose name indicates that it is an “exempt recipient” (as such term is defined in Section 1.6049-4(c)(1)(ii) of the United States Treasury Regulations) agrees to deliver to Borrower Agent (with a copy to Agent) on or prior to the date hereof, or in the case of a Lender that is an assignee of an interest under this Agreement pursuant to Sections 15.7(b) or 15.7(f) (unless the respective Lender was already a Lender hereunder immediately prior to such assignment) on the date of the applicable Assignment and Acceptance two (2) duly completed original signed copies of Internal Revenue Service Form W-9 certifying to such Lender’s entitlement as of such date to a complete exemption from United States backup withholding tax with respect to payments to be made under this Agreement and any of the other Financing Agreements, or successor forms. In addition, each Lender agrees that it will deliver updated versions of the foregoing, as applicable, whenever the previous certification has become obsolete or inaccurate in any material respect, together with such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from United States withholding tax with respect to payments under this Agreement and any of the other Financing Agreements. Unless Borrower Agent and Agent have received forms or other documents satisfactory to them indicating that payments hereunder or under any of the other Financing Agreements to or for a Foreign Lender are not subject to United States withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, Borrowers, Guarantors or Agent shall withhold amounts required to be withheld by applicable requirements of law from such payments at the applicable statutory rate.

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Borrowers and Guarantors shall not be required to indemnify any Foreign Lender or to pay any additional amounts to any Foreign Lender in respect of U.S. withholding tax pursuant Section 6.8(b) or 6.8(d) above to the extent that the obligation to pay such additional amounts would not have arisen but for a failure by such Foreign Lender to comply with the provisions of this Section 6.8(g). Should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, Borrowers and Guarantors shall, at such Lender’s expense, take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes.

(h)       Any Lender claiming any additional amounts payable pursuant to this Section 6.8 shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its applicable lending office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that would be payable or may thereafter accrue and would not, in the sole determination of such Lender, be otherwise disadvantageous in any material respect to such Lender.

(i)        If the Borrowers or Guarantors pay any additional amount pursuant to this Section 6.8 with respect to any Lender, such Lender shall use reasonable efforts to obtain a refund of tax or credit against its tax liabilities on account of such payment; provided, that, such Lender shall have no obligation to use such reasonable efforts to obtain a credit if it is in an excess foreign tax credit position and shall have no obligation to use such reasonable efforts if it believes in good faith that claiming a refund or credit would cause adverse tax consequences to it. In the event that such Lender receives such a refund or credit, such Lender shall pay to the Borrowers or Guarantors, an amount that such Lender reasonably determines is equal to the net tax benefit obtained by such Lender as a result of such payment by the Borrowers or Guarantors, as applicable, so as to leave such Lender in no worse position that in which it would have been in if payment of the relevant additional amount had not been made. Nothing contained in this Section 6.8(j) shall require a Lender to disclose or detail the basis of its calculation of the amount of any tax benefit or any other amount or the basis of its determination referred to in the proviso to the first sentence of this Section 6.8(j) to the Borrowers, Guarantors or any other party.

 

6.9 [Reserved].

6.10Appointment of Borrower Agent as Agent for Requesting Loans and Receipts of Loans and Statements.

(a)       Each Borrower hereby irrevocably appoints and constitutes Borrower Agent as its agent and attorney-in-fact to request and receive Loans pursuant to this Agreement and the other Financing Agreements from Agent or any Lender in the name or on behalf of such Borrower. Agent and Lenders may disburse the Loans to such bank account of Borrower Agent or a Borrower or otherwise make such Loans to a Borrower as Borrower Agent may designate or direct, without notice to any other Borrower or Guarantor. Notwithstanding anything to the contrary contained herein, Agent may at any time and from time to time require that Loans to or for the account of any Borrower be disbursed directly to an operating account of such Borrower.

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(b)       Borrower Agent hereby accepts the appointment by Borrowers to act as the agent and attorney-in-fact of Borrowers pursuant to this Section 6.10. Borrower Agent shall ensure that the disbursement of any Loans to each Borrower requested by or paid to or for the account of Parent, shall be paid to or for the account of such Borrower.

(c)       Each Borrower and other Guarantor hereby irrevocably appoints and constitutes Borrower Agent as its agent to receive statements on account and all other notices from Agent and Lenders with respect to the Obligations or otherwise under or in connection with this Agreement and the other Financing Agreements.

(d)       Any notice, election, representation, warranty, agreement or undertaking by or on behalf of any other Borrower or any Guarantor by Borrower Agent shall be deemed for all purposes to have been made by such Borrower or Guarantor, as the case may be, and shall be binding upon and enforceable against such Borrower or Guarantor to the same extent as if made directly by such Borrower or Guarantor.

(e)       No termination of the appointment of Borrower Agent as agent as aforesaid shall be effective, except after ten (10) Business Days’ prior written notice to Agent.

6.11Pro Rata Treatment. Except to the extent otherwise provided in this Agreement or as otherwise agreed by the applicable Lenders: (a) the making and conversion of Loans shall be made among the Lenders based on their respective Pro Rata Shares as to the Loans and (b) each payment on account of any Obligations to or for the account of one or more of Lenders in respect of any Obligations due on a particular day shall be allocated among the Lenders entitled to such payments based on their respective Pro Rata Shares and shall be distributed accordingly.

 

6.12 Sharing of Payments, Etc.

(a)       Each Borrower and Guarantor agrees that, in addition to (and without limitation of) any right of setoff, banker’s lien or counterclaim Agent or any Lender may otherwise have, each Lender shall be entitled, at its option (but subject, as among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset balances held by it for the account of such Borrower or Guarantor at any of its offices, in dollars or in any other currency, against any principal of or interest on any Loans owed to such Lender or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to such Borrower or Guarantor), in which case it shall promptly notify Borrower Agent and Agent thereof; provided, that, such Lender’s failure to give such notice shall not affect the validity thereof.

(b)       If any Lender (including Agent) shall obtain from any Borrower or Guarantor payment of any principal of or interest on any Loan owing to it or payment of any other amount under this Agreement or any of the other Financing Agreements through the exercise of any right of setoff, banker’s lien or counterclaim or similar right or otherwise (other than from Agent as provided herein), and, as a result of such payment, such Lender shall have received more than its Pro Rata Share of the principal of the Loans or more than its share of such other amounts then due hereunder or thereunder by any Borrower or Guarantor to such Lender than the percentage thereof received by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and

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simultaneously purchase from such other Lenders a participation in the Loans or such other amounts, respectively, owing to such other Lenders (or such interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) in accordance with their respective Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored.

(c)       Each Borrower and Guarantor agrees that any Lender purchasing a participation (or direct interest) as provided in this Section may exercise, in a manner consistent with this Section, all rights of setoff, banker’s lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation.

(d)       Nothing contained herein shall require any Lender to exercise any right of setoff, banker’s lien, counterclaims or similar rights or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or obligation of any Borrower or Guarantor. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, assign such rights to Agent for the benefit of Lenders and, in any event, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.

 

6.13 [Reserved].

6.14Obligations Several; Independent Nature of Lenders’ Rights. The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement or any of the other Financing Agreements and no action taken by the Lenders pursuant hereto or thereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and subject to Section 14.3 hereof, each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

SECTION 7.

COLLATERAL REPORTING AND COVENANTS

7.1Collateral Reporting. Borrowers shall provide Agent with a copy of any Collateral or other reports provided to ABL Agent or ABL Lenders pursuant to the ABL Credit Agreement.

 

7.2 Accounts Covenants.

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(a)       Borrowers shall notify Agent promptly of (i) the assertion of any claims, offsets, defenses or counterclaims by any account debtor, or any disputes with any account debtor or any settlement, adjustment or compromise thereof, to the extent any of the foregoing exceeds $250,000 in any one case or $500,000 in the aggregate and (ii) all material adverse information of which it has notice relating to the financial condition of any account debtor. No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor except in the ordinary course of a Borrower’s business in accordance with the current practices of such Borrower as in effect on the date hereof. At any time that an Event of Default exists or has occurred and is continuing and after the Discharge of the ABL Obligations (as defined in the Intercreditor Agreement), Agent shall, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any credits, discounts or allowances.

(b)       With respect to each Account: (i) the amounts shown on any invoice delivered to Agent or schedule thereof delivered to Agent shall be true and complete in all material respects, (ii) no payments shall be made thereon except those sent to the Concentration Accounts (as defined in the ABL Credit Agreement) and as otherwise may be instructed by the ABL Agent, (iii) no credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor except as reported to Agent in accordance with this Agreement and except for credits, discounts, allowances or extensions made or given in the ordinary course of each Borrower’s business, (iv) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto other than as reported to Agent in accordance with the terms of this Agreement, and (v) none of the transactions giving rise thereto will violate any applicable foreign, Federal, State or local laws or regulations, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms.

(c)       Agent shall have the right at any time or times, in Agent’s name or in the name of a nominee of Agent, to verify the validity, amount or any other matter relating to any Receivables or other Collateral, by mail, telephone, facsimile transmission or otherwise.

7.3Inventory Covenants. With respect to the Inventory: (a) each Borrower and Guarantor shall at all times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate records in all material respects itemizing and describing the kind, type, quality and quantity of Inventory, such Borrower’s or Guarantor’s cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrowers and Guarantors shall conduct a physical count of the Inventory either through periodic cycle counts or wall to wall counts, so that all Inventory is subject to such counts at least once each year, but at any time or times as Agent may request at any time a Default or an Event of Default exists or has occurred and is continuing, and promptly following such physical inventory (whether through periodic cycle counts or wall to wall counts) shall supply Agent at least once each calendar quarter if any such counts are performed within such quarter, or otherwise once each calendar year, with a report in the form and with such specificity as may be reasonably satisfactory to Agent concerning such physical count; (c) Borrowers and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales of Inventory in the ordinary course of its business and

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except to move Inventory directly from one location set forth or permitted herein to another such location and except for Inventory shipped from the manufacturer thereof to such Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (d) Borrowers shall deliver or cause to be delivered to Agent copies of written appraisals as to the Inventory delivered to the ABL Agent and accompanied by a statement that Agent and Lenders are expressly permitted to rely thereon; (e) Borrowers and Guarantors shall produce, use, store and maintain the Inventory with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the use, sale or other disposition of the Inventory (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party); (g) as of the date hereof, Borrowers and Guarantors do not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate any Borrower or Guarantor to repurchase such Inventory but shall give Agent prior written notice if such practice changes together with such information with respect to the new policy as may reasonably be requested by Agent; (h) Borrowers and Guarantors shall keep the Inventory in good and marketable condition; and (i) Borrowers and Guarantors shall not acquire or accept any Inventory on consignment or approval unless such Inventory has been specifically identified in a report with respect thereto provided by Borrower Agent to Agent pursuant to Section 7.1(a) hereof when required to be included in such report or Agent has otherwise received prior written notice thereof in form and substance reasonably satisfactory to Agent.

7.4Equipment and Real Property. (a) Borrowers and Guarantors shall keep the Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted); (b) Borrowers and Guarantors shall use the Equipment and Real Property with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with all applicable laws in all material respects; (c) the Equipment is and shall be used in the business of Borrowers and Guarantors and not for personal, family, household or farming use; provided, that, certain motor vehicles used primarily by employees for business purposes may from time to time be incidentally used for personal, family or household use, as permitted by the internal policies of the applicable Borrower or Guarantor if any; (d) Borrowers and Guarantors shall not remove any Equipment from the locations set forth or permitted herein, except to the extent necessary to have any Equipment repaired, replaced or maintained in the ordinary course of its business or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of such Borrower or Guarantor in the ordinary course of business; (e) the Equipment is now and shall remain personal property and Borrowers and Guarantors shall not permit any of the Equipment to be or become a part of or affixed to real property, other than any Mortgaged Property (but not including for this purpose any plumbing and electrical fixtures, heating, ventilation and air conditioning, wall and floor coverings, walls or ceilings and other fixtures not constituting trade fixtures); and (f) as between Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, each Borrower and Guarantor assumes all responsibility and liability arising from or relating to the use, sale or other disposition of the Equipment and Real Property (but nothing contained herein shall be construed as the basis for any liability of any Borrower or Guarantor as to any third party).

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7.5Power of Attorney. Each Borrower and Guarantor hereby irrevocably designates and appoints Agent (and all persons designated by Agent) as such Borrower’s and Guarantor’s true and lawful attorney-in-fact, and authorizes Agent, in such Borrower’s, Guarantor’s or Agent’s name, to, at any time an Event of Default exists or has occurred and is continuing and subject to the terms of the Intercreditor Agreement, (a) demand payment on any Collateral, (b) enforce payment of any of the Collateral by legal proceedings or otherwise, (c) exercise all of such Borrower’s or Guarantor’s rights and remedies to collect any Collateral, (d) sell or assign any Collateral upon such terms, for such amount and at such time or times as the Agent deems advisable, (e) settle, adjust, compromise, extend or renew any of the Collateral, (f) discharge and release any Collateral, (g) prepare, file and sign such Borrower’s or Guarantor’s name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Collateral, (h) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Collateral to an address designated by Agent, and open and dispose of all mail addressed to such Borrower or Guarantor and handle and store all mail relating to the Collateral, (i) clear Inventory the purchase of which was financed with a letter of credit through U.S. Bureau of Customs and Border Protection or foreign export control authorities in such Borrower’s or Guarantor’s name, Agent’s name or the name of Agent’s designee, and to sign and deliver to customs officials powers of attorney in such Borrower’s or Guarantor’s name for such purpose, and to complete in such Borrower’s or Guarantor’s or Agent’s name, any order, sale or transaction, obtain the necessary documents in connection therewith and collect the proceeds thereof, and (j) do all acts and things which are necessary, in Agent’s reasonable determination, to fulfill such Borrower’s or Guarantor’s obligations under this Agreement and the other Financing Agreements. Each Borrower and Guarantor hereby releases Agent and Lenders and their respective officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Agent’s or any Lender’s own gross negligence or willful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction.

7.6Right to Cure. Agent may, at its option, upon prior notice to Borrower Agent, (a) cure any default by any Borrower or Guarantor under any material agreement with a third party that affects the Collateral, its value or the ability of Agent to collect, sell or otherwise dispose of the Collateral or the rights and remedies of Agent or any Lender therein or the ability of any Borrower or Guarantor to perform its obligations hereunder or under any of the other Financing Agreements, (b) pay or bond on appeal any judgment entered against any Borrower or Guarantor, (c) discharge taxes, liens, security interests or other encumbrances at any time levied on or existing with respect to the Collateral and (d) pay any amount, incur any expense or perform any act which, in Agent’s judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Agent and Lenders with respect thereto. Agent may add any amounts so expended to the Obligations and charge any Borrower’s account therefor or may demand immediate payment thereof. Agent and Lenders shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of any Borrower or Guarantor.

7.7Access to Premises. From time to time as requested by Agent, at the cost and expense of Borrowers, (a) Agent or its designee shall have complete access to all of each Borrower’s and Guarantor’s premises during normal business hours and after notice to Parent, or at any time and without notice to Borrower Agent if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral and all of each

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Borrower’s and Guarantor’s books and records, including the Records and (b) each Borrower and Guarantor shall promptly furnish to Agent such copies of such books and records or extracts therefrom as Agent may reasonably request, and Agent or any Lender or Agent’s designee may use during normal business hours such of any Borrower’s and Guarantor’s personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event of Default exists or has occurred and is continuing for the realization of Collateral.

SECTION 8.

REPRESENTATIONS AND WARRANTIES

Each Borrower and Guarantor hereby represents and warrants to Agent and Lenders the following:

8.1Existence, Power and Authority. Each Borrower and Guarantor is a corporation, limited liability company or limited partnership duly organized and in good standing under the laws of its jurisdiction of organization and is duly qualified as a foreign corporation, limited liability company or limited partnership, as applicable, and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, where the failure to so qualify has or would reasonably be expected to have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder (a) are all within each Borrower’s and Guarantor’s corporate or limited liability company or limited partnership powers, (b) have been duly authorized, (c) are not in contravention of law or the terms of any Borrower’s or Guarantor’s certificate of incorporation, certificate of formation, bylaws, operating agreement, limited partnership agreement or other organizational documentation, or any indenture, material agreement or undertaking to which any Borrower or Guarantor is a party or by which any Borrower or Guarantor or its property are bound and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant, any lien, security interest, charge or other encumbrance upon any property of any Borrower or Guarantor except as permitted hereunder. This Agreement and the other Financing Agreements to which any Borrower or Guarantor is a party constitute legal, valid and binding obligations of such Borrower and Guarantor enforceable in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or law).

8.2Name; State of Organization; Chief Executive Office; Collateral Locations.

(a)       The exact legal name of each Borrower and Guarantor is as set forth on the signature page of this Agreement and in the Information Certificate. No Borrower or Guarantor has, during the five (5) years prior to the date of this Agreement, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property or assets out of the ordinary course of business, except as set forth in the Information Certificate.

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(b)       Each Borrower and Guarantor is an organization of the type and organized in the jurisdiction set forth in the Information Certificate. The Information Certificate accurately sets forth the organizational identification number of each Borrower and Guarantor or accurately states that such Borrower or Guarantor has none and accurately sets forth the federal employer identification number of each Borrower and Guarantor.

(c)       The chief executive office and mailing address of each Borrower and Guarantor and each Borrower’s and Guarantor’s Records concerning Accounts are located only at the address identified as such in Schedule 8.2 to the Information Certificate and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to the Information Certificate, subject to the rights of any Borrower or Guarantor to establish new locations in accordance with Section 9.2 below and other than Collateral in transit to any such locations.

8.3Financial Statements; No Material Adverse Effect. All financial statements relating to any Borrower or Guarantor which have been or may hereafter be delivered by any Borrower or Guarantor to Agent and Lenders have been prepared in accordance with GAAP (except as to any interim financial statements, to the extent such statements are subject to normal year-end adjustments and do not include any notes) and fairly present in all material respects the financial condition and the results of operation of such Borrower and Guarantor as at the dates and for the periods set forth therein. Except as disclosed in any interim financial statements furnished by Borrowers and Guarantors to Agent prior to the date of this Agreement, there has been no act, condition or event which has had or is reasonably likely to have a Material Adverse Effect since the date of the most recent audited financial statements of any Borrower or Guarantor furnished by any Borrower or Guarantor to Agent prior to the date of this Agreement. The projections dated January 16, 2008 for the fiscal years ending 2008 through 2012 that have been delivered to Agent or any projections hereafter delivered to Agent have been prepared in light of the past operations of the businesses of Borrowers and Guarantors and are based upon estimates and assumptions stated therein, all of which Borrowers and Guarantors believe to be reasonable and fair in light of the then current conditions and current facts and reflect the good faith and reasonable estimates of Borrowers and Guarantors of the future financial performance of Parent and its Subsidiaries and of the other information projected therein for the periods set forth therein.

8.4Priority of Liens; Title to Properties. The security interests and liens granted to Agent under this Agreement and the other Financing Agreements constitute (x) valid and perfected first priority liens in the case of Priority Collateral and (y) valid and perfected second priority liens in the case of ABL Priority Collateral and security interests in and upon the Collateral subject only to the liens indicated on Schedule 8.4 to the Information Certificate and the other liens permitted under Section 10.2 hereof. Each Borrower and Guarantor has good and marketable fee simple title to or valid leasehold interests in all of its Real Property and good, valid and merchantable title to all of its other properties and assets subject to no liens, mortgages, pledges, security interests, encumbrances or charges of any kind, except for Permitted Liens and such other exceptions shown on the mortgage policies delivered in accordance with Section 4.1(k)(C) and agreed to by the Agent and those granted to Agent and such others as are specifically listed on Schedule 8.4 to the Information Certificate or permitted under Section 9.8 hereof.

8.5Tax Returns. Each Borrower and Guarantor has filed, or caused to be filed, in a timely manner all material tax returns, reports and declarations which are required to be filed by it.

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All information in such tax returns, reports and declarations is complete and accurate in all material respects. Each Borrower and Guarantor has paid or caused to be paid all taxes due and payable by it, except taxes (a) the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower or Guarantor and with respect to which adequate reserves have been set aside on its books and (b) which could not, individually or in the aggregate, have a Material Adverse Effect. Adequate provision has been made for the payment of all accrued and unpaid Federal, State, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed.

8.6Litigation. (a) there is no investigation by any Governmental Authority pending, or to the best of any Borrower’s or Guarantor’s knowledge threatened in writing, against or affecting any Borrower or Guarantor, its or their assets or business and (b) there is no action, suit, proceeding or claim by any Person pending, or to the best of any Borrower’s or Guarantor’s knowledge threatened in writing, against any Borrower or Guarantor or its or their assets or goodwill, or against or affecting any transactions contemplated by this Agreement, in each case, which if adversely determined against such Borrower or Guarantor has or could reasonably be expected to have a Material Adverse Effect.

 

8.7 Compliance with Other Agreements and Applicable Laws.

(a)       Borrowers and Guarantors are not in default in any respect under, or in violation in any respect of the terms of, any agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound. Borrowers and Guarantors are in material compliance with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority relating to their respective businesses, including, without limitation, those set forth in or promulgated pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the rules and regulations thereunder, and all Environmental Laws, in each case where the failure to comply has or could reasonably be expected to have a Material Adverse Effect.

(b)       Borrowers and Guarantors have obtained all material permits, licenses, approvals, consents, certificates, orders or authorizations of any Governmental Authority required for the lawful conduct of its business (the “Permits”). All of the Permits are valid and subsisting and in full force and effect. There are no actions, claims or proceedings pending or to the best of any Borrower’s or Guarantor’s knowledge, threatened in writing that seek the revocation, cancellation, suspension or modification of any of the Permits where any of the same would have a Material Adverse Effect.

8.8Environmental Compliance. Except for matters which, when considered either individually or in the aggregate could not be reasonably expected to have a Material Adverse Effect:

(a)       Borrowers, Guarantors and their Subsidiaries have not generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on any property owned, leased or operated by it or used by it in any manner which at any time violates any applicable Environmental Law or Permit, and the operations of Borrowers, Guarantors and their Subsidiaries at such properties complies with all Environmental Laws and all Permits.

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(b)       No Borrower or Guarantor has received any notice of or otherwise has any information that there has been any investigation by any Governmental Authority or any proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any investigation pending or to the best of any Borrower’s or Guarantor’s knowledge threatened in writing, with respect to any non compliance with or violation of the requirements of any Environmental Law by any Borrower or Guarantor and any of its Subsidiaries or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter with regard to any properties or assets owned, leased or operated by it or used by Borrowers, Guarantors or their Subsidiaries or their businesses.

(c)       Borrowers, Guarantors and their Subsidiaries have no liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials under or from any property owned, leased or operated by it or used by it or otherwise in connection with their businesses.

 

8.9 Employee Benefits.

(a)       Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or State law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service and to the best of any Borrower’s or Guarantor’s knowledge, nothing has occurred which would cause the loss of such qualification where such loss, when combined with other such occurrences or failures to comply, would not reasonably be expected to have a Material Adverse Effect. Each Borrower and its ERISA Affiliates have made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

(b)       Except as set forth in the Information Certificate, there are no pending, or to the best of any Borrower’s or Guarantor’s knowledge, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan. Except as set forth in the Information Certificate, there has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan.

(c)       (i) Except as set forth in the Information Certificate, no ERISA Event has occurred or is reasonably expected to occur; (ii) based on the latest valuation of each Pension Plan and on the actuarial methods and assumptions employed for such valuation (determined in accordance with the assumptions used for funding such Pension Plan pursuant to Section 412 of the Code), the aggregate current value of accumulated benefit liabilities of such Pension Plan under Section 4001(a)(16) of ERISA does not exceed the aggregate current value of the assets of such Pension Plan; (iii) each Borrower and Guarantor, and their ERISA Affiliates, have not incurred and do not reasonably expect to

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incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) each Borrower and Guarantor, and their ERISA Affiliates, have not incurred and do not reasonably expect to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) each Borrower and Guarantor, and their ERISA Affiliates, have not engaged in a transaction that would be subject to Section 4069 or 4212(c) of ERISA.

8.10Bank Accounts. All of the deposit accounts, investment accounts or other accounts in the name of or used by any Borrower or Guarantor maintained at any bank or other financial institution are set forth on Schedule 8.10 to the Information Certificate, subject to the right of each Borrower and Guarantor to establish new accounts in accordance with Section 5.3 hereof.

8.11Intellectual Property. Except as would not reasonably be expected to have a Material Adverse Effect, each Borrower and Guarantor owns or licenses or otherwise has the right to use all Intellectual Property necessary for the operation of its business as presently conducted. As of the date hereof, Borrowers and Guarantors do not have any material Intellectual Property registered, or subject to pending applications, in the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof, other than those described in Schedule 8.11 to the Information Certificate and has not granted any licenses with respect thereto other than as set forth in Schedule 8.11 to the Information Certificate. Except as would not have a Material Adverse Effect, no event has occurred which permits or would permit after notice or passage of time or both, the revocation, suspension or termination of such rights. To the best of any Borrower’s and Guarantor’s knowledge, no slogan or other advertising device, product, process, method, substance or other Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to be sold by or employed by any Borrower or Guarantor infringes any patent, trademark, servicemark, tradename, copyright, license or other Intellectual Property owned by any other Person presently where such infringement has or would reasonably be expected to have Material Adverse Effect or adversely affect the ability of any Borrower to sell or otherwise dispose of Inventory having a value in excess of $250,000. No claim or litigation is pending or threatened in writing against or affecting any Borrower or Guarantor contesting its right to sell or use any such Intellectual Property where such claim or litigation if adversely determined for any Borrower or Guarantor would reasonably be expected to have a Material Adverse Effect or would adversely affect the ability of any Borrower to sell or otherwise dispose of Inventory having a value in excess of $250,000. Schedule 8.11 to the Information Certificate sets forth all of the material agreements or other arrangements of each Borrower and Guarantor pursuant to which such Borrower or Guarantor has a license or other right to use any trademarks, logos, designs, representations or other Intellectual Property owned by another person as in effect on the date hereof and the dates of the expiration of such agreements or other arrangements of such Borrower or Guarantor as in effect on the date hereof which is necessary or of material value to such Borrower’s or Guarantor’s business (collectively, together with such agreements or other arrangements as may be entered into by any Borrower or Guarantor after the date hereof, collectively, the “License Agreements” and individually, a “License Agreement”). No material trademark, servicemark, copyright or other material Intellectual Property at any time used by any Borrower or Guarantor which is owned by another person, or owned by such Borrower or Guarantor subject to any security interest, lien, collateral assignment, pledge or other encumbrance in favor of any person other than Agent, is affixed to or incorporated in any Eligible Inventory (as

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defined in the ABL Credit Agreement), except (a) to the extent permitted under the term of the license agreements listed on Schedule 8.11 to the Information Certificate and (b) to the extent the sale of Inventory to which such Intellectual Property is affixed or incorporated is permitted to be sold by such Borrower or Guarantor under applicable law (including the United States Copyright Act of 1976).

 

8.12 Subsidiaries; Affiliates; Capitalization; Solvency.

(a)       Each Borrower and Guarantor does not have any direct or indirect Subsidiaries or Affiliates and is not engaged in any joint venture or partnership as of the date hereof except as set forth in Schedule 8.12 to the Information Certificate.

(b)       As of the date hereof, each Borrower and Guarantor is the record and beneficial owner of all of the issued and outstanding shares of Equity Interests of each of the Subsidiaries listed on Schedule 8.12 to the Information Certificate as being owned by such Borrower or Guarantor and there are no proxies, irrevocable or otherwise, with respect to such shares and no equity securities of any of the Subsidiaries are or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any kind or nature and there are no contracts, commitments, understandings or arrangements by which any Subsidiary is or may become bound to issue additional shares of its Equity Interests or securities convertible into or exchangeable for such shares.

(c)       The issued and outstanding shares of Equity Interests of each Borrower and Guarantor (other than Parent) are directly and beneficially owned and held by the persons indicated in the Information Certificate, and in each case all of such shares have been duly authorized and are fully paid and non-assessable, free and clear of all claims, liens, pledges and encumbrances of any kind, except as disclosed in writing to Agent prior to the date hereof or otherwise permitted hereunder.

(d)       Each Borrower and Guarantor is Solvent and will continue to be Solvent after giving effect to the Acquisition, the creation of the Obligations, the security interests of Agent and the other transaction contemplated hereunder.

(e)       The Inactive Subsidiaries do not have any material liabilities, are not engaged in any business or commercial activities, do not own any assets with a book value of more than $100,000 in the aggregate and are not obligated or liable, directly or indirectly, contingently or otherwise, in respect of any material Indebtedness or other material obligations.

 

8.13 Labor Disputes.

(a)       Set forth on Schedule 8.13 to the Information Certificate is a list (including dates of termination) of all collective bargaining or similar agreements between or applicable to each Borrower and Guarantor and any union, labor organization or other bargaining agent in respect of the employees of any Borrower or Guarantor on the date hereof.

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(b)       Except as set forth on Schedule 8.13 to the Information Certificate, there is (i) no significant unfair labor practice complaint pending against any Borrower or Guarantor or, to the best of any Borrower’s or Guarantor’s knowledge, threatened in writing against it, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is pending on the date hereof against any Borrower or Guarantor or, to best of any Borrower’s or Guarantor’s knowledge, threatened against it, and (ii) no significant strike, labor dispute, slowdown or stoppage is pending against any Borrower or Guarantor or, to the best of any Borrower’s or Guarantor’s knowledge, threatened against any Borrower or Guarantor.

8.14Restrictions on Subsidiaries. Except for restrictions contained in this Agreement or any other agreement with respect to Indebtedness of any Borrower or Guarantor permitted hereunder as in effect on the date hereof, there are no contractual or consensual restrictions on any Borrower or Guarantor or any of its Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between any Borrower or Guarantor and any of its or their Subsidiaries or (ii) between any Subsidiaries of any Borrower or Guarantor or (b) the ability of any Borrower or Guarantor or any of its or their Subsidiaries to incur Indebtedness or grant security interests to Agent or any Lender in the Collateral.

8.15Material Contracts. Schedule 8.15 to the Information Certificate sets forth all Material Contracts to which any Borrower or Guarantor is a party or is bound as of the date hereof. Borrowers and Guarantors have delivered true, correct and complete copies of such Material Contracts to Agent on or before the date hereof. Borrowers and Guarantors are not in breach or in default in any material respect of or under any Material Contract and have not received any notice of the intention of any other party thereto to terminate any Material Contract.

8.16Payable Practices. Each Borrower and Guarantor has not made any material change in its customary accounts payable practices from those in effect immediately prior to the date hereof.

8.17OFAC. None of Borrower, any Subsidiary of Borrower or any Affiliate of Borrower: (a) is a Sanctioned Person, (b) has more than ten (10%) percent of its assets in Sanctioned Entities, or (c) derives more than ten (10%) percent of its operating income from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. The proceeds of any Loan will not be used and have not been used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

8.18Accuracy and Completeness of Information. All information furnished by or on behalf of any Borrower or Guarantor in writing to Agent or any Lender in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, including all information on the Information Certificate is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading. No event or circumstance has occurred which has had or could reasonably be expected to have a Material Adverse Affect, which has not been fully and accurately disclosed to Agent in writing prior to the date hereof.

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8.19Survival of Warranties; Cumulative. All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and shall be conclusively presumed to have been relied on by Agent and Lenders regardless of any investigation made or information possessed by Agent or any Lender. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which any Borrower or Guarantor shall now or hereafter give, or cause to be given, to Agent or any Lender.

8.20Compliance with FCPA. Each Borrower and Guarantor is in compliance with the Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq., and any foreign counterpart thereto. None of the Borrowers or Guarantors has made a payment, offering, or promise to pay, or authorized the payment of, money or anything of value (a) in order to assist in obtaining or retaining business for or with, or directing business to, any foreign official, foreign political party, party official or candidate for foreign political office, (b) to a foreign official, foreign political party or party official or any candidate for foreign political office, and (c) with the intent to induce the recipient to misuse his or her official position to direct business wrongfully to such Borrower or Guarantor or to any other Person, in violation of the Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq.

8.21Anti-Terrorism Laws. No Borrower or Guarantor nor any of their Subsidiaries is an “enemy” or an “ally of the enemy” within the meaning of Section 2 of the Trading with the Enemy Act of the United States of America (50 U.S.C. App. §§ 1 et seq.), as amended. No Borrower or Guarantor nor any or their Subsidiaries is in violation of (a) the Trading with the Enemy Act, as amended, (b) any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or (c) the Patriot Act. No Borrower or Guarantor (i) is a blocked person described in Section 1 of the Anti-Terrorism Order or (ii) to the best of its knowledge, engages in any dealings or transactions, or is otherwise associated, with any such blocked person.

 

8.22 Regulation H. No Mortgaged Property is a Flood Hazard Property.

8.23Insurance. The insurance coverage of the Borrowers and Guarantors as of the Closing Date is outlined as to carrier, policy number, expiration date, type and amount in the insurance certificates delivered to the Agent on the Closing Date pursuant to Section 4.1(n) and such insurance coverage complies with the requirements set forth in Section 9.5. The insurance certificates delivered to the Agent hereunder shall be updated from time to time by the Borrowers to include additional insurance coverage.

8.24Brokers’ Fees. No Borrower or Guarantor has any obligation to any Person in respect of any finder’s, broker’s, investment banking or other similar fee in connection with any of the transactions contemplated under the Finance Agreements other than the closing and other fees payable pursuant to this Agreement.

8.25Use of Proceeds. The proceeds of the Term Loan shall be used by the Borrowers solely (a) to finance in whole or in part the Acquisition, (b) refinance certain existing Indebtedness of the Parent and its Subsidiaries, (c) to pay any costs, fees and expenses associated with this Agreement on the Closing Date, (d) to pay any costs, fees and expenses incurred in connection with

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the Acquisition and (e) for working capital and other general corporate purposes of the Parent and its Subsidiaries.

8.26Margin Regulations. No part of the proceeds of the Term Loan will be used directly or indirectly for any purpose that violates, or that would require any Lender to make any filings in accordance with, the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. The Borrowers and Guarantors (a) are not engaged, principally or as one of their important activities, in the business of extending credit for the purpose of “purchasing” or “carrying” “margin stock” within the respective meanings of each of such terms under Regulation U and (b) taken as a group do not own “margin stock” except as identified in the financial statements referred to in Section 8.3 or delivered pursuant to Section 9.6and the aggregate value of all “margin stock” owned by the Parent and its Subsidiaries taken as a group does not exceed 25% of the value of their assets.

8.27Investment Company Act; etc. No Borrower or Guarantor is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. No Borrower or Guarantor is subject to regulation under the Federal Power Act, the Interstate Commerce Act, the Public Utility Holding Company Act of 2005 or any federal or state statute or regulation limiting its ability to incur the Obligations.

8.28Consummation of Acquisition. The Acquisition and related transactions have been consummated substantially in accordance with the terms of the Acquisition Documents. As of the Closing Date, the Acquisition Documents have not been materially altered, amended or otherwise modified or supplemented or any condition thereof waived without the prior written consent of Agent. Each of the representations and warranties made in the Acquisition Documents by each of the parties thereto is true and correct, except for any representation or warranty therein the failure of which to be true and correct, does not have or could not reasonably be expected to have a Material Adverse Effect.

SECTION 9.

AFFIRMATIVE COVENANTS

 

9.1 Maintenance of Existence.

(a)       Each Borrower and Guarantor shall at all times preserve, renew and keep in full force and effect its corporate or limited liability company or limited partnership existence and rights and franchises with respect thereto and maintain in full force and effect all Permits necessary to carry on the business as presently or proposed to be conducted, other than as (i) permitted in Section 10.1 hereof or (ii) otherwise permitted hereunder or under any of the other Financing Agreements.

(b)       No Borrower or Guarantor shall change its name unless each of the following conditions is satisfied: (i) Agent shall have received not less than thirty (30) days (or at such later time as Agent may agree) prior written notice from Borrower Agent of such proposed change in its corporate name, which notice shall accurately set forth the new name; and (ii) Agent shall have received a copy of the amendment to the certificate of incorporation, certificate of formation or other organizational document of such Borrower or Guarantor, as

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applicable, providing for the name change certified by the Secretary of State of the jurisdiction of incorporation or organization of such Borrower or Guarantor as soon as it is available.

(c)       No Borrower or Guarantor shall change its chief executive office or its mailing address or organizational identification number (or if it does not have one, shall not acquire one) unless Agent shall have received not less than thirty (30) days’ prior written notice from Borrower Agent of such proposed change, which notice shall set forth such information with respect thereto as Agent may reasonably require and Agent shall have received such agreements as Agent may reasonably require in connection therewith. No Borrower or Guarantor shall change its type of organization, jurisdiction of organization or other legal structure, except that a Borrower, Guarantor or Subsidiary may convert (either directly or by way of merger) into a limited liability company or limited partnership or other form of legal entity acceptable to Agent, provided, that, each of the following conditions is satisfied: (i) such company, partnership or other legal entity is organized under the laws of a jurisdiction in the United States of America, (ii) Agent shall have received not less than fifteen (15) days’ prior written notice from Borrower Agent of such proposed change, which notice shall accurately set forth a description of the new form, (iii) Agent shall have received the organizational documents of such entity (certified by the appropriate Governmental Authority, where available to be so certified), together with such other agreements, documents, and instruments related thereto as Agent may reasonably request, (iv) such change shall not adversely affect the security interests and liens of Agent in the assets of such Borrower or Guarantor or the ability of Agent to enforce any of its rights or remedies with respect to such Borrower or Guarantor, in the determination of Agent and (v) as of the date of such conversion, and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing.

9.2New Collateral Locations. Each Borrower and Guarantor may only open any new location so long as (a) such locations are within the United States or its territories or Canada, (b) such location is set forth in the copy of the applicable report provided to the Agent pursuant to Section 7.1(a) to the extent required under such Section or in any event if Collateral having a value of more than $250,000 is or will be kept at such location, Agent has received ten (10) Business Days’ written notice within the time of the opening of any such new location and (c) upon Agent’s request, such Borrower or Guarantor executes and delivers, or causes to be executed and delivered, to Agent such agreements, documents, and instruments as Agent may deem reasonably necessary or desirable to protect its interests in the Collateral at such location; provided, that, so long as no Event of Default exists or has occurred and is continuing, upon Agent’s request, Borrowers and Guarantors shall only be required to use their commercially reasonable efforts to obtain a Collateral Access Agreement.

 

9.3 Compliance with Laws, Regulations, Etc.

(a)       Each Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times, comply in all respects with all laws, rules, regulations, licenses, approvals, orders and other Permits applicable to it and duly observe all requirements of any foreign, Federal, State or local Governmental Authority where the failure to do so has or could reasonably be expected to have a Material Adverse Effect.

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(b)       Borrowers and Guarantors shall give written notice to Agent immediately upon any Borrower’s or Guarantor’s receipt of any notice of, or any Borrower’s or Guarantor’s otherwise obtaining knowledge of, (i) the occurrence of any event involving the release, spill or discharge, threatened or actual, of a material amount of any Hazardous Material that has or could reasonably be expected to have a Material Adverse Effect or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice that with respect to any of the following: (A) any material non-compliance with or material violation of any Environmental Law by any Borrower or Guarantor or (B) the release, spill or discharge of any Hazardous Material other than in the ordinary course of business and other than as permitted under any applicable Environmental Law. Copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations shall be promptly furnished, or caused to be furnished, by such Borrower or Guarantor to Agent upon Agent’s request. Each Borrower and Guarantor shall take prompt action to respond to any material non-compliance with any of the Environmental Laws and shall regularly report to Agent on such response.

(c)       Without limiting the generality of the foregoing, whenever Agent reasonably determines that there is non-compliance, or any condition which requires any action by or on behalf of any Borrower or Guarantor in order to avoid any non compliance, with any Environmental Law that has or could reasonably be expected to have a Material Adverse Effect, Borrowers shall, at Agent’s request and Borrowers’ expense: (i) cause an independent environmental engineer reasonably acceptable to Agent to conduct such tests of the site where non-compliance or alleged non compliance with such Environmental Laws has occurred as to such non-compliance and prepare and deliver to Agent a report as to such non-compliance setting forth the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Agent a supplemental report of such engineer whenever the scope of such non-compliance, or such Borrower’s or Guarantor’s response thereto or the estimated costs thereof, shall change in any material respect.

(d)       Each Borrower and Guarantor shall indemnify and hold harmless Agent and Lenders and their respective directors, officers, employees, agents, invitees, representatives, successors and assigns, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and expenses) directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presence of a Hazardous Material, including the costs of any required or necessary repair, cleanup or other remedial work with respect to any property of any Borrower or Guarantor and the preparation and implementation of any closure, remedial or other required plans. All representations, warranties, covenants and indemnifications in this Section 9.3 shall survive the payment of the Obligations and the termination of this Agreement.

9.4Payment of Taxes and Claims. Except as could not reasonably be expected to have a Material Adverse Effect, each Borrower and Guarantor shall, and shall cause any Subsidiary to, duly pay and discharge all material taxes, assessments, contributions and governmental charges upon or against it or its properties or assets, except for taxes the validity of which is being contested in good faith by appropriate proceedings diligently pursued and available to such Borrower,

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Guarantor or Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on its books to the extent required by GAAP.

9.5Insurance. Each Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be reasonably satisfactory to Agent as to form, amount and insurer (provided, that, Borrowers and Guarantors may maintain self insurance plans to the extent companies of the same or similar businesses and similarly situated do so). Borrowers and Guarantors shall furnish certificates, policies or endorsements to Agent or Control Agent as Agent shall reasonably require as proof of such insurance, and, Agent is authorized, but not required, to obtain such insurance at the expense of Borrowers if any Borrower or Guarantor fails at any time to do so. All policies shall provide for at least thirty (30) days prior written notice to Agent or Control Agent of any cancellation or reduction of coverage. Agent or Control Agent may act as attorney for each Borrower and Guarantor in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance. Borrowers and Guarantors shall cause Agent or Control Agent to be named as a loss payee as its interests may appear and an additional insured (but without any liability for any premiums) under such insurance policies and Borrowers and Guarantors shall obtain non-contributory lender’s loss payable endorsements to all insurance policies in form and substance satisfactory to Agent. Such lender’s loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Agent or Control Agent as its interests may appear and further specify that Agent and Lenders shall be paid regardless of any act or omission by any Borrower, Guarantor or any of its or their Affiliates. Payments of insurance proceeds may be subject to the Intercreditor Agreement and the prepayment provisions contained in Section 2.2(b) hereof, if and to the extent applicable. Without limiting any other rights of Agent, Control Agent or Lenders, any insurance proceeds received by Agent or Control Agent or proceeds of condemnation awards payable at any time may, subject to the Intercreditor Agreement, be applied to payment of the Obligations, whether or not then due, in any order and in such manner as Agent may determine.

 

9.6 Financial Statements and Other Information.

(a)       Each Borrower and Guarantor shall, and shall cause any Subsidiary to, keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of such Borrower, Guarantor and its Subsidiaries in accordance with GAAP. Borrowers and Guarantors shall during regular business hours and upon reasonable notice from the Agent furnish to Agent and Lenders all such financial and other information as Agent shall reasonably request relating to the Collateral and the assets, business and operations of Borrowers and Guarantors, and Borrower shall notify the auditors and accountants of Borrowers and Guarantors that Agent is authorized to obtain such information directly from them (other than materials protected by the attorney-client privilege and materials which the Borrower may not disclose without violation of a confidentiality obligation binding upon it) at any reasonable time (upon three days advance notice so long as no Default or Event of Default shall have occurred and be continuing). Without limiting the foregoing, Borrowers shall furnish or cause to be furnished to Agent and each Lender, the following:

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(i)        as soon as available, but in any event within thirty (30) days after the end of each fiscal month that is not the end of a fiscal quarter of Parent, monthly unaudited consolidated financial statements and unaudited consolidating financial statements (in substantially the same format and with the same scope of information as have been provided to Agent prior to the date hereof), all in reasonable detail (but without footnotes), fairly presenting in all material respects the financial position and the results of the operations of Parent and its Subsidiaries as of the end of and through such fiscal month, subject to normal year-end adjustments; and

(ii)      as soon as available, but in any event within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of Parent, quarterly unaudited consolidated financial statements and unaudited consolidating financial statements (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders’ equity), all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Parent and its Subsidiaries as of the end of and through such fiscal quarter, subject to normal year-end adjustments; and

(iii)      within ninety (90) days after the end of each fiscal year, audited consolidated financial statements and unaudited consolidating financial statements of Parent and its Subsidiaries (including in each case balance sheets, statements of income and loss, statements of cash flow and statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Parent and its Subsidiaries as of the end of and for such fiscal year.

(b)       Borrowers and Guarantors shall promptly notify Agent in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to Collateral having a value of more than $250,000 or which if adversely determined would result in any material adverse change in any Borrower’s or Guarantor’s business, properties, assets, goodwill or condition, financial or otherwise, (ii) any Material Contract being terminated or amended or any new Material Contract entered into (in which event Borrowers and Guarantors shall provide Agent with a copy of such Material Contract), (iii) any order, judgment or decree in excess of $500,000 shall have been entered against any Borrower or Guarantor any of its or their properties or assets, (iv) any notification of a material violation of laws or regulations received by any Borrower or Guarantor (including, without limitation, Environmental Laws), (v) any ERISA Event, (vi) any labor controversy that has resulted in, or threatens to result in, a strike or other work action against any Borrower or Guarantor which could reasonably be expected to have a Material Adverse Effect, (vii) any other development or event which could reasonably be expected to have a Material Adverse Effect and (viii) the occurrence of any Default or Event of Default.

(c)       Borrowers and Guarantors shall furnish to Agent (i) not less than ten (10) Business Days’ prior written notice of (A) the intention of any Subsidiaries of Parent to merge or consolidate as permitted under Section 10.1(a) hereof, together with such other information with respect thereto as Agent may reasonably request, (B) the issuance and sale by Parent or any Subsidiary of Equity Interests as permitted under clause (g) of the

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definition of Permitted Dispositions, together with such other information with respect thereto as Agent may reasonably request, (C) the intention of any Subsidiary of Parent to wind up, liquidate or dissolve as permitted under Section 10.1(c) hereof, together with such other information with respect thereto as Agent may reasonably request, and (ii) all notices or demands in connection with such Indebtedness either received by any Borrower or Guarantor or on its behalf promptly after the receipt thereof, or sent by any Borrower or Guarantor or on its behalf concurrently with the sending thereof, as the case may be.

(d)       Borrowers and Guarantors shall furnish to Agent and each Lender, in form and detail reasonably satisfactory to Agent:

(i)        concurrently with the delivery of the financial statements referred to in Section 9.6(a)(iii), the unqualified opinion of independent certified public accountants with respect to the audited consolidated financial statements, which independent accounting firm shall be selected by Borrower Agent and reasonably acceptable to Agent, that such audited consolidated financial statements have been prepared in accordance with GAAP, and present fairly in all material respects the results of operations and financial condition of Parent and its Subsidiaries as of the end of and for the fiscal year then ended and stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, or if any such Default or Event of Default shall exist, stating the nature and status of such event;

(ii)      concurrently with the delivery of the financial statements referred to in Sections 9.6(a)(ii) and 9.6(a)(iii), a compliance certificate substantially in the form of Exhibit D hereto by the chief financial officer, vice president of finance, treasurer or controller of Borrower Agent on behalf of Borrowers and Guarantors, along with a schedule in form reasonably satisfactory to Agent of the calculations used in determining, as of the end of such month, the ratio provided for in Section 11 of this Agreement for such month and a written summary of material changes in GAAP and in the consistent application thereof that materially affected the financial covenant calculations for the applicable period;

(iii)      at such time as available, but in any event prior to the end of each fiscal year of Parent, beginning with the fiscal year ending December 31, 2008, projected consolidated financial statements (including in each case substantially in the same format and with the same scope of information as in the projections most recently provided to Agent prior to the date hereof) of Parent and its Subsidiaries for the next fiscal year, all in reasonable detail, and in a format consistent with the projections delivered by Borrowers to Agent prior to the date hereof, together with such supporting information as Agent may reasonably request, which projected financial statements shall be prepared on a quarterly basis for the next succeeding year and shall represent the reasonable best estimate by Borrowers and Guarantors of the future financial performance of Parent and its Subsidiaries for the periods set forth therein and shall have been prepared on the basis of the assumptions set forth therein which Borrowers and Guarantors believe are fair and reasonable as of the date of preparation in light of current and reasonably foreseeable business conditions

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(it being understood that actual results may differ from those set forth in such projected financial statements);

(iv)      promptly after the same are available, copies of each annual report, proxy or annual or quarterly financial statement or other report or communication sent to the equity holders of any Borrower or Guarantor, and copies of all annual, regular, periodic and special reports and registration statements which a Borrower or Guarantor may file or be required to file with the Securities and Exchange Commission under Section 13 or 15(d) of the Exchange Act, and not otherwise required to be delivered to Agent pursuant hereto;

(v)       concurrently with the delivery of the financial statements referred to in Sections 9.6(a)(i) and 9.6(a)(ii), a certificate by the chief financial officer, vice president of finance, treasurer or controller of Borrower Agent on behalf of Borrowers and Guarantors containing information regarding the amount of all Asset Dispositions, Debt Issuances, Equity Issuances, Extraordinary Receipts, Permitted Investments, Restricted Payments, and optional prepayments of Indebtedness that occurred during the period covered by such financial statements and such other information with respect thereto as Agent may request;

(vi)      promptly after any request by Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of Parent by independent accountants in connection with the accounts or books of Parent or any Subsidiary, or any audit of any of them;

(vii)    promptly, and in any event within five (5) Business Days after receipt thereof by any Borrower or Guarantor or any Subsidiary thereof, copies of each notice or other correspondence received from the Securities and Exchange Commission (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or possible investigation or other inquiry by such agency regarding financial or other operational results of Parent or any Subsidiary thereof;

(viii)    concurrently with the delivery of the financial statements referred to in Sections 9.6(a)(i) and 9.6(a)(ii), a certificate by the chief executive officer, chief financial officer, vice president of finance, treasurer or controller of Borrower Agent on behalf of Borrowers and Guarantors attaching the insurance binder or other evidence of insurance for any insurance coverage of Borrowers, Guarantors or any Subsidiary that was renewed, replaced or modified during the period covered by such financial statements.

(e)       As to any information contained in materials furnished pursuant to Section 9.6(d)(iv), Parent shall not be separately required to furnish such information under Section 9.6(a) hereof, but the foregoing shall not be in derogation of the obligation of Parent to furnish the information and materials described in Section 9.6(a) at the times specified therein.

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(f)        Documents required to be delivered pursuant to Section 9.6(a)(iii) or Section 9.6(d)(iv) (to the extent any such documents are included in materials otherwise filed with the Securities and Exchange Commission may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which such documents are posted on a Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and Agent has access (whether commercial, third-party website or whether sponsored by Agent); providedthat: (i) Borrowers shall deliver paper copies of such documents to Agent or any Lender that requests Borrowers to deliver such paper copies until a written request to cease delivering paper copies is given by Agent or such Lender and (ii) Borrowers shall notify Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to Agent by electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every instance Borrowers shall be required to provide paper copies of the compliance certificates required by Section 9.6(d)(ii) to Agent. Except for such compliance certificates, Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by Borrowers with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

(g)       Borrowers and Guarantors hereby acknowledge that Agent and/or its Affiliates may make available to Lenders materials and/or information provided by or on behalf of Borrowers hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”) and certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to Borrowers, Guarantors or their securities) (each, a “Public Lender”). Borrowers and Guarantors shall be deemed to have authorized Agent and its Affiliates, and the Lenders to treat Borrower Materials marked “PUBLIC” or otherwise at any time filed with the Securities and Exchange Commission as not containing any material non-public information with respect to Borrowers, Guarantors or their securities for purposes of United States federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 15.5). All Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor.” Agent and its Affiliates and Lenders shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” or that are not at any time filed with the Securities and Exchange Commission as being suitable only for posting on a portion of the Platform not marked as “Public Investor.”

(h)       Borrowers and Guarantors shall furnish or cause to be furnished to Agent such other information respecting the Collateral and the business of Borrowers and Guarantors, as Agent may, from time to time, reasonably request. Agent is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrowers and Guarantors to any court or other Governmental Authority or to any Lender or Participant or prospective Lender or Participant or any Affiliate of any Lender or Participant subject to Section 15.5 hereof. Any documents, schedules, invoices or other papers delivered to Agent or any Lender may be destroyed or otherwise disposed of by Agent or such Lender one (1) year after the same are delivered to Agent or such Lender, except as otherwise designated by Borrower Agent to Agent or such Lender in writing.

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9.7Compliance with ERISA. Except as could not reasonably be expected to have a Material Adverse Effect, each Borrower and Guarantor shall, and shall cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance with the applicable provisions of ERISA, the Code and other Federal and State law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) not terminate any Pension Plan so as to incur any liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited transaction involving any Plan or any trust created thereunder which would subject such Borrower, Guarantor or such ERISA Affiliate to a tax or other liability on prohibited transactions imposed under Section 4975 of the Code or ERISA; (e) make all required contributions to any Plan which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or suffer to exist any accumulated funding deficiency, whether or not waived, with respect to any such Pension Plan; (g) not engage in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; or (h) not allow or suffer to exist any occurrence of a reportable event or any other event or condition which presents a risk of termination by the Pension Benefit Guaranty Corporation of any Plan that is a single employer plan, which termination could result in any liability to the Pension Benefit Guaranty Corporation.

9.8End of Fiscal Years; Fiscal Quarters. Each Borrower and Guarantor shall, for financial reporting purposes, cause its, and each of its Subsidiaries’ fiscal years to end on December 31 of each year, and fiscal quarters to end on the last day of each of March, June, September and December of each year.

 

9.9 License Agreements.

(a)       With respect to a material License Agreement applicable to Intellectual Property that is owned by a third party and licensed to a Borrower or Guarantor and that is affixed to or otherwise necessary for the manufacture, sale or distribution of any Inventory or the collection of Receivables (other than an off-the-shelf product with a shrink wrap license or that is generally available), each Borrower and Guarantor shall (i) give Agent prompt prior written notice of its intention to not renew or to terminate, cancel, surrender or release its rights under any such License Agreement, or any amendment of any such License Agreement that limits the scope of the right of such Borrower or Guarantor to use the Intellectual Property subject to such License Agreement in any material respect, either with respect to product, territory, term or otherwise, or that increases in any material respect the amounts to be paid by such Borrower or Guarantor thereunder or in connection therewith, (ii) give Agent prompt written notice of any such License Agreement entered into by such Borrower or Guarantor after the date hereof, or any material amendment to any such License Agreement existing on the date hereof, in each case together with a true, correct and complete copy thereof and such other information with respect thereto as Agent may in good faith request, (iii) give Agent prompt written notice of any material breach of any obligation, or any default, by the third party that is the licensor or by the Borrower or Guarantor that is the licensee or any other party under any such License Agreement, and deliver to Agent (promptly upon the receipt thereof by such Borrower or Guarantor in the case of a notice to such Borrower or Guarantor and concurrently with the sending thereof in the case of a notice from such Borrower or Guarantor) a copy of each notice of default and any other notice received or delivered by such Borrower or Guarantor in connection with any such a License Agreement that relates to the scope of the right, or the continuation of the right, of such

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Borrower or Guarantor to use the Intellectual Property subject to such License Agreement or the amounts required to be paid thereunder.

(b)       With respect to a material License Agreement applicable to Intellectual Property that is owned by a third party and licensed to a Borrower or Guarantor and that is affixed to or otherwise necessary for the manufacture, sale or distribution of any Inventory or the collection of Receivables (other than an off-the-shelf product with a shrink wrap license or that is generally available), at any time an Event of Default shall exist or have occurred and be continuing and subject to the Intercreditor Agreement, Agent shall have, and is hereby granted, the irrevocable right and authority, at its option, to renew or extend the term of such License Agreement, whether in its own name and behalf, or in the name and behalf of a designee or nominee of Agent or in the name and behalf of such Borrower or Guarantor, subject to and in accordance with the terms of such License Agreement. Agent may, but shall not be required to, perform any or all of such obligations of such Borrower or Guarantor under any of the License Agreements, including, but not limited to, the payment of any or all sums due from such Borrower or Guarantor thereunder. Any sums so paid by Agent shall constitute part of the Obligations.

 

9.10 Additional Guaranties and Collateral Security; Further Assurances.

(a)       In the case of the formation or acquisition by a Borrower or Guarantor of any Subsidiary after the date hereof (other than a Foreign Subsidiary or Inactive Subsidiary), as to any such Subsidiary, (i) the Borrower or Guarantor forming such Subsidiary shall cause any such Subsidiary to execute and deliver to Agent, in form and substance satisfactory to Agent, a joinder agreement to the Financing Agreements in order to make such Subsidiary a party to this Agreement as a “Borrower” if it owns plant, property or equipment or otherwise as a “Guarantor”, and a party to any guarantee as a “Guarantor” or pledge agreement as a “Pledgor”, and including, but not limited to, supplements and amendments hereto and to any of the other Financing Agreements, authorization to file UCC financing statements, Collateral Access Agreements (to the extent required under Section 9.2), to the extent such Person owns Real Property, those documents and other deliverables required by Section 9.13, other agreements, documents or instruments contemplated under Section 5.3 and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem reasonably necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets of such Subsidiary and the Equity Interests of any Borrower or Guarantor in such Subsidiary, corporate resolutions and other organization and authorizing documents of such Person, and favorable opinions of counsel to such person and (ii) the Borrower or Guarantor forming such Subsidiary shall execute and deliver to Agent, a pledge and security agreement, in form and substance satisfactory to Agent, granting to Agent a pledge of and lien on all of the issued and outstanding shares of Equity Interests of any such Subsidiary, and otherwise comply with the terms of Section 5.3 hereof with respect thereto, such other agreements, documents and instruments as Agent may require in connection with the documents referred to above, including, but not limited to, supplements and amendments hereto, corporate resolutions and other organization and authorizing documents and favorable opinions of counsel to such person.

(b)       In the case of an acquisition of assets (other than Equity Interests) by a Borrower or Guarantor after the date hereof, Agent shall have received, in form and

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substance satisfactory to Agent, (i) evidence that Agent has valid and perfected security interests in and liens upon all purchased assets to the extent such assets constitute Collateral hereunder (except in the case of deposit accounts, within thirty (30) days after the acquisition thereof), (ii) except as Agent may otherwise agree, all Collateral Access Agreements (to the extent required under Section 9.2 hereof) and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets purchased, and (iii) such other agreements, documents and instruments as Agent may require in connection with the documents referred to above, including, but not limited to, supplements and amendments hereto, corporate resolutions and other organization and authorizing documents and favorable opinions of counsel to such person. Borrowers and Guarantors shall use commercially reasonable efforts to obtain the agreement of the seller consenting to the collateral assignment by the Borrower or Guarantor purchasing such assets of all rights and remedies and claims for damages of such Borrower or Guarantor relating to the Collateral (including, without limitation, any bulk sales indemnification) under the agreements, documents and instruments relating to such acquisition; provided, that, Borrowers and Guarantors shall not be required to use such commercially reasonable efforts if in the good faith, reasonable judgment of Borrowers, such efforts would result in the failure to consummate the acquisition. 

(c)       At the request of Agent at any time and from time to time, Borrowers and Guarantors shall, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements.

9.11Costs and Expenses. Borrowers and Guarantors shall pay to Agent on demand all reasonable costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, syndication, administration, collection, liquidation, enforcement and defense of the Obligations, Agent’s rights in the Collateral, this Agreement, the other Financing Agreements, the Mortgages and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all costs and expenses of filing or recording (including UCC financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable), (b) costs and expenses and fees for insurance premiums, environmental audits, title insurance premiums, surveys, assessments, engineering reports and inspections, appraisal fees and search fees, background checks, costs and expenses of remitting loan proceeds, together with Agent’s customary charges and fees with respect thereto; (c) actual costs and expenses of preserving and protecting the Collateral; (d) actual costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Agent in the Collateral, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against Agent or any Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); and (e) the reasonable fees and disbursements of counsel (including legal assistants) to Agent in connection with any of the foregoing and in addition, at any time an

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Event of Default exists or has occurred and is continuing, the reasonable fees and disbursements of one counsel (including legal assistants) to Lenders in connection with matters described in clauses (c) or (d) above.

9.12Collateral Access Agreements. In the case of any personal property Collateral located at premises leased by a Borrower or Guarantor with a value in excess of $250,000, such Borrower or Guarantor will provide the Agent with a Collateral Access Agreement from the landlords on such real property to the extent (a) requested by the Agent and (b) such Borrower or Guarantor is able to secure such letters, consents and waivers after using commercially reasonable efforts (such letters, consents and waivers shall be in form and substance satisfactory to the Agent).

9.13After Acquired Real Property. If after the date hereof any Borrower or Guarantor acquires (a) any fixtures (other than Excluded Property) or (b) any Real Property (other than Excluded Property), without limiting any other rights of Agent or any Lender, or duties or obligations of any Borrower or Guarantor, such Borrower or Guarantor shall promptly notify the Agent of such new fixtures or Real Property and, upon Agent’s request, shall (i) deliver to the Agent a UCC fixture financing statement (or the information to complete a UCC fixture financing statement) with respect to such fixtures, together with a legal description of the Real Property where such fixtures are located, (ii) execute and deliver to Agent a mortgage, deed of trust or deed to secure debt, as Agent may determine, in form and substance substantially similar to the Mortgages and including any provisions relating to specific state laws satisfactory to Agent and in form appropriate for recording in the real estate records of the jurisdiction in which such Real Property is located, which mortgage, deed of trust or deed to secure debt shall grant to Agent a first and only lien and mortgage on and security interest in such Real Property (except as such Borrower or Guarantor would otherwise be permitted to incur hereunder or under the Mortgages or as otherwise consented to in writing by Agent) and (iii) such surveys, title reports, title commitments and policies, flood hazard determinations, environmental reports and other agreements, documents and instruments as Agent may require in connection with any such Real Property.

9.14Delivery of Reports. Borrowers and Guarantors shall deliver to Agent any field audit or examination report, appraisals with respect to the Collateral and financing statements required to be delivered to the ABL Agent pursuant to the ABL Credit Agreement, simultaneously with the delivery of such reports to the ABL Agent.

9.15Post-Closing Covenant.As soon as practicable but in any event within forty-five (45) days after the Closing Date (or such extended period of time as agreed to by the Agent), the Borrowers and Guarantors shall deliver to the Agent the following, each in form and substance reasonably satisfactory to the Agent:

(a) a title report in respect of each of the Mortgaged Properties;

(b)       a mortgage policy assuring the Agent that the Mortgage with respect to such Mortgaged Property creates a valid and enforceable first priority mortgage lien on such Mortgaged Property, free and clear of all defects and encumbrances except Permitted Liens and such other encumbrances shown on Schedule B to such policy that are reasonably acceptable to the Agent, which mortgage policy shall provide for affirmative insurance and such reinsurance as the Agent may reasonably request;

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(c)       maps or plats of an as-built survey of the sites of the Mortgaged Properties certified to the Agent and the Title Insurance Company in a manner reasonably satisfactory to them, dated as of the Closing Date or such other sate within fourty-five (45) days after the Closing Date reasonably satisfactory to each of the Agent and the Title Insurance Company by an independent professional licensed land surveyor issuing the maps or plats (the “Surveyor”), which shall be reasonably satisfactory to each of the Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be sufficient to delete any standard printed survey exception contained in the applicable title policy and be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 2005, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following, all to the extent visible or plottable pursuant to a recorded document: (i) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines; (ii) the lines of streets abutting the sites and width thereof; (iii) all access and other easements appurtenant to the sites necessary to use the sites; (iv) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (v) any encroachments on any adjoining property by the building structures and improvements on the sites; and (vi) if the site is described as being on a filed map, a legend relating the survey to said map;

(d)       satisfactory third-party environmental reviews of all owned Mortgaged Properties, including but not limited to Phase I environmental assessments, together with reliance letters in favor of the Lenders;

(e)       to the extent available, zoning letters from each municipality or other Governmental Authority for each jurisdiction in which the Mortgaged Properties are located; and

(f)        in the case of any personal property Collateral located at premises leased by a Borrower or Guarantor, (i) a legal description for each such leased premises and (ii) such Collateral Access Agreements from the landlords of such real property to the extent the applicable Borrower or Guarantor is able to secure such Collateral Access Agreements after using commercially reasonable efforts.

SECTION 10.

NEGATIVE COVENANTS

10.1Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, directly or indirectly,

(a)       merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it exceptthat any wholly-owned Subsidiary of Parent may merge with and into or consolidate with any other wholly-owned Subsidiary of Parent (including any such Subsidiary that only becomes a Subsidiary after giving effect to such merger or consolidation subject to the conditions set forth herein), provided, that, in

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each case each of the following conditions is satisfied: (i) as of the effective date of the merger or consolidation and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (ii) Agent shall have received, true, correct and complete copies of all agreements, documents and instruments relating to such merger or consolidation, including, but not limited to, the certificate or certificates of merger to be filed with each appropriate Secretary of State (with a copy as filed promptly after such filing), (iii) the surviving entity shall expressly confirm, ratify and assume the Obligations and the Financing Agreements to which it is a party in writing, in form and substance reasonably satisfactory to Agent, and Borrowers and Guarantors shall execute and deliver such other agreements, documents and instruments as Agent may reasonably request in connection therewith and (iv) in the case of a merger with a Person that is not a wholly-owned Subsidiary immediately prior to such merger, such merger shall not be permitted unless it is also permitted under Section 10.4(b) hereof;

(b)       sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any Equity Interests or any of its assets to any other Person, except for Permitted Dispositions; provided, that, to the extent that any Collateral is sold as permitted by this Section 10.1(b), other than to a Borrower or Guarantor, or to the extent that Agent and Required Lenders may consent to any other sale of any assets, concurrently with, and subject to the satisfaction of the conditions to such sale (including the receipt of the Net Cash Proceeds related thereto), upon the written request of Borrower Agent and effective upon the transfer of the title of the assets sold and the satisfaction of the applicable conditions to such Permitted Disposition, Agent shall, at Borrowers’ expense, cause to be filed a UCC financing statement amendment providing for the release by Agent of the assets so sold from its security interest granted hereunder;

(c)       suspend operations, wind up, liquidate or dissolve except that any Subsidiary of Parent (other than a Borrower) may wind up, liquidate and dissolve; provided, that, each of the following conditions is satisfied, (i) the winding up, liquidation and dissolution of such Guarantor or other Subsidiary shall not violate any law or any order or decree of any court or other Governmental Authority in any material respect and shall not conflict with or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, or any other agreement or instrument to which any Borrower or Guarantor is a party or may be bound, (ii) such winding up, liquidation or dissolution shall be done in accordance with the requirements of all applicable laws and regulations, (iii) effective upon such winding up, liquidation or dissolution, all of the assets and properties of such Guarantor or other Subsidiary shall be duly and validly transferred and assigned to its shareholders, free and clear of any liens, restrictions or encumbrances other than the security interest and liens of Agent or as are otherwise permitted hereunder (and Agent shall have received such evidence thereof as Agent may reasonably require) and Agent shall have received such deeds, assignments or other agreements as Agent may request to evidence and confirm the transfer of such assets and without limiting the foregoing, in the case of a winding up, liquidation or dissolution of a Borrower the transfer and assignment shall be to an entity that is or becomes a Borrower upon such transfer and assignment and has executed and delivered all such agreements, documents and instruments as Agent may require and as is otherwise provided for herein and Agent shall maintain and have a perfected security interests in and liens upon all such assets and properties as so transferred on the same terms and with the same priority, (iv) Agent shall have received all documents and agreements that any Borrower or

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Guarantor has filed with any Governmental Authority or as are otherwise required to effectuate such winding up, liquidation or dissolution, (v) no Borrower or Guarantor shall assume any Indebtedness, obligations or liabilities as a result of such winding up, liquidation or dissolution, or otherwise become liable in respect of any obligations or liabilities of the entity that is winding up, liquidating or dissolving, unless such Indebtedness is otherwise expressly permitted hereunder, and (vi) as of the date of such winding up, liquidation or dissolution and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing; or

(d)       agree to do any of the foregoing, except to the extent that such agreement contains a condition requiring the consent of the Required Lenders if the agreement to do any of the foregoing is otherwise prohibited by the terms hereof.

10.2Encumbrances. Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties, including the Collateral, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any security interest or lien with respect to any such assets or properties, except Permitted Liens.

10.3Indebtedness. Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly), the Indebtedness, performance, obligations or dividends of any other Person, except:

(a) the Obligations;

(b)       Indebtedness (including Capitalized Lease Obligations) arising after the date hereof to the extent secured by security interests in Equipment and mortgages on Real Property (other than Mortgaged Property) acquired after the date hereof in an aggregate outstanding principal amount not to exceed $10,000,000 at any time; provided, that, (i) such security interests and mortgages do not apply to any property of such Borrower, Guarantor or Subsidiary other than specific items of Equipment or Real Property, (ii) the Indebtedness secured thereby does not exceed the cost of the applicable Equipment or Real Property, as the case may be and (iii) as of the date any such Indebtedness is incurred and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(c)       Indebtedness and the Guaranty Obligations of the Parent and its Subsidiaries under the Senior Floating Rate Notes and the Senior Fixed Rate Notes; provided, that, the aggregate outstanding principal amount of such Indebtedness evidenced by the Senior Floating Rate Notes shall not exceed $128,114,000 and the aggregate outstanding principal amount of such Indebtedness evidenced by the Senior Fixed Rate Notes shall not exceed $150,000,000, except to the extent that Parent may incur additional Indebtedness under clause (k) of this Section 10.3 below;

(d)       Indebtedness of any Borrower or Guarantor to any other Borrower or Guarantor or any other Subsidiary of Parent arising after the date hereof pursuant to

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Permitted Investments consisting of loans and advances to such Borrower, Guarantor or other Subsidiary; provided, that, as to any such Indebtedness at any time owing by a Borrower to a Guarantor or any other Subsidiary of Parent (other than a Borrower), (i) the Indebtedness arising pursuant to such Investment shall be Subordinated Debt, (ii) promptly upon Agent’s request, Agent shall have received a subordination agreement, in form and substance satisfactory to Agent, providing for the terms of the subordination in right of payment of such Indebtedness of such Borrower (or such Guarantor, in the case of Indebtedness owing by a Guarantor to a Subsidiary of Parent that is not a Borrower or Guarantor) to the prior final payment and satisfaction in full of all of the Obligations, duly authorized, executed and delivered by such Guarantor and such Borrower, (iii) such Borrower (or such Guarantor, in the case of Indebtedness owing by a Guarantor to a Subsidiary of Parent that is not a Borrower or Guarantor) shall not, directly or indirectly make, or be required to make, any payments in respect of such Indebtedness except subject to the terms of subordination applicable thereto, (iv) in the case of any Indebtedness owing to a Borrower or Guarantor, the Indebtedness arising pursuant to any such loan shall not be evidenced by a promissory note or other instrument, unless the single original of such note or other instrument is promptly delivered to Agent (or the Control Agent, if applicable) upon its request to hold as part of the Collateral, with such endorsement and/or assignment by the payee of such note or other instrument as Agent may require, and (v) except as Agent may otherwise hereafter agree, as of the date any such Indebtedness is incurred and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(e)       Indebtedness of any Borrower or Guarantor entered into in the ordinary course of business pursuant to a Hedge Agreement; provided, that, (i) such arrangements are not for speculative purposes, and (ii) such Indebtedness shall be unsecured, except to the extent such Indebtedness constitutes part of the ABL Obligations arising under or pursuant to Hedge Agreements with any Bank Product Provider that are secured under the terms hereof;

(f)        Indebtedness in respect of netting services, overdraft protections and otherwise in connection with deposit accounts and Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, that, such Indebtedness is extinguished within five (5) Business Days of incurrence;

(g)       Guaranty Obligations in respect of Indebtedness of a Borrower or Guarantor to the extent that such Indebtedness is otherwise permitted pursuant to this Section 10.3;

(h)       Indebtedness of Parent or any of its Subsidiaries in respect of bid, payment and performance bonds, workers’ compensation claims, unemployment insurance, health, disability and other employee benefits or property, casualty or liability insurance, or guarantees of the foregoing types of Indebtedness, in the ordinary course of business and consistent with current practices as of the date hereof; provided, that, upon Agent’s request, Agent shall have received true, correct and complete copies of all material agreements, documents or instruments evidencing or otherwise related to such Indebtedness, as duly authorized, executed and delivered by the parties thereto;

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(i)        Indebtedness arising after the date hereof from agreements of Parent or a Subsidiary to provide for customary indemnification, adjustment of purchase price or similar obligations, earn-outs or other similar obligations, in each case, incurred in connection with a Permitted Acquisition or Permitted Disposition other than guarantees of Indebtedness of any Person acquiring all or any portion of such business, assets or subsidiary for the purpose of financing such acquisition or disposition;

(j)        Indebtedness arising after the date hereof pursuant to the ABL Credit Agreement; provided, that, (i) the aggregate principal amount of such Indebtedness shall not exceed $100,000,000, (ii) such Indebtedness shall be secured to the extent permitted under clause (n) of the definition of Permitted Liens, and (iii) Agent shall have received the Intercreditor Agreement, duly authorized, executed and delivered by the ABL Agent, the Control Agent, the Borrowers and Guarantors, and true, correct and complete copies of the ABL Financing Agreements and all other agreements, documents or instruments evidencing or otherwise related to such Indebtedness, in each case in form and substance reasonably satisfactory to Agent;

(k)       unsecured Indebtedness of Borrowers and Guarantors arising after the date hereof to any third person (but not to any other Borrower or Guarantor or other Affiliate of Parent), including Acquired Indebtedness, not otherwise permitted in this Section 10.3; provided, that, each of the following conditions is satisfied:

(i)        such Indebtedness shall not exceed in the aggregate the greater of (x) $50,000,000 and (y) such amount of Indebtedness, which will not result, after giving effect to the incurrence thereof and the receipt and application of the proceeds thereof, in the Fixed Charge Coverage Ratio being less than 2.0 to 1.0 on a Pro Forma Basis, in each case, at any time outstanding; provided that any amount in excess of $40,000,000 not used to directly finance a Permitted Acquisition shall be deemed to constitute a Debt Issuance and be subject to the mandatory prepayment set forth in Section 2.2(b),

(ii)      in the case of any such Indebtedness in excess of $2,500,000 or at any time after the aggregate amount of such Indebtedness incurred in any fiscal year exceeds $2,500,000 thereafter as to any such Indebtedness incurred in such fiscal year, Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of such Borrower or Guarantor to incur such Indebtedness, which notice shall set forth in reasonable detail satisfactory to Agent the amount of such Indebtedness, the person or persons to whom such Indebtedness will be owed, the interest rate, the schedule of repayments and maturity date with respect thereto and such other information as Agent may request with respect thereto,

(iii)      such Indebtedness shall be on commercially reasonable terms and conditions,

(iv)      in the case of any such Indebtedness in excess of $2,500,000or at any time after the aggregate amount of such Indebtedness incurred in any fiscal year exceeds $2,500,000 thereafter as to any such Indebtedness incurred in such fiscal year, Agent shall have received a Pro Forma Compliance Certificate demonstrating

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that, upon giving effect on a Pro Forma Basis to such transaction, the Parent and its Subsidiaries shall be in compliance with the financial covenant set forth in Section 11.1 both prior, and after giving effect, to such transaction,

(v)       for any such Indebtedness in excess of $5,000,000, Agent shall have received, not less than ten (10) Business Days’ prior to incurring such Indebtedness, the Permitted Transaction Projections showing that the Parent and its Subsidiaries shall be in compliance with the financial covenant set forth in Section 11.1 both prior, and after giving effect, to such Indebtedness;

(vi)      Agent shall have received true, correct and complete copies of all agreements, documents or instruments evidencing or otherwise related to such Indebtedness,

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

(viii)    such Indebtedness shall have a maturity date no sooner than six (6) months after the Maturity Date and shall not be otherwise redeemable at the option of the holder prior to such date;

(l)        the Indebtedness set forth in the Information Certificate which is not otherwise permitted by the other clauses of this Section 10.3; and

(m)      Indebtedness of any Borrower or Guarantor arising after the date hereof issued in exchange for, or the proceeds of which are used to extend, refinance, replace or substitute for Indebtedness permitted under Sections 10.3(b), (c), (j) and (l) hereof (the “Refinancing Indebtedness”); provided, that, as to any such Refinancing Indebtedness, each of the following conditions is satisfied: (i) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention to incur such Indebtedness, which notice shall set forth in reasonable detail satisfactory to Agent, the amount of such Indebtedness, the schedule of repayments and maturity date with respect thereto and such other information with respect thereto as Agent may reasonably request, (ii) promptly upon Agent’s request, Agent shall have received true, correct and complete copies of all agreements, documents and instruments evidencing or otherwise related to such Indebtedness, as duly authorized, executed and delivered by the parties thereto, (iii) the Refinancing Indebtedness shall have a Weighted Average Life to Maturity and a final maturity equal to or greater than the Weighted Average Life to Maturity and the final maturity, respectively, of the Indebtedness being extended, refinanced, replaced, or substituted for, (iv) the Refinancing Indebtedness shall rank in right of payment no more senior than, and be at least as subordinated (if subordinated) to, the Obligations as the Indebtedness being extended, refinanced, replaced or substituted for, (v) the Refinancing Indebtedness shall not include terms and conditions with respect to any Borrower or Guarantor which are more burdensome or restrictive in any material respect than those included in the Indebtedness so extended, refinanced, replaced or substituted for, taken as a whole, so that in view of all of the terms and conditions of the Refinancing Indebtedness, such terms and conditions are more favorable to such Borrower or Guarantor, (vi) as of the

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date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (vii) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount of the Indebtedness so extended, refinanced, replaced or substituted for (plus the amount of reasonable refinancing fees and expenses incurred in connection therewith outstanding on the date of such event), (viii) the Refinancing Indebtedness shall be secured by substantially the same assets, provided, that, such security interests (if any) with respect to the Refinancing Indebtedness shall have a priority no more senior than, and be at least as subordinated, if subordinated (on terms and conditions substantially similar to the subordination provisions applicable to the Indebtedness so extended, refinanced, replaced or substituted for or as is otherwise acceptable to Agent) as the security interest with respect to the Indebtedness so extended, refinanced, replaced or substituted for, and (ix) Borrowers and Guarantors may only make payments of principal, interest and fees, if any, in respect of such Indebtedness to the extent such payments would have been permitted hereunder in respect of the Indebtedness so extended, refinanced, replaced or substituted for.

For purposes of determining any particular amount of Indebtedness hereunder, Guaranty Obligations in respect of the same Indebtedness otherwise included in the determination of such particular amount shall not be included. In the event that specific Indebtedness meets the criteria of more than one of the categories of Indebtedness described above or is otherwise permitted to be incurred hereunder, the Borrower Agent shall, in its sole discretion, classify (or later reclassify) such item of Indebtedness in any manner that complies with such covenant. Indebtedness permitted hereby need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions hereof permitting such Indebtedness. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the payment of dividends on Disqualified Equity Interests in the form of additional shares of the same class of Disqualified Equity Interests, the classification of preferred stock as Indebtedness under GAAP and change in the amount outstanding due solely to the result of fluctuations in the exchange rates of currencies will not be deemed to be an incurrence of Indebtedness for purposes hereof. For purposes of determining compliance with any dollar-denominated restriction on the incurrence of Indebtedness denominated in a foreign currency, the dollar-equivalent principal amount of such Indebtedness incurred pursuant thereto shall be calculated based on the relevant currency exchange rate in effect on the date that such Indebtedness was incurred. The amount of Indebtedness issued at a price less than the amount of the liability thereof shall be determined in accordance with GAAP.

10.4Investments. Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, directly or indirectly, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly owned Subsidiary immediately prior to such merger) any Equity Interests, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, or make or permit to exist any capital contribution or other investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit or all or a substantial part of the assets or property of any other Person (whether through purchase of assets, merger or otherwise), or form or

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acquire any Subsidiaries, or agree to do any of the foregoing (each of the foregoing an “Investment”), except:

(a) Permitted Investments;

(b) Permitted Acquisitions;

(c)       the Investments consisting of loans and advances set forth on Schedule 10.4 to the Information Certificate which are not otherwise permitted by the other clauses of this Section 10.4.

10.5Restricted Payments. Each Borrower and Guarantor shall not, and shall not permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except:

(a)       each Borrower and Guarantor, and each Subsidiary, may declare and make dividend payments or other distributions payable solely in the Equity Interests of such Person (other than Disqualified Equity Interests);

(b)       any Subsidiary of Parent may pay dividends or other distributions to a Borrower or Guarantor, provided, that, as to any such dividends or distributions by a Borrower, as of the date of such dividends or other distributions, and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, except as Agent may otherwise hereafter agree;

(c)       any Subsidiary of Parent may pay or make dividends or other distributions to CPG I or Parent the proceeds of which are used to make substantially contemporaneous payments to the AEA Group to the extent such payments are permitted pursuant to Section 10.5(d) below;

(d)       Borrowers and Guarantors may pay (i) up to $1,500,000 each year to the AEA Group pursuant to the first paragraph of Section 2 of the Management Agreement (as in effect on the date hereof), (ii) any transactional fees payable to the AEA Group pursuant to such Management Agreement and (iii) reasonable expenses payable to the AEA Group pursuant to such Management Agreement; provided, that, as of the date of any payment of such amounts under clauses (i) through (iii) and after giving effect thereto, (A) using the most recent calculation of the Borrowing Base prior to the date of any such Investment and payment, on a pro forma basis, the sum of (x) the aggregate amount of the Excess Availability of Borrowers and (y) cash on hand of Borrowers and Guarantors shall be not less than $10,000,000 and (B) no Default or Event of Default shall exist or have occurred and be continuing;

(e)       any Subsidiary of Parent may pay or make distributions to CPG I or Parent or any direct or indirect parent entity of Parent that are used to make substantially contemporaneous payments of any of the following (i) accounting, legal, administrative and other general corporate and overhead expenses, franchise or similar taxes and other fees required to maintain the corporate existence of CPG I or Parent or such direct or indirect parent entity and to pay other operating costs, including customary salary, bonus and other

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benefits payable to, and indemnities provided on behalf of, officers and employees of any such parent entity, in each case as to any of the foregoing only to the extent related to, and required for, the existence or operation of Parent or any of its Subsidiaries, and as are reasonably and in good faith allocable to the operation of Parent and its Subsidiaries (ii) reasonable directors fees and to reimburse reasonable out-of-pocket expenses of the board of directors of Parent and any direct or indirect parent entity of Parent, in each case in an amount not more than the portion of such fees and expenses as are reasonably and in good faith allocable to the operation of Parent and its Subsidiaries and (iii) fees and expenses, as incurred, of an offering of securities or indebtedness of Parent or CPG I that is not consummated, or of a registered public offering or of an acquisition which is not consummated; provided, that, as of the date of any payment of such amounts under clauses (i) through (iii) to or for the benefit of any direct or indirect parent of Parent, and after giving effect thereto, using the most recent calculation of the Borrowing Base prior to the date of any such Investment and payment, on a pro forma basis, the sum of (x) the aggregate amount of the Excess Availability of Borrowers and (y) cash on hand of Borrowers and Guarantors shall be not less than $10,000,000 and as of the date of any payment of such amounts and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(f)        any Subsidiary of Parent may pay or make distributions to Parent or any direct or indirect parent entity of Parent that are used to make substantially contemporaneous payments of any Permitted Tax Distributions;

(g)       any Subsidiary of Parent may pay or make distributions to Parent that are used to make substantially contemporaneous payments to, and Parent may make payments to, repurchase or redeem Equity Interests and options to purchase Equity Interests of Parent held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates) of Parent pursuant to any management equity subscription agreement, employee agreement or stock option agreement or other agreement with such officer, director or employee or former officer, director or employee; provided, that, the aggregate cash consideration paid for all such payments, repurchases or redemptions shall not in any fiscal year of Parent exceed the sum of: (i) $5,000,000 plus amount equal to the amount by which any such repurchases, redemptions or other payments not made pursuant to this clause (h) in the immediately preceding fiscal year of Parent are less than $5,000,000; plus (ii) in the case of any such officer, director, employee or former officer, director or employee, an amount equal to the Net Cash Proceeds received by CPG I (whether directly or from Parent) of any resales or new issuances of Equity Interests of Parent, and options in respect of Equity Interests of Parent, to such any such officer, director, employee or former officer, director or employee at any time after the initial issuances thereof to such officer, director, employee or former officer, director or employee, together with the aggregate amount of deferred compensation due and owing by Parent or any of its Subsidiaries to such officer, director, employee or former officer, director or employee that is cancelled, waived or exchanged at any time after the initial issuances of any such Equity Interests and options for the grant to such officer, director, employee or former officer, director or employee of the right to receive or acquire other Equity Interests of Parent or CPG I, plus (iii) in the case of any such officer, director, employee or former officer, director or employee, an amount equal to the Net Cash Proceeds received by CPG I (whether directly or from Parent), of key man life insurance policies on

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the life of such officer, director, employee or former officer, director or employee that have been received by Parent or any of its Subsidiaries;

(h)       Borrowers and Guarantors may make payments to redeem the Equity Interests of Parent owned by Christopher Bardasian, Kevin Sloan and Larry Sloan as of the date hereof as required, and in accordance with, the terms of the Procell Unit Purchase Agreement (as in effect on the date hereof), provided, that, as to any such payment and after giving effect thereto, each of the following conditions is satisfied: (i) the aggregate amount of all such payments shall not exceed $5,400,000 and all such payments shall be made prior to July 1, 2008, except as Agent may otherwise hereafter agree, (ii) using the most recent calculation of the Borrowing Base prior to the date of any such payment, on a pro forma basis, the sum of (A) the aggregate amount of the Excess Availability of Borrowers and (B) cash on hand of Borrowers and Guarantors shall be not less than $10,000,000 and (iii) as of the date of making any payment in respect of any such payment and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(i)        Borrowers and Guarantors may make other Restricted Payments not otherwise expressly provided for in this Section 10.5 in the case of any such Restricted Payments provided, that, each of the following conditions is satisfied:

(i)        the aggregate amount of such Restricted Payments shall not exceed $10,000,000in any fiscal year,

(ii)      in the case of any such Restricted Payment in excess of $1,750,000 or at any time after the aggregate amount of such Restricted Payments made in any fiscal year exceeds $1,750,000, (A) Agent shall have received not less than ten (10) Business Days’ prior written notice of the intention of such Borrower or Guarantor to make such Restricted Payment, which notice shall set forth in reasonable detail satisfactory to Agent the amount of any such payments, the nature and purpose of such Restricted Payment, the date such payments are to be made and such other information as Agent may request with respect thereto, (B) Agent shall have received a Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such transaction, the Parent and its Subsidiaries shall be in compliance with the financial covenant set forth in Section 11.1 both prior, and after giving effect, to such Restricted Payment, (C) as of the date of any such payment and after giving effect thereto, using the most recent calculation of the Borrowing Base prior to the date of any such payment, on a pro forma basis, the sum of (x) the aggregate amount of the Excess Availability of Borrowers and (y) cash on hand of Borrowers and Guarantors shall be not less than $10,000,000 and (D) as of the date of making any payment in respect of any such redemption, retirement or repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(iii)    in the case of any such Restricted Payments that are equal to or less than $1,750,000 and so long as the aggregate amount of such Restricted Payments made in any fiscal year is equal to or less than $1,750,000, then as to all such Restricted Payments in such fiscal year thereafter, (A) as of the date of any such Restricted Payment and after giving effect thereto, using the most recent calculation

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of the Borrowing Base prior to the date of any such sale or other disposition, on a pro forma basis, there shall be Excess Availability, and (B) as of the date of any such Restricted Payment, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing;

(j)        Parent may pay any dividend or redeem any of its Equity Interests within sixty (60) days after the date of the declaration of such dividend or the mailing of such irrevocable redemption notice if the dividend or redemption payment, as the case may be, would have otherwise been permitted under the terms of this Section 10.5 on the date of such declaration or the date of the mailing of such notice; and

(k)       Parent may repurchase its Equity Interests to the extent such repurchase is deemed to occur upon (i) the non-cash exercise of stock options to the extent such Equity Interests represents a portion of the exercise price of such options and (ii) the withholding of a portion of such Equity Interests to pay taxes associated therewith, and the purchase of fractional shares of Equity Interests of Parent or any Subsidiary arising out of stock dividends, splits or combinations or business combinations.

10.6Transactions with Affiliates. Each Borrower and Guarantor shall not, directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, any officer, director or other Affiliates of such Borrower or Guarantor, except pursuant to the reasonable requirements of such Borrower’s or Guarantor’s business (as the case may be) and upon fair and reasonable terms no less favorable to such Borrower or Guarantor than such Borrower or Guarantor would obtain in a comparable arm’s length transaction with an unaffiliated person, except for the following:

(a)       any employment or compensation arrangement or agreement, employee benefit plan or arrangement, officer or director indemnification agreement or any similar arrangement or other compensation arrangement entered into by Parent or any of its Subsidiaries in the ordinary course of business and payments, issuance of securities or awards pursuant thereto, and including the grant of stock options, restricted stock, stock appreciation rights, phantom stock awards or similar rights to employees and directors in each case approved by the Board of Directors of such Borrower or Guarantor;

(b)       transactions exclusively between or among Parent and any of its Subsidiaries or exclusively between or among such Subsidiaries (including any Person that becomes a Subsidiary as a result of such transaction), provided that such transactions are not otherwise prohibited by this Agreement;

(c)       to the extent permitted under Section 10.5(d) hereof, up to $1,500,000 each year to the AEA Group pursuant to the first paragraph of Section 2 of the Management Agreement (as in effect on the date hereof), (B) any transactional fees payable to the AEA Group pursuant to such Management Agreement and (C) reasonable expenses payable to the AEA Group pursuant to such Management Agreement;

(d) Restricted Payments permitted under Section 10.5 hereof; and

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(e)       loans and investments permitted under clauses (g) and (j) of the definition of Permitted Investments;

(f)        the issuance of Qualified Equity Interests to Affiliates to the extent such issuance is permitted under clause (g) of the definition of Permitted Dispositions;

(g)       any merger or consolidation of Parent or its Subsidiaries with Affiliates of Parent or such Subsidiaries (i) to the extent permitted under Section 10.1(a), solely for the purpose of reorganizing to facilitate an initial public offering of securities of Parent or any direct or indirect parent entity of Parent or (ii) to the extent permitted under Section 9.1, solely to reincorporate the Parent or such Subsidiary in a new jurisdiction;

(h)       transactions pursuant to or contemplated by the Partnership Agreement as in effect on the date hereof.

10.7Change in Business. Each Borrower and Guarantor shall not engage in any business other than the business of such Borrower or Guarantor on the date hereof and any business reasonably related, ancillary or complimentary to the business in which such Borrower or Guarantor is engaged on the date hereof.

10.8Limitation of Restrictions Affecting Subsidiaries. Each Borrower and Guarantor shall not, directly, or indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction which prohibits or limits the ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or make other distributions or pay any Indebtedness owed to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make loans or advances to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor, (c) transfer any of its properties or assets to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor; except for encumbrances and restrictions arising under (i) applicable law, rule, regulation or order, including of any regulatory body, (ii) this Agreement, the other Financing Agreements, the ABL Credit Agreement and the Senior Note Documents or an agreement governing any other Indebtedness permitted hereby provided that, with respect to any agreement governing such other Indebtedness, the provisions relating to such encumbrance or restriction are no less favorable to the Parent and its Subsidiaries in any material respect, taken as a whole, than the provisions contained in this Agreement as in effect on the date hereof, (iii) customary provisions restricting subletting or assignment of (x) any lease governing a leasehold interest of such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor or (y) any contracts and licenses (including, without limitation, those relating to intellectual property), in each case entered into in the ordinary course of business, (iv) customary restrictions on real property interests found in easement agreements of such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor, (v) any agreement relating to permitted Indebtedness incurred by, or Equity Interests of, a Subsidiary of such Borrower or Guarantor prior to the date on which such Subsidiary was acquired by such Borrower or such Guarantor and outstanding on such acquisition date, (vi) restrictions on the transfer of assets subject to any Lien permitted hereunder imposed by the holder of such Lien, (vii) restrictions imposed by any agreement to sell assets or Equity Interests permitted hereunder to any Person pending the closing of such sale, (viii) purchase money Indebtedness or Capitalized Lease Obligations that impose restrictions on the property purchased or leased, (ix) provisions in joint venture agreements, partnership agreements, limited liability company organizational governance documents, asset sale and stock sale agreements, sale-leaseback

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agreements, stock sale agreements and other similar agreements that restrict the transfer of ownership interests in such entity, (x) restrictions on cash or other deposits or net worth imposed by customers or suppliers under contracts entered into in the ordinary course of business, (xi) encumbrances pursuant to the subordination provisions of any Indebtedness permitted to be incurred hereunder, (xii) encumbrances on the assets or capital stock of Foreign Subsidiaries pursuant to Indebtedness of Foreign Subsidiaries permitted to be incurred hereunder that are not expected to make the Borrowers unable to make principal or interest payments hereunder, as determined in good faith by the Borrower Agent, and (xiii) agreements existing on the date hereof and amendments, restatements, modifications, renewals, supplements, refundings, replacements, refinancings, extensions or continuations of contracts, instruments or contractual obligations in existence on the date hereof or those referred to above; provided, that, any such encumbrances or restrictions contained in such extension or continuation are no less favorable to the Parent and Subsidiaries than those encumbrances and restrictions under or pursuant to the contracts, instruments or contractual obligations so extended or continued.

10.9Certain Payments of Indebtedness, Etc. Borrowers and Guarantors shall not, and shall not permit any Subsidiary to, make or agree to make any payment, prepayment, redemption, retirement, defeasance, purchase or sinking fund payment or other acquisition for value of any of its Indebtedness other than the Indebtedness under the Financing Agreements and Indebtedness under the ABL Credit Agreement (but in such case subject to the Intercreditor Agreement) including, without limitation, by way of depositing money or securities with the trustee therefor before the date required for the purpose of paying any portion of such Indebtedness when due), or otherwise set aside or deposit or invest any sums for such purpose, exceptthat:

(a)       Parent may make (i) regularly scheduled payments of principal and interest in respect of Indebtedness evidenced by the Senior Fixed Rate Notes and the Senior Floating Rate Notes and (ii) to the extent permitted by Section 10.5, prepayments of, or redemptions of, principal in respect thereof;

(b)       Borrowers and Guarantors may make payments in respect of the Indebtedness owing to Christopher Bardasian, Kevin Sloan and Larry Sloan constituting the earn-out consideration payable to them under the Procell Unit Purchase Agreement to the extent due and payable in accordance with the terms of such agreement as in effect on the date hereof not to exceed $6,900,000 in the aggregate; provided, that, as to any such payments and after giving effect thereto, each of the following conditions shall be satisfied: (i) all such payments shall be made prior to July 1, 2008, except as Agent may otherwise hereafter agree, (ii) using the most recent calculation of the Borrowing Base prior to the date of any such payment, on a pro forma basis, the sum of (x) the aggregate amount of the Excess Availability of Borrowers and (y) cash on hand of Borrowers and Guarantors shall be not less than $10,000,000 and (iii) no Default or Event of Default shall exist or have occurred and be continuing;

(c)       Borrowers and Guarantors may make payments in respect of Indebtedness owing by them in exchange for substantially contemporaneous issuance of Qualified Equity Interests of Parent permitted hereunder or with Net Cash Proceeds from the substantially contemporaneous sale of Qualified Equity Interests of Parent;

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(d)       Borrowers and Guarantors may make payments in respect of Indebtedness permitted under Sections 10.3(b), (c), (j) and (l) in each case with proceeds of Refinancing Indebtedness as permitted under Section 10.3(m); and

(e)       as to payments in respect of any other Indebtedness permitted under Section 10.3 hereof not subject to the provisions above in this Section 10.9, Borrower and Guarantors may make payments of regularly scheduled principal and interest or other mandatory payments as and when due in respect of such Indebtedness in accordance with the terms thereof (and in the case of Subordinated Debt, subject to the terms of subordination set forth therein or applicable thereto).

10.10Modifications of Indebtedness, Organizational Documents and Certain Other Agreements. Borrowers and Guarantors shall not, and shall not permit any Subsidiary to:

(a)       amend, modify or otherwise change its certificate of incorporation, articles of association, certificate of formation, limited liability agreement, limited partnership agreement or other organizational documents, as applicable, including, without limitation, entering into any new agreement with respect to any of its Equity Interests, except for amendments, modifications or other changes that do not affect the rights and privileges of any Borrower or Guarantor, or its Subsidiaries and do not affect the ability of a Borrower, Guarantor or such Subsidiary to amend, modify, renew or supplement the terms of this Agreement or any of the other Financing Agreements, or otherwise affect the interests of Agent or Lenders and so long as at the time of any such amendment, modification or change, no Default or Event of Default shall exist or have occurred and be continuing;

(b)       amend, modify or otherwise change (or permit the amendment, modification or other change in any manner of) any of the provisions of the Senior Note Documents, the ABL Credit Agreement (except to the extent permitted under the Intercreditor Agreement) or any agreements, documents or instruments in respect of any Subordinated Debt or any agreements related to the Indebtedness permitted under Sections 10.3(k), (l), and (m) hereof, except, that, Borrowers and Guarantors, and any Subsidiary, may, after prior written notice to Agent, amend, modify, alter or change the terms thereof to forgive, or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or to make the terms thereof less restrictive or burdensome to Borrowers, Guarantors or such Subsidiary.

 

10.11 Inactive Subsidiaries; Parent Holding Company.

(a)       Except as otherwise provided in Section 10.11(b) below, Borrowers and Guarantors will not permit any Inactive Subsidiary to (i) engage in any business or conduct any operations, (ii) own assets with a book value of more than $100,000 in the aggregate and (iii) incur any obligations or liabilities in respect of any Indebtedness or otherwise.

(b)       In the event that a Borrower or Guarantor intends to have any then Inactive Subsidiary commence any business or operations or own assets with a book value of more than $100,000 in the aggregate or incur any obligations or liabilities in respect of any Indebtedness or otherwise, (i) Borrowers and Guarantors shall give Agent not less than ten (10) Business Days’ prior written notice thereof with reasonable detail and specificity and

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such other information with respect thereto as Agent may request and (ii) at any time thereafter, promptly upon the request of Agent, Borrowers and Guarantors shall cause such Inactive Subsidiary to execute and deliver to Agent, in form and substance satisfactory to Agent, a joinder agreement to the Financing Agreements in order to, among other things, make such Subsidiary a party to this Agreement as a “Guarantor” and a party to any guarantee as a “Guarantor” or pledge agreement as a “Pledgor”, and without limitation, supplements and amendments hereto and to any of the other Financing Agreements, authorization to file UCC financing statements, Collateral Access Agreements (to the extent required under Section 9.2 hereof), other agreements, documents or instruments contemplated under Section 5.3 hereof and other consents, waivers, acknowledgments and other agreements from third persons which Agent may deem reasonably necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets of such Subsidiary, corporate resolutions and other organization and authorizing documents of such Person, and favorable opinions of counsel to such person; provided, that such Inactive Subsidiary is not a Foreign Subsidiary and (iii) upon the satisfaction of each of the conditions set forth in this Section 10.11(b), such Inactive Subsidiary shall cease to be deemed an Inactive Subsidiary for purposes of this Agreement.

(c)       Except for any Guaranty Obligations in respect of Indebtedness of CPG I evidenced by the Senior Fixed Rate Notes and the Senior Floating Rate Notes permitted hereunder and as otherwise provided in Sections 10.3(d), 10.3(f), 10.3(g), 10.3(h), 10.3(i), 10.3(j) and 10.3(k), Parent shall not incur any Indebtedness nor grant any security interests, liens or other encumbrances upon any of its properties or assets nor engage in any operations, business or activity other than holding one hundred (100%) percent of the Equity Interests of CPG I and each of any administrative, management or other activities incidental to such holdings, pledging its interests therein to Agent and executing and delivering the Financing Agreements to which it is a party and fulfilling its obligations thereunder.

10.12Sale and Leasebacks. Borrowers and Guarantors shall not, and shall not permit any Subsidiary to, enter into any Sale and Leaseback Transaction, unless the sale of such property is permitted under Section 10.1 hereof and the lease back of the property gives rise to Indebtedness permitted under Section 10.3 hereof.

10.13Designation of Designated Senior Debt. Borrowers and Guarantors shall not, and shall not permit any Subsidiary to, designate any Indebtedness, other than the Obligations and the obligations under the ABL Credit Agreement (if applicable), as “Designated Senior Debt”, or any similar term under and as defined in the agreements relating to any Indebtedness of Borrowers or Guarantors, including Subordinated Debt or Indebtedness of any Borrower or Guarantor evidenced by any of the Senior Note Documents or Senior Floating Rate Note Documents, which contains such designation. Borrowers and Guarantors shall, and shall cause any Subsidiary to, designate the Obligations as “Designated Senior Debt” or any similar term under and as defined in the agreements relating to any Indebtedness (including any Subordinated Debt) of any Borrower or Guarantor which contains such designation.

10.14Foreign Assets Control Regulations, Etc. None of the requesting or borrowing of the Loans or the use of the proceeds thereof will violate the Trading With the Enemy Act (50 U.S.C. §1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as

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amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or executive order relating thereto (including, but not limited to (a) Executive order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56). None of Borrowers or any of their Subsidiaries or other Affiliates is or will become a Sanctioned Entity or Sanctioned Person” as described in the Executive Order, the Trading with the Enemy Act or the Foreign Assets Control Regulations or engages or will engage in any dealings or transactions, or be otherwise associated, with any such Sanctioned Entity or Sanctioned Person.

SECTION 11.

FINANCIAL COVENANT

11.1Maximum Senior Secured Leverage Ratio. Commencing on the day immediately following the Closing Date, the Senior Secured Leverage Ratio as of the end of each fiscal quarter of the Parent shallbe less than or equal to 2.5 to 1.0.

SECTION 12.

EVENTS OF DEFAULT AND REMEDIES

12.1Events of Default. The occurrence or existence of any one or more of the following events are referred to herein individually as an “Event of Default”, and collectively as “Events of Default”:

(a)       (i) any Borrower fails to make any principal payment hereunder when due or fails to pay interest, fees or any of the other Obligations within three (3) Business Days after the due date thereof, or (ii) any Borrower or Guarantor fails to perform any of the covenants contained in Sections 2.2, 2.3, 3, 5, 7, 9.5, 9.6, 10 and 11, or (iii) any Borrower or Guarantor fails to perform any of the terms, covenants, conditions or provisions contained in this Agreement or any of the other Financing Agreements other than those described in Sections 12.1(a)(i) and 12.1(a)(ii) above and such failure shall continue for thirty (30) days; provided, that, such thirty (30) day period shall not apply in the case of any failure to observe any such covenant which is not capable of being cured at all or within such thirty (30) day period or which has been the subject of a prior failure within a six (6) month period;

(b)       any representation, warranty or statement of fact made by any Borrower or Guarantor to Agent in this Agreement, the other Financing Agreements or any other written agreement, schedule, confirmatory assignment or otherwise that are qualified as to materiality or Material Adverse Effect shall when made or deemed made be incorrect, false or misleading and any other such representation, warranty or statement of fact made by any Borrower or Guarantor to Agent shall when made or deemed made be incorrect, false or misleading in any material respect;

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(c)       any Guarantor revokes or terminates or purports to revoke or terminate any guarantee of such party in favor of Agent or any Lender, except as a result of a transaction permitted under Section 10.1 hereof;

(d)       any judgment for the payment of money is rendered against any Borrower or Guarantor in excess of $7,000,000 in the aggregate (to the extent not covered by independent third party insurance where the insurer has not declined or disputed coverage) and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against any Borrower or Guarantor or any of the Collateral having a value in excess of $1,000,000;

(e)       any Borrower or Guarantor makes an assignment for the benefit of creditors or makes or sends notice of a bulk transfer;

(f)        a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed against any Borrower or Guarantor other than the Inactive Subsidiaries or all or any part of its properties and such petition or application is not dismissed within sixty (60) days after the date of its filing or any Borrower or Guarantor other than the Inactive Subsidiariesshall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner;

(g)       a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed by any Borrower or Guarantor (other than the Inactive Subsidiaries) or for all or any part of its property;

(h)       any default in respect of any Indebtedness of any Borrower or Guarantor in any case in a principal amount (or, in the case of a revolving credit facility, a commitment amount) in excess of $7,000,000(including Subordinated Debt or any Indebtedness evidenced by or arising under any of the Senior Note Documents or the ABL Credit Agreement), which default continues for more than the applicable cure period, if any, with respect thereto, including any default by any Borrower or Guarantor under any Material Contract, which default continues for more than the applicable cure period, if any, with respect thereto and/or is not waived in writing by the other parties thereto or the subordination provisions contained in any agreement related to any Subordinated Debt shall cease to be in full force and effect or to give Agent or Lenders the rights, powers and privileges purported to be created thereby,

(i)        any material provision hereof or of any of the other Financing Agreements shall for any reason cease to be valid, binding and enforceable with respect to any party hereto or thereto (other than Agent) in accordance with its terms, or any such party shall challenge the enforceability hereof or thereof, or shall assert in writing, or take any action or fail to take any action based on the assertion that any provision hereof or of any of the other

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Financing Agreements has ceased to be or is otherwise not valid, binding or enforceable in accordance with its terms, or any security interest provided for herein or in any of the other Financing Agreements shall cease to be a valid and perfected first priority security interest in any of the Collateral purported to be subject thereto (except as otherwise permitted herein or therein);

(j)        an ERISA Event shall occur which results in or could reasonably be expected to result in liability of any Borrower in an aggregate amount in excess of $2,500,000;

(k)       any Borrower or Guarantor shall be prohibited or otherwise restrained from conducting the business theretofore conducted by it in any manner that has or could reasonably be expected to result in a Material Adverse Effect by virtue of any determination, ruling, decision, decree or order of any court or Governmental Authority of competent jurisdiction;

(l) any Change of Control; or

(m)      any uninsured damage to or loss, theft or destruction of any assets of the Borrowers or Guarantors or any of their Subsidiaries shall occur that is in excess of $2,500,000.

 

12.2 Remedies.

(a)       At any time an Event of Default exists or has occurred and is continuing, Agent and Lenders shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by any Borrower or Guarantor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Agent and Lenders hereunder, under any of the other Financing Agreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Agent’s discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by any Borrower or Guarantor of this Agreement or any of the other Financing Agreements. Subject to Section 14 hereof, Agent may, and at the direction of the Required Lenders shall, at any time or times an Event of Default exists or has occurred and is continuing, proceed directly against any Borrower or Guarantor to collect the Obligations without prior recourse to the Collateral.

(b)       Without limiting the generality of the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, at its option and shall upon the direction of the Required Lenders, upon notice to Borrower Agent, accelerate the payment of all Obligations and demand immediate payment thereof to Agent for itself and the benefit of Lenders (provided, that, upon the occurrence of any Event of Default described in Sections 12.1(f) and 12.1(g), all Obligations shall automatically become immediately due and payable) (provided, that, upon the occurrence of any Event of Default described in Sections 12.1(f) and 12.1(g), any obligation of the Agent or a Lender hereunder shall automatically terminate).

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(c)       Without limiting the foregoing, at any time an Event of Default exists or has occurred and is continuing and only at such time or times, Agent may, in its discretion (i) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, (ii) require any Borrower or Guarantor, at Borrowers’ expense, to assemble and make available to Agent any part or all of the Collateral at any place and time designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (iv) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker’s board, at any office of Agent or elsewhere) at such prices or terms as Agent may deem reasonable, for cash, upon credit or for future delivery, with the Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of any Borrower or Guarantor, which right or equity of redemption is hereby expressly waived and released by Borrowers and Guarantors and/or (vi) terminate this Agreement. If any of the Collateral is sold or leased by Agent upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Agent. If notice of disposition of Collateral is required by law, ten (10) days prior notice by Agent to Borrower Agent designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and, subject to applicable law, Borrowers and Guarantors waive any other notice. In the event Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, each Borrower and Guarantor waives the posting of any bond which might otherwise be required.

(d)       At any time or times that an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, enforce the rights of any Borrower or Guarantor against any account debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables. Without limiting the generality of the foregoing, Agent may, in its discretion, at such time or times (i) notify any or all account debtors, secondary obligors or other obligors in respect thereof that the Receivables have been assigned to Agent and that Agent has a security interest therein and Agent may direct any or all account debtors, secondary obligors and other obligors to make payment of Receivables directly to Agent, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other obligations included in the Collateral and thereby discharge or release the account debtor or any secondary obligors or other obligors in respect thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Agent and Lenders shall not be liable for any failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto and (iv) take whatever other action Agent may deem necessary or desirable for the protection of its interests and the interests of Lenders. At any time that an Event of Default exists or has occurred and is continuing, at Agent’s request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Agent and are payable directly and only to Agent

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and Borrowers and Guarantors shall deliver to Agent such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Agent may require. In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Borrowers shall, upon Agent’s request, hold the returned Inventory in trust for Agent, segregate all returned Inventory from all of its other property, dispose of the returned Inventory solely according to Agent’s instructions, and not issue any credits, discounts or allowances with respect thereto without Agent’s prior written consent.

(e)       To the extent that applicable law imposes duties on Agent or any Lender to exercise remedies in a commercially reasonable manner (which duties cannot be waived under such law), each Borrower and Guarantor acknowledges and agrees that it is not commercially unreasonable for Agent or any Lender (i) to fail to incur expenses reasonably deemed significant by Agent or any Lender to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain consents of any Governmental Authority or other third party for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against account debtors, secondary obligors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other persons, whether or not in the same business as any Borrower or Guarantor, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insure Agent or Lenders against risks of loss, collection or disposition of Collateral or to provide to Agent or Lenders a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Agent in the collection or disposition of any of the Collateral. Each Borrower and Guarantor acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Agent or any Lender would not be commercially unreasonable in the exercise by Agent or any Lender of remedies against the Collateral and that other actions or omissions by Agent or any Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation of the foregoing, nothing contained in this Section shall be construed to grant any rights to any Borrower or Guarantor or to impose any duties on Agent or Lenders that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

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(f)        For the purpose of enabling Agent to exercise the rights and remedies hereunder, each Borrower and Guarantor hereby grants to Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable at any time an Event of Default shall exist or have occurred and for so long as the same is continuing and only at such time or times) without payment of royalty or other compensation to any Borrower or Guarantor, to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and general intangibles now owned or hereafter acquired by any Borrower or Guarantor, wherever the same maybe located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof.

(g)       At any time an Event of Default exists or has occurred and is continuing, Agent may apply the cash proceeds of Collateral actually received by Agent from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in accordance with the terms hereof, whether or not then due or may hold such proceeds as cash collateral for the Obligations. Borrowers and Guarantors shall remain liable to Agent and Lenders for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including attorneys’ fees and expenses.

(h)       Without limiting the foregoing, upon the occurrence of a Default or an Event of Default, Agent and Lenders may, at Agent’s option, and upon the occurrence of an Event of Default at the direction of the Required Lenders, Agent and Lenders shall, without notice, (i) cease making Loans or reduce the lending formulas or amounts of Loans available to Borrowers and/or (ii) in the case of an Event of Default, terminate any provision of this Agreement providing for any future Loans to be made by Agent and Lenders.

SECTION 13.

JURY TRIAL WAIVER; OTHER WAIVERS CONSENTS; GOVERNING LAW

13.1Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

(a)       The validity, interpretation and enforcement of this Agreement and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

(b)       Borrowers, Guarantors, Agent and Lenders irrevocably consent and submit to the non-exclusive jurisdiction of the of the Supreme Court of the State of New York, New York County and the United States District Court for the Southern District of New York, whichever Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to

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the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Agent and Lenders shall have the right to bring any action or proceeding against any Borrower or Guarantor or its or their property in the courts of any other jurisdiction which Agent deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against any Borrower or Guarantor or its or their property).

(c)       Each Borrower and Guarantor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Agent’s option, by service upon any Borrower or Guarantor (or Borrower Agent on behalf of such Borrower or Guarantor) in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, such Borrower or Guarantor shall appear in answer to such process, failing which such Borrower or Guarantor shall be deemed in default and judgment may be entered by Agent against such Borrower or Guarantor for the amount of the claim and other relief requested.

(d)       BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR, AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e)       Agent and Secured Parties shall not have any liability to any Borrower or Guarantor (whether in tort, contract, equity or otherwise) for losses suffered by such Borrower or Guarantor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Agent and such Lender, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. Each Borrower and Guarantor: (i) certifies that neither Agent, any Lender, nor any representative, agent or attorney acting for or on behalf of Agent or any Lender has represented, expressly or otherwise, that Agent and Lenders would not, in the event of litigation, seek to enforce any of the waivers provided for in this Agreement or any of the other Financing Agreements and

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(ii) acknowledges that in entering into this Agreement and the other Financing Agreements, Agent and Lenders are relying upon, among other things, the waivers and certifications set forth in this Section 11.1 and elsewhere herein and therein.

13.2Waiver of Notices. Each Borrower and Guarantor hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and chattel paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and this Agreement, except such as are expressly provided for herein or required by applicable law and cannot be waived thereunder. No notice to or demand on any Borrower or Guarantor which Agent or any Lender may elect to give shall entitle such Borrower or Guarantor to any other or further notice or demand in the same, similar or other circumstances.

 

13.3 Amendments and Waivers.

(a)       Neither this Agreement nor any other Financing Agreement nor any terms hereof or thereof may be amended, waived, discharged or terminated unless such amendment, waiver, discharge or termination is in writing signed by Agent and the Required Lenders or at Agent’s option, by Agent with the authorization or consent of the Required Lenders, and as to amendments to any of the Financing Agreements (other than with respect to any provision of Section 14 hereof), by any Borrower and such amendment, waiver, discharger or termination shall be effective and binding as to all Lenders only in the specific instance and for the specific purpose for which given; except, that, no such amendment, waiver, discharge or termination shall:

(i)        reduce the interest rate or any fees or extend the time of payment of principal, interest or any fees or reduce the principal amount of any Loan without the consent of each Lender directly affected thereby,

(ii)      increase the Pro Rata Share of any Lender over the amount thereof then in effect or provided hereunder, in each case without the consent of the Lender directly affected thereby,

(iii)      release all or substantially all of the Collateral (except as expressly required hereunder or under any of the other Financing Agreements or applicable law and except as permitted under Section 14.11(b) hereof), or release of any Borrower or any Guarantor, or agree to the subordination of any of the Obligations, or alter the order of application set forth in Section 6.7(b), in each case without the consent of Agent and all of Lenders,

(iv)      consent to the assignment or transfer by any Borrower or Guarantor of any of their rights and obligations under this Agreement, without the consent of Agent and all of Lenders,

(v)       amend, modify or waive any terms of this Section 13.3, without the consent of Agent and all of Lenders;

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(vi)      reduce any percentage specified in the definition of Required Lenders without the consent of Agent and all of Lenders;

(vii)    amend or modify the definition of “Interest Period” without the written consent of Agent and all of Lenders;

(viii)    amend or modify the definition of “Obligations” to delete or exclude any obligation or liability described therein without the consent of Agent and all of Lenders; or

(ix)      amend, modify or waive any provision of the Financing Agreements requiring consent, approval or request of all Lenders without the written consent of Agent and all of Lenders.

(b)       Agent and Lenders shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its or their rights, powers and/or remedies unless such waiver shall be in writing and signed as provided herein. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Agent or any Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Agent or any Lender would otherwise have on any future occasion, whether similar in kind or otherwise.

(c)       Notwithstanding anything to the contrary contained in Section 13.3(a) above, in connection with any amendment, waiver, discharge or termination, in the event that any Lender whose consent thereto is required shall fail to consent or fail to consent in a timely manner (such Lender being referred to herein as a “Non-Consenting Lender”), but the consent of any other Lenders to such amendment, waiver, discharge or termination that is required are obtained, if any, then Wachovia or Borrower Agent shall have the right, but not the obligation, at any time within one hundred twenty (120) days thereafter, and upon the exercise by Wachovia or Borrower Agent of such right, such Non-Consenting Lender shall have the obligation, to sell, assign and transfer to Wachovia or such Eligible Transferee as Wachovia may specify, the Pro Rata Share of such Non-Consenting Lender and all rights and interests of such Non-Consenting Lender pursuant thereto. Wachovia shall provide the Non-Consenting Lender with prior written notice of its intent to exercise its right under this Section (or if Wachovia does not exercise such right, Borrower Agent shall provide Agent and the Non-Consenting Lender with prior written notice of its intent to exercise its right under this Section), which notice shall specify the date on which such purchase and sale shall occur, which date shall be within thirty (30) days after such notice. Such purchase and sale shall be pursuant to the terms of an Assignment and Acceptance (whether or not executed by the Non-Consenting Lender), except that on the date of such purchase and sale, Wachovia, or such Eligible Transferee specified by Wachovia shall pay to the Non-Consenting Lender (except as Wachovia and such Non-Consenting Lender may otherwise agree) the amount equal to: (i) the principal balance of the Loans held by the Non-Consenting Lender outstanding as of the close of business on the business day immediately preceding the effective date of such purchase and sale, plus (ii) amounts accrued and unpaid in respect of interest and fees payable to the Non-Consenting Lender to the effective date of the purchase (including amounts payable under Section 3.10 as if the Non-Consenting Lender’s Eurodollar Rate Loans were being prepaid on the purchase date, but in no event

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shall the Non-Consenting Lender be deemed entitled to any early termination fee). Such purchase and sale shall be effective on the date of the payment of such amount to the Non-Consenting Lender and the Pro Rata Share of the Non-Consenting Lender shall terminate on such date.

(d)       The consent of Agent shall be required for any amendment, waiver or consent affecting the rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section. Notwithstanding anything to the contrary contained in Section 13.3(a) above, (i) in the event that Agent shall agree that any items otherwise required to be delivered to Agent as a condition of the Term Loan hereunder may be delivered after the date hereof, Agent may, in its discretion, agree to extend the date for delivery of such items or take such other action as Agent may deem appropriate as a result of the failure to receive such items as Agent may determine or may waive any Event of Default as a result of the failure to receive such items, in each case without the consent of any Lender and (ii) Agent may consent to any change in the type of organization, jurisdiction of organization or other legal structure of any Borrower, Guarantor or any of their Subsidiaries and amend the terms hereof or of any of the other Financing Agreements as may be necessary or desirable to reflect any such change, in each case without the approval of any Lender.

(e) [Reserved.]

(f)        Notwithstanding anything to the contrary herein, (i) except as set forth in clause (h) below, each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code of the United States supersedes the unanimous consent provisions set forth herein and (ii) Agent and the Required Lenders shall determine whether or not to allow a Borrower or Guarantor to use cash collateral in the context of a bankruptcy or insolvency proceeding and such determination shall be binding on all of the Lenders.

(g)       Notwithstanding the foregoing, any provision of this Agreement may be amended by an agreement in writing entered into by Borrowers and Agent with the express consent of the Required Lenders if at the time such amendment becomes effective, each Lender not consenting thereto receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under this Agreement.

(h)       Notwithstanding anything in this Agreement or any other Financing Agreements to the contrary, the Sponsor Affiliated Lender shall not be permitted to exercise its right to vote (x) as a Lender hereunder or under any of the other Financing Agreements for any purpose whatsoever other than in connection with any amendment, waiver or other modification specified in Sections 13.3(a)(i) – (ix) or in Section 13.3(i) or (y) under section 1126(e) of Title 11 of the United States Code (as now and hereafter in effect, or any successor statute) or any other bankruptcy law in the event that any proceeding thereunder shall be instituted by or against any Borrower or Guarantor; provided, however, that to the extent the Sponsor Affiliated Lender is not entitled to vote on a specific issue, the voting rights associated with such issue shall be allocated pro rata to the Lenders (other than the

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Sponsor Affiliated Lenders) that hold the remaining portion of the principal amount of the Loans.

(i)        Notwithstanding anything in this Agreement or any other Financing Agreements to the contrary, any amendment, waiver, consent, modification or other action affecting the rights, benefits or obligations of the Sponsor Affiliated Lender (and not the rights, benefits or obligations of all other Lenders holding a portion of the outstanding principal amount of the Loans in the same manner) shall require the consent of the Sponsor Affiliated Lender.

13.4Waiver of Counterclaims. Each Borrower and Guarantor waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other then compulsory counterclaims) in any action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.

13.5Indemnification. Each Borrower and Guarantor shall, jointly and severally, indemnify and hold Agent, each Lender, and their respective officers, directors, agents, employees, advisors and counsel and their respective Affiliates (each such person being an “Indemnitee”), harmless from and against any and all losses, claims, damages, penalties, liabilities, costs or expenses (including attorneys’ fees and expenses) imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel except that Borrowers and Guarantors shall not have any obligation under this Section 13.5 to indemnify an Indemnitee with respect to a matter covered hereby resulting from the gross negligence or willful misconduct of such Indemnitee as determined pursuant to a final, non-appealable order of a court of competent jurisdiction (but without limiting the obligations of Borrowers or Guarantors as to any other Indemnitee). To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrowers and Guarantors shall pay the maximum portion which it is permitted to pay under applicable law to Agent and Lenders in satisfaction of indemnified matters under this Section. To the extent permitted by applicable law, no Borrower or Guarantor shall assert, and each Borrower and Guarantor hereby waives, any claim against any Indemnitee, on any theory of liability for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any of the other Financing Agreements or any undertaking or transaction contemplated hereby. No Indemnitee referred to above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or any of the other Financing Agreements or the transaction contemplated hereby or thereby. All amounts due under this Section shall be payable upon demand. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.

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SECTION 14.

THE AGENT

14.1Appointment, Powers and Immunities. Each Secured Party irrevocably designates, appoints and authorizes Wachovia to act as Agent hereunder and under the other Financing Agreements with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Financing Agreements, together with such other powers as are reasonably incidental thereto. Agent (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Financing Agreements, and shall not by reason of this Agreement or any other Financing Agreement be a trustee or fiduciary for any Secured Party; (b) shall not be responsible to Secured Parties for any recitals, statements, representations or warranties contained in this Agreement or in any of the other Financing Agreements, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Financing Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Financing Agreement or any other document referred to or provided for herein or therein or for any failure by any Borrower or any Guarantor or any other Person to perform any of its obligations hereunder or thereunder; and (c) shall not be responsible to Secured Parties for any action taken or omitted to be taken by it hereunder or under any other Financing Agreement or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Agent may employ agents and attorneys in fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys in fact selected by it in good faith. Agent may deem and treat the payee of any note as the holder thereof for all purposes hereof unless and until the assignment thereof pursuant to an agreement (if and to the extent permitted herein) in form and substance satisfactory to Agent shall have been delivered to and acknowledged by Agent.

14.2Reliance by Agent. Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy or other electronic means) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent. As to any matters not expressly provided for by this Agreement or any other Financing Agreement, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders or all of Lenders as is required in such circumstance, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all Lenders.

 

14.3 Events of Default.

(a)       Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or an Event of Default or other failure of a condition precedent to the Loans hereunder, unless and until Agent has received written notice from a Lender, or a Borrower specifying such Event of Default or any unfulfilled condition precedent, and stating that such notice is a “Notice of Default or Failure of Condition”. In the event that Agent receives such a Notice of Default or Failure of Condition, Agent shall give prompt notice thereof to the Lenders. Agent shall (subject to Section 14.7) take such action with respect to

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any such Event of Default or failure of condition precedent as shall be directed by the Required Lenders to the extent provided for herein; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to or by reason of such Event of Default or failure of condition precedent, as it shall deem advisable in the best interest of Lenders. Without limiting the foregoing, and notwithstanding the existence or occurrence and continuance of an Event of Default or any other failure to satisfy any of the conditions precedent set forth in Section 4 of this Agreement to the contrary, unless and until otherwise directed by the Required Lenders, Agent may, but shall have no obligation to, continue to make Loans for the ratable account and risk of Lenders from time to time if Agent believes making such Loans is in the best interests of Lenders.

(b)       Except with the prior written consent of Agent, no Secured Party may assert or exercise any enforcement right or remedy in respect of the Loans or other Obligations, as against any Borrower or Guarantor or any of the Collateral or other property of any Borrower or Guarantor or otherwise under any of the Financing Agreements.

14.4Wachovia in Its Individual Capacity. With respect to the Loans made by it, so long as Wachovia shall be a Lender hereunder, it shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates, include Wachovia in its individual capacity as Lender hereunder. Wachovia (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of business with Borrowers (and any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and Wachovia and its Affiliates may accept fees and other consideration from any Borrower or Guarantor and any of its Subsidiaries and Affiliates for services in connection with this Agreement or otherwise without having to account for the same to Lenders.

14.5Indemnification. Lenders agree to indemnify Agent (to the extent not reimbursed by Borrowers hereunder and without limiting any obligations of Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any and all claims of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Financing Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Agent is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents; provided, that, no Lender shall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the party to be indemnified as determined by a final non-appealable judgment of a court of competent jurisdiction. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.

 

14.6 Non-Reliance on Agent and Other Lenders.

(a)       Each Secured Party agrees that it has, independently and without reliance on Agent or any other Secured Party, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrowers and Guarantors and has

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made its own decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Secured Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Financing Agreements. Agent shall not be required to keep itself informed as to the performance or observance by any Borrower or Guarantor of any term or provision of this Agreement or any of the other Financing Agreements or any other document referred to or provided for herein or therein or to inspect the properties or books of any Borrower or Guarantor. Agent will use reasonable efforts to provide Lenders with any information received by Agent from any Borrower or Guarantor which is required to be provided to Lenders or deemed to be requested by Lenders hereunder and with a copy of any Notice of Default or Failure of Condition received by Agent from any Borrower or any Lender; provided, that, Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent’s own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Except for notices, reports and other documents expressly required to be furnished to Lenders by Agent or deemed requested by Lenders hereunder, Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of any Borrower or Guarantor that may come into the possession of Agent.

14.7Failure to Act. Except for action expressly required of Agent hereunder and under the other Financing Agreements, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Lenders of their indemnification obligations under Section 14.5 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.

 

14.8 [Reserved].

 

14.9 Concerning the Collateral and the Related Financing Agreements.

(a)       Each Secured Party authorizes and directs Agent to enter into this Agreement and the other Financing Agreements. Each Secured Party agrees that any action taken by Agent or Required Lenders (or such greater percentage as may be required hereunder) in accordance with the terms of this Agreement or the other Financing Agreements and the exercise by Agent or Required Lenders (or such greater percentage as may be required hereunder) of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all Secured Parties.

(b)       Without limiting the generality of the foregoing, each Secured Party authorizes Agent to enter into the Intercreditor Agreement on behalf of such Secured Party and agrees that it will be bound by the terms of the Intercreditor Agreement as if it were a direct signatory thereto, whether or not such Secured Party executes the Intercreditor Agreement.

 

14.10 [Reserved].

 

14.11 Collateral Matters.

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(a)       Agent may, at its option, from time to time, at any time on or after an Event of Default and for so long as the same is continuing or upon any other failure of a condition precedent to the Loans hereunder, make such disbursements and advances (“Special Agent Advances”) which Agent, in its sole discretion, deems necessary or (with respect to clauses (i) and (ii)) desirable (i) to preserve or protect the Collateral or any portion thereof, (ii) to enhance the likelihood or maximize the amount of repayment by Borrowers and Guarantors of the Loans and other Obligations, provided, that, the aggregate principal amount of the Special Agent Advances pursuant to this clause (ii) outstanding at any time shall not exceed the aggregate amount equal to $3,000,000or (iii) to pay any other amount chargeable to any Borrower or Guarantor pursuant to the terms of this Agreement or any of the other Financing Agreements consisting of costs, fees and expenses. The Special Agent Advances shall be repayable on demand and together with all interest thereon shall constitute Obligations secured by the Collateral. Special Agent Advances shall not constitute Loans but shall otherwise constitute Obligations hereunder. Interest on Special Agent Advances shall be payable at the Interest Rate then applicable to Base Rate Loans and shall be payable on demand. Each Lender agrees that it shall make available to Agent, upon Agent’s demand, in immediately available funds, the amount equal to such Lender’s Pro Rata Share of each such Special Agent Advance. If such funds are not made available to Agent by such Lender, such Lender shall be deemed a Defaulting Lender and Agent shall be entitled to recover such funds, on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m on that day by each of the three leading brokers of Federal funds transactions in New York selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Base Rate Loans.

(b)       Lenders hereby irrevocably authorize Agent, at its option and in its discretion to release any security interest in, mortgage or lien upon, any of the Collateral (i) upon termination of this Agreement and payment and satisfaction of all of the Obligations and delivery of cash collateral to the extent required under Section 15.1 below, or (ii) constituting property being sold or disposed of if Borrower Agent or any Borrower or Guarantor certifies to Agent that the sale or disposition is made in compliance with Section 10.1 hereof (and Agent may rely conclusively on any such certificate, without further inquiry), or (iii) constituting property in which any Borrower or Guarantor did not own an interest at the time the security interest, mortgage or lien was granted or at any time thereafter, or (iv) having a value in the aggregate in any twelve (12) month period of less than $10,000,000, and to the extent Agent may release its security interest in and lien upon any such Collateral pursuant to the sale or other disposition thereof, such sale or other disposition shall be deemed consented to by Lenders, or (v) if required or permitted under the terms of any of the other Financing Agreements, including any intercreditor agreement, or (vi) subject to Section 13.3, if the release is approved, authorized or ratified in writing by the Required Lenders. Except as provided above, Agent will not release any security interest in, mortgage or lien upon, any of the Collateral without the prior written authorization of all of Lenders. Upon request by Agent at any time, Lenders will promptly

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confirm in writing Agent’s authority to release particular types or items of Collateral pursuant to this Section.

(c)       Without any manner limiting Agent’s authority to act without any specific or further authorization or consent by the Required Lenders, each Lender agrees to confirm in writing, upon request by Agent, the authority to release Collateral conferred upon Agent under this Section. Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the security interest, mortgage or liens granted to Agent upon any Collateral to the extent set forth above; provided, that, (i) Agent shall not be required to execute any such document on terms which, in Agent’s opinion, would expose Agent to liability or create any obligations or entail any consequence other than the release of such security interest, mortgage or liens without recourse or warranty and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any security interest, mortgage or lien upon (or obligations of any Borrower or Guarantor in respect of) the Collateral retained by such Borrower or Guarantor.

(d)       Agent shall have no obligation whatsoever to any Secured Party or any other Person to investigate, confirm or assure that the Collateral exists or is owned by any Borrower or Guarantor or is cared for, protected or insured or has been encumbered, or that any particular items of Collateral meet the eligibility criteria applicable in respect of the Loans hereunder, or whether any particular reserves are appropriate, or that the liens and security interests granted to Agent pursuant hereto or any of the Financing Agreements or otherwise have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Financing Agreements, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, subject to the other terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its discretion, given Agent’s own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any other Lender.

14.12Agency for Perfection. Each Secured Party hereby appoints Agent and each other Secured Party as agent and bailee for the purpose of perfecting the security interests in and liens upon the Collateral of Agent in assets which, in accordance with Article 9 of the UCC can be perfected only by possession (or where the security interest of a secured party with possession has priority over the security interest of another secured party) and Agent and each Secured Party hereby acknowledges that it holds possession of any such Collateral for the benefit of Agent as secured party. Should any Secured Party obtain possession of any such Collateral, such Secured Party shall notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver such Collateral to Agent or Collateral Agent or in accordance with Agent’s instructions.

 

14.13 Agent May File Proofs of Claim.

(a)       In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Borrower or Guarantor, Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or

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otherwise and irrespective of whether Agent shall have made any demand on the Borrowers) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(i)        to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of Lenders and Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders and Agent and their respective agents and counsel and all other amounts due Lenders and Agent allowed in such judicial proceeding; and

(ii)      to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Agent and, in the event that Agent shall consent to the making of such payments directly to Lenders, to pay to Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Agent and its agents and counsel, and any other amounts due Agent.

(b)       Nothing contained herein shall be deemed to authorize Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize Agent to vote in respect of the claim of any Lender in any such proceeding.

14.14Successor Agent. Agent may resign as Agent upon thirty (30) days’ notice to Lenders and Parent. If Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for Lenders. If no successor agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with Lenders and Parent, a successor agent from among Lenders. Upon the acceptance by the Lender so selected of its appointment as successor agent hereunder, such successor agent shall succeed to all of the rights, powers and duties of the retiring Agent and the term “Agent” as used herein and in the other Financing Agreements shall mean such successor agent and the retiring Agent’s appointment, powers and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 14 shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is thirty (30) days after the date of a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nonetheless thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

14.15Legal Representation of Agent. In connection with the negotiation, drafting, and execution of this Agreement and the other Financing Agreements, or in connection with future legal representation relating to loan administration, amendments, modifications, waivers, or enforcement of remedies, Moore & Van Allen PLLC has only represented and shall only represent Wachovia in its capacity as Agent and as a Lender. Each other Lender hereby acknowledges that such firm does not represent it in connection with any such matters.

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14.16Other Agent Designations. Agent may at any time and from time to time determine that a Lender may, in addition, be a “Co-Agent”, “Syndication Agent”, “Documentation Agent”. “Control Agent” or similar designation hereunder and enter into an agreement with such Lender to have it so identified for purposes of this Agreement. Any such designation shall be effective upon written notice by Agent to Borrower Agent of any such designation. Any Lender that is so designated as a Co-Agent, Syndication Agent, Documentation Agent, Control Agent or such similar designation by Agent shall have no right, power, obligation, liability, responsibility or duty under this Agreement or any of the other Financing Agreements other than those applicable to all Lenders as such. Without limiting the foregoing, the Lenders so identified shall not have or be deemed to have any fiduciary relationship with any Lender and no Lender shall be deemed to have relied, nor shall any Lender rely, on a Lender so identified as a Co-Agent, Syndication Agent, Documentation Agent, Control Agent or such similar designation in deciding to enter into this Agreement or in taking or not taking action hereunder.

 

14.17 Intercreditor Agreement.

Each of the Lenders hereby acknowledges that it has received and reviewed the Intercreditor Agreement and agrees to be bound by the terms thereof. Each Lender (and each Person that becomes a Lender hereunder pursuant to Section 15.7) hereby (i) acknowledges that Wachovia is acting under the Intercreditor Agreement in multiple capacities as Agent, ABL Agent and Control Agent and (ii) waives any conflict of interest, now contemplated or arising hereafter, in connection therewith and agrees not to assert against Wachovia any claims, causes of action, damages or liabilities of whatever kind or nature relating thereto. Each Lender (and each Person that becomes a Lender hereunder pursuant to Section 15.7) hereby authorizes and directs Wachovia to enter into the Intercreditor Agreement on behalf of such Lender and agrees that Wachovia, in its various capacities thereunder, may take such actions on its behalf as is contemplated by the terms of the Intercreditor Agreement. In addition, each Lender and Agent acknowledge and agree that (a) the rights and remedies of Agent and the Lenders hereunder and under the other Financing Agreements are subject to the Intercreditor Agreement and (b) in the event of a conflict the provisions of the Intercreditor Agreement shall control.

SECTION 15.

TERM OF AGREEMENT; MISCELLANEOUS

 

15.1 Term.

(a)       This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on the Maturity Date, unless sooner terminated pursuant to the terms hereof. Upon the Maturity Date or any other effective date of termination of the Financing Agreements, Borrowers shall pay to Agent all outstanding and unpaid Obligations and shall furnish cash collateral to Agent (or at Agent’s option, a letter of credit issued for the account of Borrowers and at Borrowers’ expense, in form and substance satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as beneficiary) in such amounts as Agent determines are reasonably necessary to secure Agent and Lenders from loss, cost, damage or expense, including attorneys’ fees and expenses, in connection with any contingent

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Obligations, including checks or other payments provisionally credited to the Obligations and/or as to which Agent or any Lender has not yet received final and indefeasible payment (and including any contingent liability of Agent to any bank at which deposit accounts of Borrowers and Guarantors are maintained under any Deposit Account Control Agreement). Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in Federal funds to the bank account of Agent, as Agent may, in its discretion, designate in writing to Borrower Agent for such purpose. Interest shall be due until and including the next Business Day, if the amounts so paid by Borrowers to the bank account designated by Agent are received in such bank account later than 2:00 p.m.

(b)       No termination of this Agreement or any of the other Financing Agreements shall relieve or discharge any Borrower or Guarantor of its respective duties, obligations and covenants under this Agreement or any of the other Financing Agreements until all Obligations have been fully and finally discharged and paid, and Agent’s continuing security interest in the Collateral and the rights and remedies of Agent and Lenders hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finally discharged and paid, other than the contingent Obligations for which Agent has received cash collateral, or at its option, a letter of credit, in accordance with Section 15.1(a) above. Accordingly, each Borrower and Guarantor waives any rights it may have under the UCC to demand the filing of termination statements with respect to the Collateral and Agent shall not be required to send such termination statements to Borrowers or Guarantors, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations paid and satisfied in full in immediately available funds, other than the contingent Obligations for which Agent has received cash collateral, or at its option, a letter of credit, in accordance with Section 15.1(a) above.

 

15.2 Interpretative Provisions.

(a)       All terms used herein which are defined in Article 1, Article 8 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement.

(b)       All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires.

(c)       All references to any Borrower, Guarantor, Agent and Lenders pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns.

(d)       The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(e)       The word “including” when used in this Agreement shall mean “including, without limitation” and the word “will” when used in this Agreement shall be construed to have the same meaning and effect as the word “shall”.

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(f)        An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 13.3 or is cured. Reference herein to a Default or Event of Default that “exists” shall only include a Default or Event of Default, as the case may be, that has not been cured or waived in accordance with the terms hereof, so that such Default or Event of Default, as the case may be, shall cease to exist and shall not be deemed to be continuing if it has been so cured or waived.

(g)       All references to the term “good faith” used herein when applicable to Agent or any Lender shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty-in-fact in the conduct or transaction concerned and observance of reasonable commercial standards of fair dealing based on how an asset-based lender with similar rights providing a credit facility of the type set forth herein would act in similar circumstances at the time with the information then available to it. All references to the term “reasonably” or “reasonable” as applied to any conduct or determination by Agent shall be based on how an asset-based lender with similar rights providing a credit facility of the type set forth herein would act in similar circumstances.

(h)       Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP applied on a basis consistent with the most recent audited consolidated financial statements of Parent delivered to the Lenders; provided, that, in the event of any change in GAAP after the date hereof that affects the covenants in Section 11 hereof, Borrower Agent may by notice to Agent, or Agent may, and at the request of Required Lenders shall, by notice to Borrower Agent require that such covenants be calculated in accordance with GAAP as in effect, and as applied by Parent and its Subsidiaries, immediately before the applicable change in GAAP became effective, until either the notice from the applicable party is withdrawn or such covenant is amended in a manner satisfactory to Parent, Agent and the Required Lenders. Parent shall deliver to Agent and upon Agent’s request, to each Lender at the same time as the delivery of any financial statements given in accordance with the provisions of Section 9.6 hereof (i) a description in reasonable detail of any material change in the application of accounting principles employed in the preparation of such financial statements from those applied in the most recently preceding monthly, quarterly or annual financial statements and (ii) a reasonable estimate of the effect on the financial statements on account of such changes in application. Notwithstanding the above, all calculations of the financial covenant in Section 11 shall be made on a Pro Forma Basis.

(i)        Unless otherwise indicated herein, all references to time of day refer to Eastern Standard Time or Eastern daylight saving time, as in effect in New York City on such day. For purposes of the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to and including”; provided, that, with respect to a computation of fees or interest payable to Agent or any Lender, such period shall in any event consist of at least one full day.

(j)        Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect

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thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation.

(k)       The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

(l)        This Agreement and other Financing Agreements may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.

(m)      This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Agent and the other parties, and are the products of all parties. Accordingly, this Agreement and the other Financing Agreements shall not be construed against Agent or Lenders merely because of Agent’s or any Lender’s involvement in their preparation.

 

15.3 Notices.

(a)       All notices, requests and demands hereunder shall be in writing and deemed to have been given or made: if delivered in person, immediately upon delivery; if by facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing. Notices delivered through electronic communications shall be effective to the extent set forth in Section 15.3(b) below. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section):

If to any Borrower or Guarantor:	CPG International Inc. 801 Corey Street Scranton, Pennsylvania 18505 Attention: Scott Harrison Telephone No.: (570) 558-8000 Telecopy No. (570) 558-8201
with a copy to:	Fried, Frank, Harris, Shriver & Jacobson LLP One New York Plaza New York, New York 10004 Attention: Emil Buchman, Esq. Telephone No.: (212) 859-8298 Telecopy No. (212) 859-4000

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If to Agent:	Wachovia Bank, National Association 1525 W. WT Harris Blvd NC0608/CP8 Charlotte, North Carolina 28262 Attention: Syndication Agency Services Telephone No.: (704) 590-2703 Telecopy No.: (704) 590-2708
with a copy to:	Wachovia Bank, National Association 301 South College Street, NC5562 Charlotte, North Carolina 28288 Attention: Portfolio Management Telecopier: (704) 383-[____] Telephone: (704) 383-[____]

(b)       Notices and other communications to Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Agent or as otherwise determined by Agent; provided, that, the foregoing shall not apply to notices to any Lender pursuant to Section 2 hereof if such Lender has notified Agent that it is incapable of receiving notices under such Section by electronic communication. Unless Agent otherwise requires, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided, that, if such notice or other communication is not given during the normal business hours of the recipient, such notice shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communications is available and identifying the website address therefor. In no event shall Agent or any of its officers, directors, agents, employees, advisors and counsel and their respective Affiliates have any liability to Borrowers, Guarantors, any Lender or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrowers’ or Agent’s transmission of materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Person; provided, that, in no event shall Agent or any of its officers, directors, agents, employees, advisors and counsel and their respective Affiliates have any liability to Borrowers, Guarantors, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

15.4Partial Invalidity. If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

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15.5 Confidentiality.

(a)       Agent and each Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors, trustees and representatives and to any pledgee referred to in Section 15.7 hereof and to any direct or indirect contractual counterparty (or such contractual counterparty’s professional advisor) (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), or otherwise in accordance with its compliance with applicable regulations, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party hereto, (v) in connection with the exercise of any remedies hereunder or under any of the other Financing Agreements or any action or proceeding relating to this Agreement or any of the other Financing Agreements or applicable law or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction, (vii) with the consent of Borrower Agent, or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to Agent, any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than Borrower Agent.

(b)       For purposes of this Section, “Information” means all information received from a Borrower or Guarantor or any Subsidiary relating to Borrowers, Guarantors or any Subsidiary or any of their respective businesses, other than any such information that is available to Agent or any Lender on a nonconfidential basis prior to disclosure by such Borrower or Guarantor or any Subsidiary, provided that, in the case of information received from a Borrower, Guarantor or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

(c)       Agent and each Lender acknowledges that (i) the Information may include material non-public information concerning a Borrower or a Subsidiary, as the case may be, (ii) it has developed compliance procedures regarding the use of material non-public information and (iii) it will handle such material non-public information in accordance with applicable laws and regulations, including Federal and state securities laws. The obligations of Agent and Lenders under this Section 15.5 shall supersede and replace the obligations of Agent and Lenders under any confidentiality letter signed prior to the date hereof or any other arrangements concerning the confidentiality of information provided by any Borrower or Guarantor to Agent or any Lender.

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(d)       Agent may share with its respective Affiliates any information relating to the Term Loan and Parent and its Subsidiaries. Agent may disclose information relating to the Term Loan to Gold Sheets and other publications with such information to consist of deal terms and other information customarily found in such publications. In addition, Agent may otherwise use the corporate names and logos of Borrowers and Guarantors and such information in “tombstones” or other advertisements, public statements or other marketing materials, and in connection with obtaining a published CUSIP from the Standard & Poor’s CUSIP Service Bureau.

15.6Successors. This Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable by Agent, Secured Parties, Borrowers, Guarantors and their respective successors and assigns, except that no Borrower may assign its rights under this Agreement, the other Financing Agreements and any other document referred to herein or therein without the prior written consent of Agent and Lenders. Any such purported assignment without such express prior written consent shall be void. No Secured Party may assign its rights and obligations under this Agreement without the prior written consent of Agent, except as provided in Section 15.7 below. The terms and provisions of this Agreement and the other Financing Agreements are for the purpose of defining the relative rights and obligations of Borrowers, Guarantors, Agent and Secured Parties with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or any of the other Financing Agreements.

 

15.7 Assignments; Participations.

(a)       Each Lender may assign all or, if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Lender, of such rights and obligations under this Agreement to one or more Eligible Transferees (but not including for this purpose any assignments in the form of a participation), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Acceptance; provided, that, (i) such transfer or assignment will not be effective without the prior written consent of Agent, which consent shall not be unreasonably withheld, conditioned or delayed, provided, that, the consent of Agent shall not be required in connection with an assignment to another Lender, to any Affiliate of a Lender, or to any Approved Fund, (ii) so long as no Event of Default has occurred and is continuing, such transfer or assignment will not be effective without the prior written consent of Borrower Agent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, that, the consent of Borrower Agent shall not be required in connection with an assignment to another Lender, to any Affiliate of a Lender, or to any Approved Fund or prior to the completion of the primary syndication as determined by Agent, (iii) in the case of an assignment of the entire remaining amount of the assigning Lender’s Loans at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned, (iv) such transfer or assignment will not be effective until recorded by Agent on the Register, and (v) Agent shall have received for its sole account payment of a processing fee from the assigning Lender or the assignee in the amount of $3,500. Notwithstanding the foregoing, without the consent of the Agent, no assignment of any Loans to the Sponsor Affiliated Lender (other than the initial assignment of $7,500,000 in principal amount of the Loans to AEA Middle Market Debt Funding LLC following the Closing Date) or to an Affiliate of a Sponsor Affiliated Lender (other than an assignment by

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the Sponsor Affiliated Lender to one of its Affiliates of the entire remaining amount of the Sponsor Affiliated Lender’s Loans) shall be permitted.

(b)       Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and to the other Financing Agreements and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and thereunder and the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement.

(c)       By execution and delivery of an Assignment and Acceptance, the assignor and assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Financing Agreements or the execution, legality, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Financing Agreements furnished pursuant hereto, (ii) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Borrower, Guarantor or any of their Subsidiaries or the performance or observance by any Borrower or Guarantor of any of the Obligations; (iii) such assignee confirms that it has received a copy of this Agreement and the other Financing Agreements, together with such other documents and information it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (iv) such assignee will, independently and without reliance upon the assigning Lender, Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Financing Agreements, (v) such assignee appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Financing Agreements as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Financing Agreements are required to be performed by it as a Lender. Agent and Lenders may furnish any information concerning any Borrower or Guarantor in the possession of Agent or any Lender from time to time to assignees and Participants.

(d)       Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Financing Agreements (including, without limitation, all or a portion of the Loans owing to it, without the consent of Agent or the other Lenders); provided, that, (i) such Lender’s obligations under this Agreement and the other Financing Agreements shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and Borrowers, Guarantors, the other Lenders and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Financing Agreements, (iii) the

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Participant shall not have any rights under this Agreement or any of the other Financing Agreements (the Participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by any Borrower or Guarantor hereunder shall be determined as if such Lender had not sold such participation, (iv) each Lender shall retain the sole right to vote, approve or consent, or to not approve or not consent, to or in connection with any amendment, waiver or other modifications of any of the terms and provisions hereof or of any of the other Financing Agreements or to otherwise act or refrain from acting hereunder or thereunder within its exclusive discretion and without any vote, approval or consent of any Participant, other than for the forgiveness of principal, interest or fees, reductions in the interest rate or fees payable with respect to any Loan in which such Participant has an interest, the extension of the Maturity Date for a Loan in which such Participant has an interest, or any date fixed for any regularly scheduled payment of principal, interest or fees in such Loan, or the release of a Borrower or Guarantor or all or substantially all of the Collateral and in the case of any Participant that may be an Affiliate of a Borrower or Guarantor, (A) no such Participant shall have any of the rights to vote, approve or consent to any amendment, waiver or modification hereof or of any of the other Financing Agreements or the right to vote, approve or consent to any vote, approval of consent or other action or refraining from action of the Lender in whose Loans such Participant has an interest, and (B) such Participant shall not, and shall not have the right to, attend any meeting (whether conducted by telephone or in person) with any Agent or Lender or receive any information from Agent or any Lender in connection with the Term Loan.

(e)       Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans hereunder to a Federal Reserve Bank or other Federal banking authority or institution in support of borrowings made by such Lenders from such Federal Reserve Bank or other such banking authority or institution; provided, that, no such pledge shall release such Lender from any of its obligations hereunder or substitute any such pledgee for such Lender as a party hereto.

(f)        Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to Agent and Borrower Agent (an “SPC”) the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof or, if it fails to do so, to make such payment to Agent as are required hereunder. Each party hereto hereby agrees that (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of any Borrower or Guarantor under this Agreement or otherwise, (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder. The making of a Loan by an SPC hereunder shall utilize the Pro Rata Share of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. In furtherance of the foregoing, each party hereto

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hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior debt of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency, or liquidation proceeding under the laws of the United States or any State thereof. Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of Borrower Agent and Agent and with the payment of a processing fee in the amount of $3,500, assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.

15.8Entire Agreement. This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern.

15.9USA Patriot Act. Each Lender subject to the USA PATRIOT Act (Title III of Pub.L. 107-56 (signed into law October 26, 2001) (the “Act”) hereby notifies Borrowers and Guarantors that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies each person or corporation who opens an account and/or enters into a business relationship with it, which information includes the name and address of Borrowers and Guarantors and other information that will allow such Lender to identify such person in accordance with the Act and any other applicable law. Borrowers and Guarantors are hereby advised that any Loans hereunder are subject to satisfactory results of such verification.

15.10No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, Borrowers and Guarantors each acknowledge and agree, and acknowledge their respective Affiliates’ understanding, that: (a) the Term Loan provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any of the other Financing Agreements) are an arm’s-length commercial transaction between Borrowers and Guarantors and their respective Subsidiaries, on the one hand, and Agent and Arranger, on the other hand, and each of Borrowers and Guarantors is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Financing Agreements (including any amendment, waiver or other modification hereof or thereof); (b) in connection with the process leading to such transaction, Agent and Arranger is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for any Borrower or Guarantor or any of their respective Affiliates, stockholders, creditors or employees or any other Person; (c) neither Agent nor Arranger has assumed or will assume an advisory, agency or fiduciary responsibility in favor of any Borrower or Guarantors or any of their respective Affiliates with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any of the other

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Financing Agreements (irrespective of whether Agent or Arranger has advised or is currently advising any Borrower or Guarantor or any of their respective Affiliates on other matters) and neither Agent nor Arranger has any obligation to any Borrower or Guarantor or any of their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Financing Agreements; (d) Agent and the Arranger and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of Borrowers and Guarantors and their respective Affiliates, and neither Agent nor Arranger has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (e) Agent and the Arranger have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any of the other Financing Agreements) and each Borrower and Guarantor has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. Each Borrower and Guarantor hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against Agent and the Arranger with respect to any breach or alleged breach of agency or fiduciary duty.

15.11Counterparts, Etc. This Agreement or any of the other Financing Agreements may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement or any of the other Financing Agreements by telefacsimile or other electronic method of transmission shall have the same force and effect as the delivery of an original executed counterpart of this Agreement or any of such other Financing Agreements. Any party delivering an executed counterpart of any such agreement by telefacsimile or other electronic method of transmission shall in a timely manner also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of such agreement.

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IN WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have caused these presents to be duly executed as of the day and year first above written.

	BORROWERS:
	CPG INTERNATIONAL I INC.
By:	/s/ SCOTT HARRISON
Name:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer
	SCRANTON PRODUCTS INC.
By:	/s/ SCOTT HARRISON
Name:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer
	AZEK BUILDING PRODUCTS, INC.
By:	/s/ SCOTT HARRISON
Name:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer
	PROCELL DECKING INC.
By:	/s/ SCOTT HARRISON
Name:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer

[SIGNATURES CONTINUED ON NEXT PAGE]

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	GUARANTORS:
	CPG INTERNATIONAL
By:	/s/ SCOTT HARRISON
Name:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer
	SANTANA PRODUCTS INC.
By:	/s/ SCOTT HARRISON
Name:	Scott Harrison
Title:	Executive Vice President and Chief Financial Officer
	VYCOM CORP.
By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua
Title:	Vice President

	CPG SUB I CORP.
By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua
Title:	Vice President
	SANATEC CORP.
By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua
Title:	Vice President

[SIGNATURES CONTINUED ON NEXT PAGE]

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	AGENTS AND LENDERS:
	WACHOVIA BANK, NATIONAL
	ASSOCIATION, as Agent and as a Lender
By:	/s/ JACOB PETKOVICH
Name:	Jacob Petkovich
Title:	Vice President-Leveraged Finance

		STRUCTURED PRINCIPAL STRATEGIES LLC,
	as a Lender
By:	/s/ BRIAN GRABENSTEIN
Name:	Brian Grabenstein

HAR1\1039522v2

1

EX-10

Exhibit 10.16

SEPARATION AGREEMENT AND RELEASE

This Separation Agreement and Release (this “Agreement”) is entered into as of the 5th day of November 2007, by and among John R. Loyack (the “Executive”), and CPG International I Inc. (formerly known as Compression Polymers Holding Corporation), a Delaware corporation (“CPG International I”), and its wholly owned subsidiaries, Scranton Products Inc. (formerly known as Compression Polymers Corp.), a Delaware corporation (“Scranton”), and AZEK Building Products Inc. (formerly known as Vycom Corp.), a Delaware corporation (“AZEK”)(Scranton and AZEK, collectively, the “Employers” and individually an “Employer” and, together with CPG International I, the “Companies”), and, solely with respect to Sections 2, 3(a), 4 and 11, CPG International Holdings LP (formerly known as Compression Polymers Holding I LP), a Delaware limited partnership (“CPG LP”) (each of the Executive, the Companies and CPG LP a “Party” and, collectively, the “Parties”). The Parties acknowledge that the terms and conditions of this Agreement have been voluntarily agreed to and are intended to be final and binding.

RECITALS

WHEREAS, the Parties have previously entered into an Amended and Restated Employment Agreement, dated as of January 1, 2006 (the “Employment Agreement”);

WHEREAS, the Executive and the Companies are parties to a Noncompetition Agreement dated as of September 6, 2005 (the “Noncompetition Agreement”);

WHEREAS, the Executive separated from employment in all capacities, including directorships, with the Employers on October 3, 2007 (the “Separation Date”);

WHEREAS, on January 30, 2007, the Executive purchased 250 class A units (the “Class A Units”) of CPG LP pursuant to and in accordance with the terms of the Subscription Agreement between CPG LP and the Executive entered into on such date (the “Class A Subscription Agreement”);

WHEREAS, on August 2, 2005, February 9, 2006 and January 1, 2007, the Executive purchased, in the aggregate, 3,000 class B units (the “Class B Units”) of CPG LP pursuant to and in accordance with the terms of the Executive Subscription Agreement and Power of Attorney between CPG LP and the Executive entered into on such dates (the “Class B Subscription Agreements”); and

WHEREAS, as a condition precedent and a material inducement for the Employers to provide to the Executive the Separation Benefits (as defined in Section 1 hereof) and for CPG LP to agree to the provisions of Section 2 hereof, the Executive has agreed to execute this Agreement and be bound by the provisions herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for the monetary and other consideration set forth below, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.         Separation from Employment. The Executive and Companies agree that on the Separation Date, the Executive resigned from any directorship, position or office with or in the Employers or their subsidiaries or affiliates, which resignations have been accepted as of the Separation Date by the Employers or their respective subsidiaries or affiliates. The Executive and Companies understand and agree that from and after the Separation Date the Executive was no longer authorized to incur any expenses, obligations or liabilities on behalf of the Companies or any of their subsidiaries or affiliates. In consideration for acceptance of the terms contained in this Agreement, the Employers shall (a) pay the Executive his Base Compensation (as defined in the Employment Agreement) as in effect immediately preceding the Separation Date for the period commencing on the Separation Date through December 31, 2008 ($100,000 being payable with respect to the remainder of the 2007 calendar year at such times and in such amounts as would have been paid in accordance with the Employers’ normal payroll procedures had the Executive’s employment continued after the Separation Date and $400,000 being payable with respect to the 2008 calendar year in a lump sum on the first regular payroll date scheduled in 2008); (b) pay the Executive an amount equal to $281,000 in respect of the Executive’s eligibility to receive his 2007 Incentive Bonus, payable in a lump sum on the first regular payroll date scheduled in 2008; (c) continue to provide the Executive with the same medical and dental benefits provided immediately prior to the Separation Date until December 31, 2008; (d) upon presentation of an invoice, reimburse the Executive for all legal expenses incurred by the Executive during 2007 regarding the review and negotiation of this Agreement up to a maximum of $10,000; (e) reimburse the Executive for the balance remaining of the $12,000 for 2007, and for 2008, up to $12,000, of expenses he may incur for life, disability, automobile, liability and/or homeowners insurance upon the submission of written receipts as provided in Section3(c) of the Employment Agreement; and (f) continue to provide the Executive with the use of his Company cell phone through December 31, 2008 and reimburse the Executive for the expenses incurred with respect to such use but only up to a maximum of $100 per month (together with clauses (a) through (e), the “Separation Benefits”); provided, however, that the Employers’ obligation to provide the Separation Benefits shall be conditioned upon (x) the Executive’s continued compliance with his obligations under the Noncompetition Agreement, excluding any immaterial violation and any inadvertent violation cured within thirty (30) calendar days of the Executive’s receipt of written notice from the Companies of the alleged violation, and (y) the Executive’s continued compliance with his obligations under this Agreement. With respect to any reimbursements or in-kind benefit to be provided pursuant to clause (e) of this Section 1, the amount of expenses eligible for reimbursement or in-kind benefits during a particular calendar year shall not affect the expenses eligible for reimbursement or in-kind benefits during any other calendar year. Any reimbursements hereunder shall be made as promptly as administratively feasible but in no event later than the last day of the calendar year immediately following the calendar year in which the Executive incurs such expenses. The Executive’s right to reimbursements or in-kind benefits hereunder shall not be subject to liquidation or exchange for another benefit.

2. Redemption of Units.

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(a)       Class A Units. CPG LP and the Executive agree that CPG LP is hereby purchasing for cash the 250 Class A Units held by the Executive for an aggregate purchase price of $458,166.68. Funds for the purchase of the 250 Class A Units totaling $458,166.68 will be paid to the Executive the next business day following the expiration of the revocation period set forth in Section 3(e). In the event of any conflict between or among the provisions of this Agreement and the Agreement of Limited Partnership of CPG LP, dated as of May 10, 2005, as amended (the “CPG Partnership Agreement”), and/or the Class A Subscription Agreement, such conflict shall be resolved in each and every instance in favor of the provisions of this Agreement.

(b) Class B Units.

(i)        Pursuant to Article 8 of the CPG Partnership Agreement, as modified by the Class B Subscription Agreements, CPG LP is exercising its right to redeem and is hereby purchasing for cash (a) 1,500 Class B Units held by the Executive for an aggregate purchase price of $15,000 and (b) 1,000 Class B Units held by the Executive for an aggregate purchase price of $179,465. Funds for the purchase of the 2,500 Class B Units totaling $194,465 will be paid to the Executive the next business day following the expiration of the revocation period set forth in Section 3(e).

(ii)       CPG LP and the Executive acknowledge and agree that the remaining 500 Class B Units held by the Executive (the “Outstanding Class B Units”) shall continue to remain subject to the terms and conditions of the CPG Partnership Agreement, as modified by the Class B Subscription Agreements; provided, however, that in the event the Executive materially breaches any of his obligations under Sections 3, 4, 5 or 6 of this Agreement or the Noncompetition Agreement, excluding any immaterial violation and any inadvertent violation cured within thirty (30) calendar days of the Executive’s receipt of written notice from the Companies of the alleged violation, CPG LP may, at its option, redeem the Outstanding Class B Units in accordance with the procedures set forth in Section 8.2 of the Partnership Agreement for a redemption price equal to the lesser of (x) the Fair Market Value (as defined in the CPG Partnership Agreement) of the Outstanding Class B Units at the time of redemption or (y) $179.465 per Outstanding Class B Unit.

(iii)      In the event of any conflict between or among the provisions of this Agreement and the CPG Partnership Agreement and/or the Class B Subscription Agreements, such conflict shall be resolved in each and every instance in favor of the provisions of this Agreement.

3. Release of Claims by the Executive.

(a)       In consideration of the Companies entering into this Agreement, the sufficiency of which the Executive acknowledges, the Executive, with the intention of binding himself and his heirs, executors, administrators and assigns, does hereby release, remise, acquit and forever discharge the Companies, CPG LP and each of its or their subsidiaries and affiliates (the “Company Affiliated Group”), their present and former officers, directors, executives, shareholders, agents, attorneys, employees and employee benefit plans (and the fiduciaries thereof) and the successors, predecessors and assigns of each of the foregoing (collectively, the “Company Released Parties”) of and from any and all claims, actions, causes of action, complaints, charges, demands, rights, damages, debts, sums of money, accounts, financial

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obligations, suits, expenses, attorneys’ fees and liabilities of whatever kind or nature in law, equity or otherwise, whether accrued, absolute, contingent, unliquidated or otherwise and whether now known or unknown, suspected or unsuspected, which the Executive, individually or as a member of a class, now has, owns or holds, or has at any time heretofore had, owned or held, arising on or prior to the date hereof, against any Company Released Party in any capacity, including, without limitation, any and all claims (i) in respect of the Class A Units and Class B Units repurchased by CPG LP pursuant to Section 2 hereof, (ii) arising out of or in any way connected with the Executive’s service to any member of the Company Affiliated Group (or the predecessors thereof) in any capacity, or the termination of such service in any such capacity, (iii) for severance or vacation benefits, unpaid wages, salary or incentive payments, (iv) for breach of contract, wrongful discharge, impairment of economic opportunity, defamation, intentional infliction of emotional harm or other tort, (v) for any violation of applicable state and local labor and employment laws (including, without limitation, all laws concerning unlawful and unfair labor and employment practices)and (vi) for employment discrimination under any applicable federal, state or local statute, provision, order or regulation, and including, without limitation, any claim under Title VII of the Civil Rights Act of 1964 (“Title VII”), the Civil Rights Act of 1988, the Fair Labor Standards Act, the Americans with Disabilities Act (the “ADA”), the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Age Discrimination in Employment Act (the “ADEA”) and any similar or analogous state statute, excepting only:

(i) rights of the Executive under this Agreement;

(ii)       the right of the Executive to receive COBRA continuation coverage in accordance with applicable law;

(iii)      claims for accrued and unpaid benefits under any health, disability, retirement or other similar employee benefit plan (within the meaning of Section 3(3) of ERISA) of the Company Affiliated Group; and

(iv)      rights to indemnification the Executive has under the by-laws or certificate of incorporation of any member of the Company Affiliated Group or otherwise through or from the Companies, including under any policy of insurance providing indemnification or coverage.

(b)       The Executive acknowledges and agrees that the release of claims set forth in this Section 3 is not to be construed in any way as an admission of any liability whatsoever by any Company Released Party, any such liability being expressly denied.

(c)       The release of claims set forth in this Section 3 applies to any relief no matter how called, including, without limitation, wages, back pay, front pay, compensatory damages, liquidated damages, punitive damages, damages for pain or suffering, costs and attorneys’ fees and expenses, except as provided in Section 3(a)(i)-(iv) herein.

(d)       The Executive specifically acknowledges that his acceptance of the terms of the release of claims set forth in this Section 3 is, among other things, a specific waiver of his rights, claims and causes of action under Title VII, the ADEA, the ADA and any state or local law or regulation in respect of discrimination of any kind; provided, however, that nothing herein

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shall be deemed, nor does anything contained herein purport, to be a waiver of any right or claim or cause of action which by law the Executive is not permitted to waive.

(e)       As to rights, claims and causes of action arising under the ADEA, the Executive acknowledges that he has been given but not utilized a period of twenty-one (21) days to consider whether to execute this Agreement. If the Executive accepts the terms hereof and executes this Agreement, he may thereafter, for a period of seven (7) days following (and not including) the date of execution, revoke this Agreement as it relates to the release of claims arising under the ADEA. If no such revocation occurs, this Agreement shall become irrevocable in its entirety, and binding and enforceable against the Executive, on the day next following the day on which the foregoing seven-day period has elapsed. If such a revocation occurs, this Agreement shall be of no force or effect.

(f)        The Executive acknowledges and agrees that he has not, with respect to any transaction or state of facts existing prior to the date hereof, filed any complaints, charges or lawsuits against any Company Released Party with any governmental agency, court or tribunal.

(g)       The Executive acknowledges that he has been advised to seek, and has had the opportunity to seek, the advice and assistance of an attorney with regard to the release of claims set forth in this Section 3 and has been given a sufficient period within which to consider the release of claims set forth in this Section 3.

(h)       The Executive acknowledges that the release of claims set forth in this Section 3 relates only to claims which exist as of the date of this Agreement.

(i)        The Executive acknowledges that the Separation Benefits he is receiving in connection with the release of claims set forth in this Section 3 are in addition to anything of value to which the Executive is entitled from the Companies and their affiliates.

4.         Non-disparagement. From and after the Separation Date, the Executive shall not make or publish any disparaging statements (whether written or oral) regarding any member of the Company Affiliated Group or the affiliates, directors, officers or executives of any of them. From and after the Separation Date, the directors, officers and executives of the Companies and CPG LP shall not make or publish any disparaging statements (whether written or oral) regarding the Executive.

5.         Return of Company Property. The Executive shall return to the Employers any automobile and all documents, files, credit cards and other property of any kind belonging to the Employers not later than the date hereof, except as agreed with respect to the Executive’s continued use of the Company cell phone through and including December 31, 2008.

6.         Notices. Any notice required or desired to be delivered hereunder shall be in writing and shall be delivered personally, by courier service, or by certified mail, return receipt requested, and shall be effective when actually delivered to the Party to whom such notice shall be directed and shall be addressed as follows (or to such other address as the Party entitled to notice shall hereafter designate in accordance with the terms hereof):

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If to the Companies:	With a copy to:
c/o AEA Investors LLC	Fried, Frank, Harris, Shriver & Jacobson LLP
Park Avenue Tower	One New York Plaza
65 East 55th Street	New York, NY 10004
New York, NY 10022	Attn: Howard Adler, Esq.
Attn: Sanford Krieger
	With a copy to:
If to the Executive:	Bracewell & Giuliani LLP
John R. Loyack	2000 K Street, N.W., Suite 500
90 Ice Lake Drive	Washington, D.C. 20006-1872
Mountaintop, PA 18707	Attn: Nancy Morrison O’Connor, Esq.

7.         Withholding. Notwithstanding anything in this agreement to the contrary, the Employers shall have the right to deduct from any amount payable under this Agreement any taxes or other amounts required by applicable law to be withheld.

8.         Complete Agreement. This Agreement and the Noncompetition Agreement constitute the complete agreement of the Parties with respect to the subject matter hereof and shall supersede all agreements between the Parties to the extent they relate in any way to the employment, termination of employment, compensation and executive benefits of the Executive.

9.         Severability. Each provision hereof and portion thereof is severable, and if one or more provisions hereof or portions thereof are declared invalid, the remaining provisions and portions thereof shall nevertheless remain in full force and effect. If any provision of this Agreement or portion thereof is so broad, in scope or duration or otherwise, as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.

10.       No Waiver. The failure to enforce at any time any of the provisions of this Agreement or to require at any time performance by another party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect the validity of this Agreement, or any part hereof, or the right of any Party thereafter to enforce each and every such provision in accordance with the terms of this Agreement.

11.       Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. The Parties represent that each signatory to this Agreement on his, its or their behalf is authorized to make the promises and commitments herein.

12.       Successors. This Agreement shall be binding upon any and all successors and assigns of the Executive and the Companies.

13.       Third-Party Beneficiary. Each of the Company Released Parties shall be a third-party beneficiary with respect to Section 3 and shall be entitled to enforce the provisions thereof.

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14.       Governing Law. Except for issues or matters as to which federal law is applicable, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without giving effect to the conflicts of law principles thereof.

15.       Headings. The captions and headings contained in this Agreement are for convenience only and shall not be construed as a part of the Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

	CPG INTERNATIONAL I INC.
	/s/ AMY C BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President
	EMPLOYERS:
	SCRANTON PRODUCTS INC.
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President
	AZEK BUILDING PRODUCTS INC.
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President
	EXECUTIVE:
By:	/s/ JOHN R. LOYACK
	John R. Loyack
	Solely with respect to Sections 2, 3(a), 4 and 11:
	CPG INTERNATIONAL HOLDINGS LP
By:	CPG Holding I LLC, its General Partner
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President

EX-10

EXHIBIT 10.17

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made effective as of the 3^rd day of March, 2008 by and among CPG International Holdings LP, a Delaware limited partnership (“CPG International”), CPG International, Inc., a Delaware corporation (“CPG Inc.”), CPG International I Inc., a Delaware corporation (“CPG I Inc.”), Scranton Products Inc., a Delaware corporation (“Scranton”), and AZEK Building Products Inc., a Delaware corporation (“AZEK”) (CPG Inc., CPG I Inc., Scranton and AZEK, collectively, the “Employers” and each individually an “Employer”), and Eric Jungbluth (the “Executive”).

RECITALS

WHEREAS, the Executive desires to be employed by the Employers; and

WHEREAS, the Employers desire to employ the Executive and to utilize his management services as indicated herein, and the Executive has agreed to provide such management services to the Employers; and

WHEREAS, as a condition precedent and a material inducement for the Employers to employ and pay the Executive, the Executive has agreed to execute this Agreement and the Non-Competition Agreement (as defined below) and be bound by the provisions herein and therein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

PROVISIONS

•Term and Duties. The Employers hereby agree to employ the Executive as Chief Executive Officer commencing on a date mutually agreed by the parties within ten (10) days of the date hereof (the “Start Date”) and continuing for a period of three (3) years (the “Initial Term”) or until terminated in accordance with this Section 1 or Section 5. Unless terminated by written notice delivered at least thirty (30) days prior to the expiration of the Initial Term, the Executive’s employment shall continue for successive one (1) year terms (each one (1) year term hereinafter referred to as a “Subsequent Term” and together with the Initial Term, the “Term”) until terminated by written notice delivered at least thirty (30) days prior to the expiration of the Subsequent Term. During the Term, the Executive shall devote his best efforts and abilities to the performance of the Executive’s duties on behalf of the Employers and to the promotion of their interests consistent with and subject to the direction and control of the Board of Directors of each of the Employers (the “Board”). The Executive shall devote substantially all of his business time, energies, attention and abilities to the operation of the business of the Employers and shall not be involved in any other trade or business or as an employee of any other trade or business.

• Compensation During Term.

•Base Compensation. In consideration of the services to be rendered by the Executive during the Term, the Employers shall pay to the Executive, in the aggregate, $400,000 per year (“Base Compensation”), payable bi-weekly and prorated for any partial employment period.

•Bonuses. (i) As soon as practicable following the Start Date, the Employers shall pay to the Executive a one-time cash signing bonus of $100,000; (ii) subject only to the limitations set forth in this Agreement, commencing with the fiscal year beginning January 1, 2008, the Executive shall be eligible to receive an annual target bonus (the “Target Bonus”)equal to 100% of Base Compensation based upon the achievement of certain budget performance goals related to the Employers’ (A) EBITDA, (B) working capital, (C) sales growth and/or (D) such other performance criteria, in each case, as the Compensation Committee of the Board shall determine in consultation with the Executive. The Target Bonus shall be paid no later than 2½ months following the end of the fiscal year to which it relates; (iii) if within thirty six months following the Start Date, a “Strategic Buyer” (as defined below) acquires all or substantially all of the businesses of CPG International and its subsidiaries, the Employers shall pay to the Executive a one-time cash transaction bonus (the “Transaction Bonus”) as follows: if the acquisition closes within twelve months following the Start Date, the amount of the Transaction Bonus shall be $2 million; if the acquisition closes after the twelve month anniversary of the Start Date, but before the twenty-four month anniversary of the Start Date, the amount of the Transaction Bonus shall be $1 million; and if the acquisition closes after the twenty-four month anniversary of the Start Date, but before the thirty-six month anniversary of the Start Date, the amount of the Transaction Bonus shall be $500,000; provided, however, that payment of the Transaction Bonus is conditioned on its approval by the stockholders of the Employers in a manner that satisfies the requirements of Section 280G of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. “Strategic Buyer” means a person or persons independent of AEA Investors, LLC and its affiliates other than (A) one or more special purpose vehicles or similar entities formed by or on behalf of a private equity firm, hedge fund, financial institution or similar financial sponsor, or (B) one or more persons actively engaged in the building products industry which are controlled by one or more of such vehicles or entities, if the Executive remains the chief executive of the Employers or their successors following the transaction.

• Benefits.

•Subject to Section 3(b) below, the Executive shall be eligible to participate in such pension and welfare benefit programs offered by each Employer, such as health, dental, life insurance, vision, vacations and 401(k), as are offered to similarly situated employees and in each case no more favorable than the terms of benefits generally available to the employees of the Employers (based on seniority and salary level), subject in each case to the generally applicable terms and conditions of the plan, benefit or program in question.

•Notwithstanding the foregoing, the Executive shall be entitled, at a minimum, to the following: (i) major medical insurance coverage comparable to the insurance coverage provided by the Employers for executive officers; (ii) ten (10) days of paid sick leave during each full annual period (prorated for 2008) and (iii) four (4) weeks of paid vacation leave during each annual period (prorated for 2008).

•Unless otherwise determined by the Board, during the Term, the Executive shall be authorized to incur necessary and reasonable travel, entertainment and other business expenses in connection with his duties hereunder. The Employers shall reimburse the Executive for such expenses upon presentation of an itemized account and appropriate supporting documentation, all in accordance with the Employers’ generally applicable policies; provided that the Board’s written approval shall be required prior to the Executive’s incurring $10,000 of expenses in any one instance or $20,000 of expenses in the aggregate.

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•The Employers shall reimburse the Executive for reasonable travel expenses incurred by him in seeking permanent housing in the Scranton, Pennsylvania area and for reasonable temporary housing expenses until such permanent housing is obtained.

•Equity Participation. Within thirty days of the date hereof the Executive shall purchase class A units and class B-2 units of CPG International with an aggregate purchase price of between $300,000 to $350,000, pursuant to and in accordance with the terms of the Subscription Agreements between the Executive and CPG International attached hereto as Exhibits A and B.

•Termination. The Executive’s employment shall terminate upon the first to occur of the following (each a“Termination Date”):

• The expiration of the Term;

•The Executive’s death or disability (mental, physical or emotional), so that the Executive cannot substantially perform his duties hereunder for a period of ninety (90) consecutive days or for one hundred eighty (180) days during any 365-day period during the Term;

•The Executive’s voluntary termination of his employment for any reason, upon not less than 10 business days’ written notice to the Employers; provided, however, that any termination by Executive pursuant to Section 5(e) shall not be treated as a voluntary termination under this Section 5(c);

•The Employers’ termination of the Executive’s employment with or without Cause (as defined below); or

•The Executive’s termination of his employment for Good Reason (as defined below).

• Termination Payments.

•Except as otherwise provided herein, if the Executive’s employment is terminated by thirty (30) days’ prior written notice pursuant to Section 1 hereof or pursuant to Section 5, the Executive’s Base Compensation and other benefits (it being understood that no Target Bonus shall be payable), if any, shall terminate at the end of the month during which such termination occurs.

•Upon termination of the Executive’s employment without Cause or by reason of the Employers’ delivering written notice not to renew the Term, or upon the Executive’s termination of his employment for Good Reason, the Employers shall be obligated, in lieu of any other remedies available to the Executive, to pay the Executive (i) his then current Base Compensation until the eighteen month anniversary of the Termination Date and (ii) a prorata portion of the annual bonus for the full year of termination based on the actual performance of the Employers for the full year of termination and the number of days the Executive was employed in such year (payable at such times as annual bonuses are paid to the Employers’ executives generally) (the “Termination Payment”); provided, however, that payment of the Termination Payment is conditioned on (x) the Executive’s execution of a release in favor of the Employers and their affiliates in a form satisfactory to the Employers and (y) the Executive’s compliance with the Non-Competition Agreement attached hereto as Exhibit C (the “Non-Competition

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Agreement”). The Termination Payment is payable under this Section 6(b) in accordance with the payroll practices of the Employers.

•In the event of a termination of the Executive’s employment pursuant to Section 5(b) as a result of his death or disability, the Employers shall pay to the Executive, his estate or legal representative, as the case may be, all amounts accrued to the date of termination and payable to the Executive hereunder and under any other bonus, incentive or other plan.

•Any termination of the Term shall not adversely affect or alter the Executive’s rights under any employee benefit plan of any Employer in which the Executive, at the date of termination, has a vested interest, unless otherwise provided in such employee benefit plan or any agreement or other instrument attendant thereto.

•If the Executive is a “specified employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, any payments required to be made pursuant to this Section 6 which are subject to Section 409A shall not commence until six months from the Termination Date, with the first payment equaling the first six months of Termination Payments.

•Restrictive Covenants. This Agreement is subject to the Executive’s entering into the Non-Competition Agreement.

• Definitions.

•“Cause” as used herein shall mean the Executive’s (i) commission of an act which constitutes common law fraud, embezzlement (other than occasional, customary and de minimis use of the Employers’ property for personal purposes) or a felony, an act of moral turpitude, or of any tortious or unlawful act causing material harm to any Employer’s business, standing or reputation, (ii) gross negligence on the part of the Executive in the performance of his duties hereunder, (iii) breach of his duty of loyalty or care to any Employer, (iv) other misconduct that is materially detrimental to any Employer; (v) ongoing refusal or failure to perform the Executive’s duties or the deliberate and consistent refusal to conform to or follow any reasonable policy adopted by the Board, in each case after receiving written notice describing his noncompliance and being given a five (5) business days opportunity to cure (to the extent curable) such noncompliance; or (vi) material breach by the Executive of this Agreement, the Non-Competition Agreement, or any other agreement with or for the benefit of any Employer to which the Executive is a party or by which the Executive is bound, which is not cured (to the extent curable) within five (5) business days following written notice from an Employer.

•“Good Reason” shall mean (i) there is a substantial reduction of the level of the Executive’s Base Compensation, authority, title or scope of duties provided, however, that it is understood that each Employer may hire a successor to fill the Executive’s office, each Employer may require that the Executive work together with such successor for up to six months as the successor takes on increasing amounts of the responsibility formerly entrusted to the Executive, and the hiring and employment of such successor shall not constitute “Good Reason” for the Executive’s termination of his employment; (ii) the failure in any material way of any Employer otherwise to fulfill any of its material obligations under this Agreement; or (iii) the involuntary relocation of the Employers’ offices at which the Executive is principally employed to a location more than 50 miles from such offices, or the requirement by the Employers that the Executive be based anywhere other than the Employers’ offices at such location on an extended basis, except for required travel on the Employers’ business to an extent substantially consistent with the Executive’s business travel obligations.

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•Consideration. The Executive acknowledges and agrees that the consideration set forth in the recitals to this Agreement and the rights and benefits hereunder are all and singularly valuable consideration which are sufficient for any or all of the Executive’s covenants set forth herein or in the Non-Competition Agreement.

•No Prior Agreements. The Executive represents and warrants that his performance of all the terms of this Agreement does not and shall not breach any fiduciary or other duty or any covenant, agreement or understanding (including, without limitation, any agreement relating to any proprietary information, knowledge or data acquired in confidence, trust or otherwise) to which he is a party or by the terms of which he may be bound. The Executive further covenants and agrees not to enter into any agreement or understanding, either written or oral, in conflict with the provisions of this Agreement.

• Miscellaneous.

•Notices. All notices, requests, consents and demands by the parties hereto shall be delivered by hand, by confirmed facsimile transmission, by recognized national overnight courier service or by deposit in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to be notified at the addresses set forth below:

if to the Executive:

Eric Jungbluth

2210 Poplar Street

Coralville, IA 52241

if to the Employers:

c/o AEA Investors LLC

55 East 52^nd Street

New York, NY 10022

Attn: Sanford Krieger

with copy to:

Fried, Frank, Harris, Shriver and Jacobson LLP

One New York Plaza

New York, NY 10004-1980

Attn: Chris Ewan

Notices shall be effective immediately upon personal delivery or facsimile transmission, one (1) business day after deposit with an overnight courier service or three (3) business days after the date of mailing thereof. Other notices shall be deemed given on the date of receipt. Any party hereto may change the address specified herein by written notice to the other parties hereto.

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•Entire Agreement. This Agreement cancels and supersedes any and all prior agreements and understandings between the parties hereto with respect to the obligations of the Executive. The Executive hereby agrees that, as of the date hereof, this Agreement shall take effect and no further obligations of any kind whatsoever shall be owed by the Employers. This Agreement, the Subscription Agreements and the Non-Competition Agreement constitute the entire agreement between the parties with respect to the matters herein and therein provided, and no modifications or waiver of any provision hereof shall be effective unless in writing and signed by each Employer and Executive.

•Binding Effect. All of the terms and provisions of this Agreement shall be binding upon the parties hereto and its or his heirs, executors, administrators, legal representatives, successors and assigns, and inure to the benefit of and be enforceable by any Employer and its successors and assigns, except that the duties and responsibilities of the Executive hereunder are of a personal nature and shall not be assignable or delegable in whole or in part.

•Severability. In the event that any provision of this Agreement or application thereof to anyone or under any circumstance is found to be invalid or unenforceable in any jurisdiction to any extent for any reason, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

•Remedies; Waiver. No remedy conferred upon any Employer by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by any Employer in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the party possessing the same from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

•Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

•Governing Law. The validity, interpretation, construction, performance and enforcement of this Agreement shall be governed by the laws of the State of New York, without application of conflict of laws principles.

•Headings. The captions and headings contained in this Agreement are for convenience only and shall not be construed as a part of the Agreement.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

	CPG INTERNATIONAL HOLDINGS LP
	By: CPG HOLDING I LLC, its general partner
By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua
Title:	Vice President

	EMPLOYERS:
	CPG INTERNATIONAL, INC.
By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua
Title:	Vice President

	CPG INTERNATIONAL I INC.
By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua
Title:	Vice President

	SCRANTON PRODUCTS INC
By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua
Title:	Vice President

	AZEK BUILDING PRODUCTS INC.
By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua
Title:	Vice President

	EXECUTIVE:
By:	/s/ ERIC JUNGBLUTH
Name:	Eric Jungbluth

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EX-10

Exhibit 10.18

NONCOMPETITION AGREEMENT

AGREEMENT, made as of the 3rd day of March, 2008 by and among CPG International Holdings LP, a Delaware limited partnership, CPG International, Inc., a Delaware corporation, CPG International I Inc., a Delaware corporation, Scranton Products Inc., a Delaware corporation, and AZEK Building Products Inc., a Delaware corporation (collectively, the “Companies” and each individually a “Company”), and Eric Jungbluth (the “Covenantor”).

W I T N E S S E T H:

WHEREAS, pursuant to that certain Employment Agreement (the “Employment Agreement”), dated as of March 3, 2008 (the “Effective Date”) by and among the Companies and the Covenantor, the Covenantor performs services to the Companies;

WHEREAS, the Covenantor, by reason of his intimate involvement in the operations and management of the business of the Companies will acquire knowledge and expertise relating to the business and operations of the Companies;

WHEREAS, the Companies would not enter into the Employment Agreement without obtaining the agreement that the expertise and knowledge of the Covenantor will not be put to any use which may in any way harm the Companies or their interests;

WHEREAS, Covenantor acknowledges that the Companies would not enter into the Employment Agreement unless Covenantor executes and delivers this Agreement, and wishes to forego his right to compete therewith with respect to the business of the Companies.

NOW, THEREFORE, in order to induce the Companies to enter into the Employment Agreement and in consideration of the premises and of the mutual covenants and agreements contained herein and in the Employment Agreement, the parties hereto, intending legally to be bound, hereby agree as follows:

• Noncompetition, Nonsolicitation.

•          Subject to the provisions of Paragraph 1(c) herein below, from and after the date hereof and until eighteen (18) months following the date of the Covenantor’s termination of employment from the Companies, Covenantor shall not, without the prior written consent of the Companies:

•          directly or indirectly, as a sole proprietor, member of a partnership, stockholder, investor, officer or director of a corporation, including, without limitation, as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity, render any service to (including the making of investments in or otherwise providing capital to) any competitor (or any person or entity that is reasonably anticipated to become a competitor within the term hereof) of any of the Companies or its or their subsidiaries or affiliates, within the geographic areas described in Paragraph 1(b); it being understood that such a person, partnership, corporation or other business organization or entity is in competition

with a Company if it is then engaging or planning to engage within the term hereof, itself or through any joint venture, partnership or otherwise, in any business in which (A) any Company or its or their subsidiaries or affiliates (1) has been engaged in prior to the date hereof (unless such engagement has been terminated) or (2) is presently engaged in at the date hereof, or (B) any Company or its or their subsidiaries or affiliates is engaged in or has taken steps in preparation to engage in during the term hereof,

•          induce or attempt to induce any person or entity which is or was a customer or client of any Company or its or their affiliates, or becomes a customer or client of any Company or its or their affiliates, to terminate its relationship or otherwise cease doing business in whole or in part with any Company or its or their affiliates,

•          solicit, entice, induce or hire any person who is an employee, or becomes an employee, of any Company or its or their affiliates to become employed by any other person, firm or corporation or to leave his or her employment with any Company or its or their affiliates, or approach any such employee for such purpose or authorize or knowingly approve the taking of such actions by any other person, or

•          interfere with any relationship between any Company or its or their affiliates and any of its customers or clients so as to cause harm to such Company or its or their affiliates.

•          The restrictions contained in Paragraph l(a) shall apply in the specific geographic areas and customer markets within such geographic areas served by any Company or its or their affiliates at any time during the term hereof.

•          Nothing in this Paragraph 1 shall prohibit Covenantor from (i) engaging in any business that is not in competition with any Company or its or their affiliates, or (ii) investing in the securities of any corporation having securities listed on a national securities exchange, provided that such investment does not exceed 2% of any class of securities of any corporation engaged in business in competition with any Company or its or their affiliates, and provided that such investment represents a passive investment and that neither Covenantor nor any group of persons including him, in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations or otherwise takes any part in its business, other than exercising his or her rights as a shareholder, or seeks to do any of the foregoing.

•Non-Disclosure of Confidential Information. Covenantor agrees that on and after the date of this Agreement he shall not, without the prior written consent of each Company, use for himself or others, or divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity, any Confidential Information pertaining to the business of any Company or its or their affiliates, except when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of such Company, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Covenantor to divulge, disclose or make accessible such information. All Confidential Information in any Covenantor’s possession shall be returned to the Company promptly following the date hereof. The term “Confidential Information” shall mean non-public information concerning any Company or its or their affiliates, including, but not limited to,

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financial data, strategic business plans, product development or other proprietary product data, customer lists, consulting or licensing agreements, vendor lists, lists of potential customers, pricing and credit techniques, private processes, marketing plans, reports, summaries, analyses or other proprietary information now or hereafter in the possession of Covenantor, except for specific items which have become publicly available information (other than such items which Covenantor knows have become publicly available through a breach of fiduciary duty or any confidentiality agreement).

•Inventions. Covenantor shall promptly, and in any event no later than one (1) year after termination of his employment with the Companies, with respect to Inventions (as defined below) made or conceived by Covenantor during his employment with any Company, either solely or jointly with others, if based on or related to or connected with the business of any Company or if any Company’s time, material, facilities or other employees contributed thereto:

•          Promptly and fully inform the Companies in writing of such Inventions;

•          Assign, and Covenantor does hereby assign, to the Companies all of Covenantor’s rights to such Inventions, if any, and to applications for letters patent and to letters patent granted upon such Inventions; and

•          Acknowledge and deliver promptly to the Companies (without charge to Covenantor but at the expense of the Companies) such written instruments and do such other acts as may be reasonably necessary to obtain and maintain letters patent and to vest the entire right and title thereto in the Companies.

All Inventions, regardless of whether or not they are considered “works for hire,” shall for all purposes be regarded as acquired and held by Covenantor for the benefit, and shall be the sole and exclusive property, of the Companies. The term “Inventions” shall mean discoveries, developments, improvements, or inventions (whether patentable or not) related to the business of any Company.

•Non-Disparagement.From and after the Effective Date and following termination of the Covenantor’s employment with the Company, the Covenantor agrees not to make any statement that that criticizes, ridicules, disparages or is otherwise derogatory of the Companies or any of their subsidiaries, affiliates, employees, officers, directors or stockholders.

• Remedy for Certain Breaches.

•          Covenantor acknowledges and agrees that the restrictions on his activities under the provisions of Paragraphs 1, 2 and 3 above are required for the reasonable protection of each Company. Covenantor further acknowledges and agrees that a breach of any of those obligations will result in irreparable harm to the Companies, for which there would be no adequate remedy at law, and therefore, Covenantor irrevocably and unconditionally (i) agrees that in addition to any other remedies which each Company may have under this Agreement or otherwise, all of which remedies shall be cumulative, each Company shall be entitled to apply to any court of competent jurisdiction for preliminary and permanent injunctive relief and other equitable relief, without the necessity of proving actual damage, restraining Covenantor from doing or continuing to do or perform any acts constituting such breach or threatened breach, (ii)

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agrees that such relief and any other claim by any Company pursuant hereto may be brought in the United States District Court for the Southern District of New York, or if such court does not have subject matter jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in the State of New York, (iii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iv) waives any objection which Covenantor may have to the laying of venue of any such suit, action or proceeding in any such court.

•          Covenantor agrees that the existence of any claim or cause of action by Covenantor against any Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by such Company of the provisions of this Agreement.

•Nature of Restrictions. Covenantor has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon each Company under this Agreement, and hereby acknowledges and agrees that the same are reasonable in time and territory, are designed to eliminate competition which otherwise would be unfair to any Company, do not stifle the inherent skill and experience of Covenantor, would not operate as a bar to Covenantor’s sole means of support, are fully required to protect the legitimate interests of each Company and do not confer a benefit upon any Company disproportionate to the detriment to Covenantor.

•Warranties. Covenantor warrants and represents that he has full power and authority to enter into this Agreement for and on behalf of himself and that such act, and the performance of his obligations hereunder, will not conflict with any other agreements or undertakings to which he is a party or to which he is bound.

•Notices. All notices, requests, consents and demands by the parties hereunder shall be delivered by hand, by confirmed facsimile transmission, by recognized national overnight courier service or by deposit in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to be notified at the addresses set forth below:

If to Covenantor:

Eric Jungbluth

2210 Poplar Street

Coralville, IA 52241

If to any Company:

c/o AEA Investors LLC

55 East 52^nd Street

New York, NY 10022

Attn: Sanford Krieger

With copy to:

Fried, Frank, Harris, Shriver and Jacobson LLP

One New York Plaza

New York, NY 10004

Attn: Chris Ewan

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Notices shall be effective immediately upon personal delivery or facsimile transmission, one business day after deposit with an overnight courier service or three (3) business days after the date of mailing thereof. Other notices shall be deemed given on the date of receipt. Any party hereto may change the address specified herein by written notice to the other parties hereto.

•Entire Agreement. This Agreement cancels and supersedes any and all prior agreements and understandings between the parties hereto with respect to the obligations of Covenantor other than under and pursuant to any employment agreement between Covenantor and any of the Companies. This Agreement constitutes the entire agreement between the parties with respect to the matters herein provided, and no modifications or waiver of any provision hereof shall be effective unless in writing and signed by each Company and Covenantor.

•Binding Effect. All of the terms and provisions of this Agreement shall be binding upon the parties hereto and its or his heirs, executors, administrators, legal representatives, successors and assigns, and inure to the benefit of and be enforceable by any Company and its successors and assigns, except that the duties and responsibilities of Covenantor hereunder are of a personal nature and shall not be assignable or delegable in whole or in part.

•Reformation of Agreement; Severability. In the event that any of the provisions of Paragraph 1, 2 or 3 shall be found by a court of competent jurisdiction to be invalid or unenforceable to any extent for any reason, such court shall exercise its discretion in reforming such provision(s) to the end that Covenantor shall be subject to nondisclosure, nonsolicitation and noncompetition covenants that are reasonable under the circumstances and enforceable by any Company. In the event that any other provision of this Agreement or application thereof to anyone or under any circumstance is found to be invalid or unenforceable in any jurisdiction to any extent for any reason, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

•Remedies; Waiver. No remedy conferred upon any Company by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by any Company in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the party possessing the same from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

•Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

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•Governing Law. The validity, interpretation, construction, performance and enforcement of this Agreement shall be governed by the laws of the State of New York, without application of conflict of laws principles.

•Headings. The captions and headings contained in this Agreement are for convenience only and shall not be construed as a part of the Agreement.

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IN WITNESS HEREOF, the parties have executed this Agreement as of the date and year first above written.

	CPG INTERNATIONAL HOLDINGS LP		CPG INTERNATIONAL, INC.
	By: CPG HOLDING I LLC, its general partner
By:	/s/ AMY C. BEVACQUA	By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua	Name:	Amy C. Bevacqua
Title:	Vice President	Title:	Vice President

	CPG INTERNATIONAL I INC.		SCRANTON PRODUCTS INC.
By:	/s/ AMY C. BEVACQUA	By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua	Name:	Amy C. Bevacqua
Title:	Vice President	Title:	Vice President

	AZEK BUILDING PRODUCTS INC.
By:	/s/ AMY C. BEVACQUA
Name:	Amy C. Bevacqua
Title:	Vice President

	COVENANTOR:
By:	/s/ ERIC JUNGBLUTH
Name:	Eric Jungbluth

EX-10

EXHIBIT 10.19

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made effective as of the 31st day of January, 2007, by and among CPG International I Inc., a Delaware corporation (“CPG International”), Pro-Cell, LLC, an Alabama limited liability company (“Pro-Cell,” and together with CPG International, “Employer”), CPG International Holdings LP, a Delaware limited partnership (“CPG International Holdings”), and Christopher Bardasian (“Executive”).

RECITALS

WHEREAS, CPG International will purchase membership interests (the “Units”) in Pro-Cell pursuant to the Unit Purchase Agreement, dated as of December 13, 2006, between CPG International, Christopher Bardasian, Kevin Sloan, and Larry Sloan (the “Unit Purchase Agreement”);

WHEREAS, Employer desires to continue to employ Executive and to utilize his management services as indicated herein, and Executive has agreed to provide such management services to Employer;

WHEREAS, as a condition precedent and a material inducement for Employer to purchase the Units and to continue to employ and pay Executive, Executive has agreed to execute this Agreement and be bound by the provisions herein;

WHEREAS, as a condition precedent and a material inducement for Employer to enter into the Unit Purchase Agreement and this Agreement, Executive has agreed to execute the Noncompetition Agreement among Employer, Executive and the other parties thereto, dated as of the date hereof (the “Noncompetition Agreement”), and be bound by the provisions therein; and

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

PROVISIONS

•Term and Duties. Employer hereby agrees to employ Executive as the Senior Vice President – Pro-Cell Sales and Marketing commencing on the date of the Closing (as defined in the Unit Purchase Agreement) and continuing for a period of three (3) years (the “Initial Term”) or until terminated in accordance with this Section 1 or Section 5. Unless terminated by written notice delivered at least thirty (30) days prior to the expiration of the Initial Term, Executive’s employment shall continue for successive one (1) year terms (each one (1) year term hereinafter referred to as a “Subsequent Term” and together with the Initial Term, the “Term”) until terminated by written notice delivered at least thirty (30) days prior to the expiration of the Subsequent Term. Subject to the provisions of this Agreement, during the Term, Executive shall devote his best efforts and abilities to the performance of Executive’s duties on behalf of Employer and to the promotion of its interests consistent with and subject to the direction of John Loyack, the President of CPG International, or his successor during the first

eighteen (18) months of the Initial Term, and thereafter, of John Loyack or his successor or Ralph Bruno or any other Business Unit President or their successors. Executive shall devote substantially all of his business time, energies, attention and abilities to the operation of the business of Employer and shall not be actively involved in any other trade or business or as an employee of any other trade or business. Nothing contained herein shall be deemed to prevent or limit Executive’s rights to (i) engage in religious, charitable or other non-profit activities, and (ii) make any other passive investments which do not otherwise interfere, in any material respect, with Executive’s duties hereunder or violate the terms of Executive’s Noncompetition Agreement.

• Compensation.

In consideration of the services to be rendered by Executive during the Term, Employer shall pay to Executive $250,000 per year (“Base Compensation”), payable bi-weekly and prorated for any partial employment period. Such Base Compensation shall be reviewed annually by the Board of Directors of CPG International (the “Board”), or any compensation committee of the Board, for purposes of considering an increase to (but never a decrease of) such Base Compensation in its sole discretion. Executive shall also be eligible for an annual bonus with a target of not less than forty (40) percent of his Base Compensation, based upon the achievement of certain performance goals determined by John Loyack or his successor and the Board. Notwithstanding the foregoing, Executive’s annual bonus for 2007 shall be determined in accordance with Schedule A.

• Signing Bonus.

Executive shall be eligible to receive a signing bonus in the amount of $500,000 (the “Signing Bonus”), which will be paid to Executive on the date on which the Closing occurs if he is employed by Employer on that date. If Executive terminates his employment for other than Good Reason or is terminated for Cause within the twelve (12) month period following the date on which the Closing occurs, Executive shall immediately and with no further action forfeit to CPG International Holdings for no consideration a number of Class A Units thereof, which are then owned by Executive, having a value on the date of termination equal to $500,000 times a fraction the numerator of which is the number of days during the Term on which Executive was employed by Employer and the denominator of which is 365.

• Benefits.

•Subject to Section 4(c) below, after the date hereof and until the first day of the first calendar month following the date of the Closing (such date, the “Eligibility Date”), Executive shall be eligible to participate in such benefit programs offered by Pro-Cell (other than bonus plans) as are offered to similarly-situated employees (except in the case of equity-based incentive plans where awards are subject to Board (or committee thereof) approval and in each case no less favorable than the terms of benefits generally available to the employees of Pro-Cell (based on seniority), subject in each case to the generally applicable terms and conditions of the plan, benefit or program in question. Subject to Section 4(c) below, from and after the Eligibility Date, Executive shall be eligible to participate in such benefit programs offered by CPG International as are offered to similarly-situated employees (except in the case of equity-based

incentive plans where awards are subject to Board (or committee thereof) approval)and in each case no less favorable than the terms of benefits generally available to the employees of CPG International (based on seniority), subject in each case to the generally applicable terms and conditions of the plan, benefit or program in question.

•For each calendar year, Executive shall be entitled to three (3) weeks vacation.

•Executive shall be authorized to incur necessary and reasonable travel, entertainment and other business expenses in connection with his duties hereunder. Pro-Cell shall reimburse Executive for such expenses upon presentation of an itemized account and appropriate supporting documentation, all in accordance with the generally applicable policies; provided the Board’s written approval shall be required prior to Executive’s incurring $10,000 of expenses in any one instance or $20,000 of expenses in the aggregate.

•Upon the earlier of the termination of Executive's employment or the 12 month anniversary of the date hereof, Executive shall have the option to have assigned to him, at no cost, that certain term life insurance policy presently in effect insuring the life of Executive and for which the Employer is the named beneficiary, and upon such election the Employer shall cause such life insurance policy to be transferred and assigned to Executive, whereupon Executive shall assume all of the obligations thereunder from and after the date of such assignment.

•Termination. Executive’s employment shall terminate upon the first to occur of the following (each a“Termination Date”):

• The expiration of the Term;

•Executive’s death or disability (mentally, physically or emotionally), so that Executive cannot substantially perform his duties hereunder for a period of ninety (90) consecutive days or for one hundred eighty (180) days during any 365 day period during the Term;

•Executive’s voluntary termination of his employment for any reason other than Good Reason, upon not less than ten (10) business days’ written notice to Employer;

• Executive’s termination of his employment for Good Reason;

•Employer’s termination of Executive’s employment for other than Cause, upon not less than ten (10) business days’ written notice to Executive; or

• Employer’s termination of Executive’s employment for Cause.

• Termination Payments.

•Except as otherwise provided herein, Executive’s Base Compensation and other benefits, if any, shall terminate on the Termination Date.

•In the event of a termination of Executive’s employment with Employer pursuant to Sections 5(d) or 5(e), Employer shall be obligated, in lieu of any other remedies available to Executive, to provide Executive with the following: (i) continuation of Executive’s Base Compensation at the rate then in effect for a period of twelve (12) months (the “Termination Payment”), (ii) continuation of group health plan benefits for a period of twelve (12) months to the extent authorized by and consistent with 29 U.S.C. §1161 et seq., subject to payment of premiums by Executive at the active employee’s rate and (iii) payment of all earned but unpaid Base Compensation and earned but unpaid incentive compensation, unpaid expense reimbursements, accrued but unused vacation and any vested benefits Executive may have under any employee benefit plan, under this Agreement and under any bonus, incentive or other plan (the “Accrued Payments”). Employer’s obligation to make the Termination Payment shall be conditioned upon (i) the absence of a material breach by Executive of the Noncompetition Agreement and (ii) Executive’s execution, delivery and non-revocation of a valid and enforceable general release of claims in a form reasonably acceptable to Employer (the “Release”). Subject to Section 6(e), the Termination Payment shall be paid in installments on Employer’s regular payroll dates occurring during the twelve (12) month period immediately following the effectiveness of the Release. Subject to Section 6(e), the Accrued Payments shall be paid within thirty (30) days following the Termination Date.

•In the event of a termination of Executive’s employment pursuant to Section 5(a), 5(b), 5(c) or 5(f), Employer shall pay to Executive, his estate or legal representative, as the case may be, the Accrued Payments.

•Any termination of Executive’s employment shall not adversely affect or alter Executive’s rights under any employee benefit plan of Pro-Cell in which Executive, at the date of termination, has a vested interest, unless otherwise provided in such employee benefit plan or any agreement or other instrument attendant thereto.

•If Executive is a “specified employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, any payments required to be made pursuant to this Section 6 which are subject to Section 409A shall not commence until six months from the Termination Date, with the first payment to be equal to the aggregate amount that would have been paid to Executive under this Section 6 during the first six months immediately following the Termination Date had this Section 6(e) not been applicable.

• Definitions.

•“Cause” as used herein shall mean Executive’s (i) commission of an act which constitutes common law fraud, embezzlement (other than occasional, customary and de minimis use of Employer’s property for personal purposes) or a felony, an act of moral turpitude, or of any tortious or unlawful act causing material harm to Employer’s business, standing or reputation; (ii) gross negligence on the part of Executive in the performance of his duties hereunder; (iii) breach of his duty of loyalty or care to Employer; (iv) ongoing refusal or failure

to perform Executive’s duties or the deliberate and consistent refusal to conform to or follow any reasonable policy adopted by the Board, in each case after receiving written notice describing his noncompliance and being given a ten (10) business days opportunity to cure (to the extent curable) such non-compliance; or (v) material breach by Executive of this Agreement, the Noncompetition Agreement or any other agreement with or for the benefit of Employer to which Executive is a party or by which Executive is bound (excluding, however, the Unit Purchase Agreement and the Contribution Agreement dated as of December 13, 2006, by and among CPG International Holdings, Christopher Bardasian, Kevin Sloan, and Larry Sloan (the “Contribution Agreement”)), which material breach is not cured (to the extent curable) within ten (10) business days following written notice from Employer.

•“Good Reason” shall mean (i) without Executive’s express written consent, the assignment to Executive of any duties materially inconsistent with his positions, duties, responsibilities and status with Employer, or a material adverse change in his reporting responsibilities, titles or offices, or any demotion of Executive from any of such positions, in each case as in effect on the date hereof; (ii) Employer's requirement of Executive, without his express written consent, to be based at a location more than 50 miles away from Executive's current office location in Mansfield, Texas; or (iii) any material breach by Employer of this Agreement, which material breach is not cured (to the extent curable) within ten (10) business days following written notice from Executive.

•Consideration. Executive acknowledges and agrees that the consideration set forth in the recitals to this Agreement and the rights and benefits hereunder are all and singularly valuable consideration which are sufficient for any or all of Executive’s covenants set forth herein or in the Noncompetition Agreement.

•No Prior Agreements. Executive represents and warrants that his performance of all the terms of this Agreement does not and shall not breach any fiduciary or other duty or any covenant, agreement or understanding (including, without limitation, any agreement relating to any proprietary information, knowledge or data acquired in confidence, trust or otherwise) to which he is a party or by the terms of which he may be bound. Executive further covenants and agrees not to enter into any agreement or understanding, either written or oral, in conflict with the provisions of this Agreement.

• Miscellaneous.

•Notices. All notices, requests, consents and demands by the parties hereto shall be delivered by hand, by confirmed facsimile transmission, by recognized national overnight courier service or by deposit in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to be notified at the addresses set forth below:

if to Executive:

Christopher Bardasian

1517 Cannon Gate Drive

Mansfield, Texas 76063

with copy to:

Goodwin Procter LLP

599 Lexington Avenue

New York, NY 10022

Attn: Stuart Rosenthal

If to Employer:

Compression Polymers Holding Corporation

c/o AEA Investors LLC

Park Avenue Tower

65 East 55^th Street

New York, NY 10022

Attn: Sanford Krieger

with copy to:

Fried, Frank, Harris, Shriver and Jacobson LLP

One New York Plaza

New York, NY 10004-1980

Notices shall be effective immediately upon personal delivery or facsimile transmission, one (1) business day after deposit with an overnight courier service or three (3) business days after the date of mailing thereof. Other notices shall be deemed given on the date of receipt. Any party hereto may change the address specified herein by written notice to the other parties hereto.

•Entire Agreement. This Agreement cancels and supersedes any and all prior agreements and understandings between the parties hereto with respect to the obligations of Executive, whether oral or written. This Agreement, the Noncompetition Agreement, the Unit Purchase Agreement, and the Contribution Agreement constitute the entire agreement between the parties with respect to the matters herein provided, and no modifications or waiver of any provision hereof shall be effective unless in writing and signed by Employer and Executive.

•Binding Effect. All of the terms and provisions of this Agreement shall be binding upon the parties hereto and its or his heirs, executors, administrators, legal representatives, successors and assigns, and inure to the benefit of and be enforceable by Employer and its successors and assigns, except that the duties and responsibilities of Executive hereunder are of a personal nature and shall not be assignable or delegable in whole or in part.

•Severability. In the event that any provision of this Agreement or application thereof to anyone or under any circumstance is found to be invalid or unenforceable in any jurisdiction to any extent for any reason, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

•Remedies; Waiver. No remedy conferred upon Employer by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by Employer in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the party possessing the same from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

•Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

•Governing Law. The validity, interpretation, construction, performance and enforcement of this Agreement shall be governed by the laws of the State of New York, without application of conflict of laws principles.

•Headings. The captions and headings contained in this Agreement are for convenience only and shall not be construed as a part of the Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

	CPG INTERNATIONAL I INC.
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President
	CPG INTERNATIONAL HOLDINGS LP
By:	CPG Holding I LLC, its General Partner
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President
	PRO-CELL LLC
	/s/ KEVIN SLOAN
By:	Kevin Sloan
Title:	Co-President and Co-Chief Executive Officer
	EXECUTIVE:
By:	/s/ CHRISTOPHER G. BARDASIAN
	Christopher G. Bardasian

Schedule A

Christopher Bardasian: 2007 Annual Bonus

Bonus as % of Base

2007 Sales of Pro-Cell Compensation

$50 million 10

55 " 15

60 " 20

65 " 25

70 " 30

75 " 35

80 " 40

EX-10

EXHIBIT 10.20

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made effective as of the 31st day of January, 2007, by and among CPG International I Inc., a Delaware corporation (“CPG International”), Pro-Cell, LLC, an Alabama limited liability company (“Pro-Cell,” and together with CPG International, “Employer”), CPG International Holdings LP, a Delaware limited partnership (“CPG International Holdings”), and Kevin Sloan (“Executive”).

RECITALS

WHEREAS, CPG International will purchase membership interests (the “Units”) in Pro-Cell pursuant to the Unit Purchase Agreement, dated as of December 13, 2006, between CPG International, Christopher Bardasian, Kevin Sloan, and Larry Sloan (the “Unit Purchase Agreement”);

WHEREAS, Employer desires to continue to employ Executive and to utilize his management services as indicated herein, and Executive has agreed to provide such management services to Employer;

WHEREAS, as a condition precedent and a material inducement for Employer to purchase the Units and to continue to employ and pay Executive, Executive has agreed to execute this Agreement and be bound by the provisions herein;

WHEREAS, as a condition precedent and a material inducement for Employer to enter into the Unit Purchase Agreement and this Agreement, Executive has agreed to execute the Noncompetition Agreement among Employer, Executive and the other parties thereto, dated as of the date hereof (the “Noncompetition Agreement”), and be bound by the provisions therein; and

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

PROVISIONS

•Term and Duties. Employer hereby agrees to employ Executive as the Senior Vice President – Pro-Cell General Manager commencing on the date of the Closing (as defined in the Unit Purchase Agreement) and continuing for a period of three (3) years (the “Initial Term”) or until terminated in accordance with this Section 1 or Section 5. Unless terminated by written notice delivered at least thirty (30) days prior to the expiration of the Initial Term, Executive’s employment shall continue for successive one (1) year terms (each one (1) year term hereinafter referred to as a “Subsequent Term” and together with the Initial Term, the “Term”) until terminated by written notice delivered at least thirty (30) days prior to the expiration of the Subsequent Term. Subject to the provisions of this Agreement, during the Term, Executive shall devote his best efforts and abilities to the performance of Executive’s duties on behalf of Employer and to the promotion of its interests consistent with and subject to the direction of John Loyack, the President of CPG International, or his successor during the first eighteen (18)

months of the Initial Term, and thereafter, of John Loyack or his successor or Ralph Bruno or any other Business Unit President or their successors. Executive shall devote substantially all of his business time, energies, attention and abilities to the operation of the business of Employer and shall not be actively involved in any other trade or business or as an employee of any other trade or business. Nothing contained herein shall be deemed to prevent or limit Executive’s rights to (i) engage in religious, charitable or other non-profit activities, and (ii) make any other passive investments which do not otherwise interfere, in any material respect, with Executive’s duties hereunder or violate the terms of Executive’s Noncompetition Agreement.

• Compensation.

In consideration of the services to be rendered by Executive during the Term, Employer shall pay to Executive $250,000 per year (“Base Compensation”), payable bi-weekly and prorated for any partial employment period. Such Base Compensation shall be reviewed annually by the Board of Directors of CPG International (the “Board”), or any compensation committee of the Board, for purposes of considering an increase to (but never a decrease of) such Base Compensation in its sole discretion. Executive shall also be eligible for an annual bonus with a target of not less than forty (40) percent of his Base Compensation, based upon the achievement of certain performance goals determined by John Loyack or his successor and the Board. Notwithstanding the foregoing, Executive’s annual bonus for 2007 shall be determined in accordance with Schedule A.

• Signing Bonus.

Executive shall be eligible to receive a signing bonus in the amount of $500,000 (the “Signing Bonus”), which will be paid to Executive on the date on which the Closing occurs if he is employed by Employer on that date. If Executive terminates his employment for other than Good Reason or is terminated for Cause within the twelve (12) month period following the date on which the Closing occurs, Executive shall immediately and with no further action forfeit to CPG International Holdings for no consideration a number of Class A Units thereof, which are then owned by Executive, having a value on the date of termination equal to $500,000 times a fraction the numerator of which is the number of days during the Term on which Executive was employed by Employer and the denominator of which is 365.

• Benefits.

•Subject to Section 4(c) below, after the date hereof and until the first day of the first calendar month following the date of the Closing (such date, the “Eligibility Date”), Executive shall be eligible to participate in such benefit programs offered by Pro-Cell (other than bonus plans) as are offered to similarly-situated employees (except in the case of equity-based incentive plans where awards are subject to Board (or committee thereof) approval) and in each case no less favorable than the terms of benefits generally available to the employees of Pro-Cell (based on seniority), subject in each case to the generally applicable terms and conditions of the plan, benefit or program in question. Subject to Section 4(c) below, from and after the Eligibility Date, Executive shall be eligible to participate in such benefit programs offered by CPG International as are offered to similarly-situated employees (except in the case of equity-based incentive plans where awards are subject to Board (or committee thereof) approval)and in each

case no less favorable than the terms of benefits generally available to the employees of CPG International (based on seniority), subject in each case to the generally applicable terms and conditions of the plan, benefit or program in question.

•For each calendar year, Executive shall be entitled to three (3) weeks vacation.

•Executive shall be authorized to incur necessary and reasonable travel, entertainment and other business expenses in connection with his duties hereunder. Pro-Cell shall reimburse Executive for such expenses upon presentation of an itemized account and appropriate supporting documentation, all in accordance with the generally applicable policies; provided the Board’s written approval shall be required prior to Executive’s incurring $10,000 of expenses in any one instance or $20,000 of expenses in the aggregate.

•Upon the earlier of the termination of Executive's employment or the 12 month anniversary of the date hereof, Executive shall have the option to have assigned to him, at no cost, that certain term life insurance policy presently in effect insuring the life of Executive and for which the Employer is the named beneficiary, and upon such election the Employer shall cause such life insurance policy to be transferred and assigned to Executive, whereupon Executive shall assume all of the obligations thereunder from and after the date of such assignment.

•Termination. Executive’s employment shall terminate upon the first to occur of the following (each a“Termination Date”):

• The expiration of the Term;

•Executive’s death or disability (mentally, physically or emotionally), so that Executive cannot substantially perform his duties hereunder for a period of ninety (90) consecutive days or for one hundred eighty (180) days during any 365 day period during the Term;

•Executive’s voluntary termination of his employment for any reason other than Good Reason, upon not less than ten (10) business days’ written notice to Employer;

• Executive’s termination of his employment for Good Reason;

•Employer’s termination of Executive’s employment for other than Cause, upon not less than ten (10) business days’ written notice to Executive; or

• Employer’s termination of Executive’s employment for Cause.

• Termination Payments.

•Except as otherwise provided herein, Executive’s Base Compensation and other benefits, if any, shall terminate on the Termination Date.

•In the event of a termination of Executive’s employment with Employer pursuant to Sections 5(d) or 5(e), Employer shall be obligated, in lieu of any other remedies available to Executive, to provide Executive with the following: (i) continuation of Executive’s Base Compensation at the rate then in effect for a period of twelve (12) months (the “Termination Payment”), (ii) continuation of group health plan benefits for a period of twelve (12) months to the extent authorized by and consistent with 29 U.S.C. §1161 et seq., subject to payment of premiums by Executive at the active employee’s rate and (iii) payment of all earned but unpaid Base Compensation and earned but unpaid incentive compensation, unpaid expense reimbursements, accrued but unused vacation and any vested benefits Executive may have under any employee benefit plan, under this Agreement and under any bonus, incentive or other plan (the “Accrued Payments”). Employer’s obligation to make the Termination Payment shall be conditioned upon (i) the absence of a material breach by Executive of the Noncompetition Agreement and (ii) Executive’s execution, delivery and non-revocation of a valid and enforceable general release of claims in a form reasonably acceptable to Employer (the “Release”). Subject to Section 6(e), the Termination Payment shall be paid in installments on Employer’s regular payroll dates occurring during the twelve (12) month period immediately following the effectiveness of the Release. Subject to Section 6(e), the Accrued Payments shall be paid within thirty (30) days following the Termination Date.

•In the event of a termination of Executive’s employment pursuant to Section 5(a), 5(b), 5(c) or 5(f), Employer shall pay to Executive, his estate or legal representative, as the case may be, the Accrued Payments.

•Any termination of Executive’s employment shall not adversely affect or alter Executive’s rights under any employee benefit plan of Pro-Cell in which Executive, at the date of termination, has a vested interest, unless otherwise provided in such employee benefit plan or any agreement or other instrument attendant thereto.

•If Executive is a “specified employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, any payments required to be made pursuant to this Section 6 which are subject to Section 409A shall not commence until six months from the Termination Date, with the first payment to be equal to the aggregate amount that would have been paid to Executive under this Section 6 during the first six months immediately following the Termination Date had this Section 6(e) not been applicable.

• Definitions.

•“Cause” as used herein shall mean Executive’s (i) commission of an act which constitutes common law fraud, embezzlement (other than occasional, customary and de minimis use of Employer’s property for personal purposes) or a felony, an act of moral turpitude, or of any tortious or unlawful act causing material harm to Employer’s business, standing or reputation; (ii) gross negligence on the part of Executive in the performance of his duties hereunder; (iii) breach of his duty of loyalty or care to Employer; (iv) ongoing refusal or failure to perform Executive’s duties or the deliberate and consistent refusal to conform to or follow any reasonable policy adopted by the Board, in each case after receiving written notice describing his noncompliance and being given a ten (10) business days opportunity to cure (to the extent

curable) such non-compliance; or (v) material breach by Executive of this Agreement, the Noncompetition Agreement or any other agreement with or for the benefit of Employer to which Executive is a party or by which Executive is bound (excluding, however, the Unit Purchase Agreement and the Contribution Agreement dated as of December 13, 2006, by and among CPG International Holdings, Christopher Bardasian, Kevin Sloan, and Larry Sloan (the “Contribution Agreement”)), which material breach is not cured (to the extent curable) within ten (10) business days following written notice from Employer.

•“Good Reason” shall mean (i) without Executive’s express written consent, the assignment to Executive of any duties materially inconsistent with his positions, duties, responsibilities and status with Employer, or a material adverse change in his reporting responsibilities, titles or offices, or any demotion of Executive from any of such positions, in each case as in effect on the date hereof; (ii) Employer's requirement of Executive, without his express written consent, to be based at a location more than 50 miles away from Executive's current office location in Foley, Alabama; or (iii) any material breach by Employer of this Agreement, which material breach is not cured (to the extent curable) within ten (10) business days following written notice from Executive.

•Consideration. Executive acknowledges and agrees that the consideration set forth in the recitals to this Agreement and the rights and benefits hereunder are all and singularly valuable consideration which are sufficient for any or all of Executive’s covenants set forth herein or in the Noncompetition Agreement.

•No Prior Agreements. Executive represents and warrants that his performance of all the terms of this Agreement does not and shall not breach any fiduciary or other duty or any covenant, agreement or understanding (including, without limitation, any agreement relating to any proprietary information, knowledge or data acquired in confidence, trust or otherwise) to which he is a party or by the terms of which he may be bound. Executive further covenants and agrees not to enter into any agreement or understanding, either written or oral, in conflict with the provisions of this Agreement.

• Miscellaneous.

•Notices. All notices, requests, consents and demands by the parties hereto shall be delivered by hand, by confirmed facsimile transmission, by recognized national overnight courier service or by deposit in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to be notified at the addresses set forth below:

if to Executive:

Kevin Sloan

with copy to:

Goodwin Procter LLP

599 Lexington Avenue

New York, NY 10022

Attn: Stuart Rosenthal

if to Employer:

Compression Polymers Holding Corporation

c/o AEA Investors LLC

Park Avenue Tower

65 East 55^th Street

New York, NY 10022

Attn: Sanford Krieger

with copy to:

Fried, Frank, Harris, Shriver and Jacobson LLP

One New York Plaza

New York, NY 10004-1980

Notices shall be effective immediately upon personal delivery or facsimile transmission, one (1) business day after deposit with an overnight courier service or three (3) business days after the date of mailing thereof. Other notices shall be deemed given on the date of receipt. Any party hereto may change the address specified herein by written notice to the other parties hereto.

•Entire Agreement. This Agreement cancels and supersedes any and all prior agreements and understandings between the parties hereto with respect to the obligations of Executive, whether oral or written. This Agreement, the Noncompetition Agreement, the Unit Purchase Agreement, and the Contribution Agreement constitute the entire agreement between the parties with respect to the matters herein provided, and no modifications or waiver of any provision hereof shall be effective unless in writing and signed by Employer and Executive.

•Binding Effect. All of the terms and provisions of this Agreement shall be binding upon the parties hereto and its or his heirs, executors, administrators, legal representatives, successors and assigns, and inure to the benefit of and be enforceable by Employer and its successors and assigns, except that the duties and responsibilities of Executive hereunder are of a personal nature and shall not be assignable or delegable in whole or in part.

•Severability. In the event that any provision of this Agreement or application thereof to anyone or under any circumstance is found to be invalid or unenforceable in any jurisdiction to any extent for any reason, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

•Remedies; Waiver. No remedy conferred upon Employer by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by Employer in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the party possessing the same from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

•Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

•Governing Law. The validity, interpretation, construction, performance and enforcement of this Agreement shall be governed by the laws of the State of New York, without application of conflict of laws principles.

•Headings. The captions and headings contained in this Agreement are for convenience only and shall not be construed as a part of the Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

	CPG INTERNATIONAL I INC.
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President
	CPG INTERNATIONAL HOLDINGS LP
By:	CPG Holding I LLC, its General Partner
	/s/ AMY C. BEVACQUA
By:	Amy C. Bevacqua
Title:	Vice President
	PRO-CELL LLC
	/s/ CHRISTOPHER G. BARDASIAN
By:	Christopher G. Bardasian
Title:	Co-President and Co-Chief Executive Officer
	EXECUTIVE:
By:	/s/ KEVIN SLOAN
	Kevin Sloan

Schedule A

Kevin Sloan: 2007 Annual Bonus

Bonus as % of Base

2007 Sales of Pro-Cell Compensation

$50 million 10

55 " 15

60 " 20

65 " 25

70 " 30

75 " 35

80 " 40

EX-21

Exhibit 21.1

(as of December 31, 2007)

List of Subsidiaries

Subsidiaries	State of Incorporation
CPG International I Inc	Delaware
AZEK Buildings Products Inc.	Delaware
Scranton Products Inc.	Delaware
Santana Products Inc.	Delaware
CPG Sub I Corporation	Delaware
Vycom Corp.	Delaware
Sanatec Sub I Corporation	Delaware
Procell Decking Inc.	Delaware

EX-31

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Glenn M. Fischer, certify that:

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2007 of CPG International Inc.;

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f )) for the registrant and we have:

a.           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.         The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   March 28, 2008	By:	/s/ GLENN M. FISCHER
		Glenn M. Fischer
		Interim Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Scott Harrison, certify that:

1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2007 of CPG International Inc.;

2.         Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.         Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.         The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f )) for the registrant and we have:

a.           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.         The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   March 28, 2008	By:	/s/ SCOTT HARRISON
		Scott Harrison
		Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of CPG International Inc. (the “Company”) on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Glenn M. Fischer, the Interim Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:   March 28, 2008	By:	/s/GLENN M. FISCHER
		Glenn M. Fischer
		Interim Chief Executive Officer

EX-32

Exhibit 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of CPG International Inc. (the “Company”) on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott Harrison, the Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:   March 28, 2008	By:	/s/SCOTT HARRISON
		Scott Harrison
		Executive Vice President and Chief Financial Officer