Form 10-K

Position

Position with Zep and Principal

Business Affiliation During Past Five Years

Cedric M. Brown

Senior Vice President, Supply Chain

Mr. Brown is our Senior Vice President, Chief Supply Chain Officer, a position he has held since October 2007. Having joined Acuity Specialty Products in August 2006, Mr. Brown previously served Acuity Brands Lighting in various executive and managerial roles in manufacturing, quality, continuous improvement, and business transformation. He served as Vice President, Acuity Business System from January 2005 to August 2006 and as Vice President, Lean/Q6 from April 2001 through December 2004.

C. Francis Whitaker, III

Vice President, General Counsel, and Secretary

Mr. Whitaker is our Vice President, General Counsel and Secretary, a position he has held since October 2007. He joined Acuity Specialty Products in April 2006 as Vice President and General Counsel. Mr. Whitaker served Acuity Brands as Assistant Counsel from September 2003 to March 2006. He was a senior associate with the law firm of Paul, Hastings, Janofsky and Walker LLP from September 2001 to September 2003 and an associate with the law firm of Sutherland Asbill & Brennan LLP from September 1992 to September 2001.

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MygxULmvsvtp6WSFdYzXUQSCvhTneMTfYIWYUOzZgCHPksihfVErhPd7YgI3rhIQ 8ZmQZkMJGj17FMn0qcav7Q== 0001193125-07-255587.txt : 20071129 0001193125-07-255587.hdr.sgml : 20071129 20071129083245 ACCESSION NUMBER: 0001193125-07-255587 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20070831 FILED AS OF DATE: 20071129 DATE AS OF CHANGE: 20071129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Zep Inc. CENTRAL INDEX KEY: 0001408287 STANDARD INDUSTRIAL CLASSIFICATION: SPECIALTY CLEANING, POLISHING AND SANITATION PREPARATIONS [2842] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33633 FILM NUMBER: 071273006 BUSINESS ADDRESS: STREET 1: 4401 NORTHSIDE PARKWAY, SUITE 700 CITY: ATLANTA STATE: GA ZIP: 30327 BUSINESS PHONE: (404) 352-1680 MAIL ADDRESS: STREET 1: 4401 NORTHSIDE PARKWAY, SUITE 700 CITY: ATLANTA STATE: GA ZIP: 30327 FORMER COMPANY: FORMER CONFORMED NAME: Acuity SpinCo, Inc. DATE OF NAME CHANGE: 20070730 10-K 1 d10k.htm FORM 10-K Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2007.

¨	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 1-33633.

Zep Inc.

(Exact name of registrant as specified in its charter)


Delaware		26-0783366
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1310 Seaboard Industrial Avenue, Atlanta, Georgia		30318-2825
(Address of principal executive offices)		(Zip Code)

(404) 352-1680

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Title of Each Class		Name of Each Exchange on which Registered
Common Stock ($0.01 Par Value)		New York Stock Exchange
Preferred Stock Purchase Rights		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the 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. Yes ¨ No x

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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ¨ Accelerated Filer ¨ Non-accelerated Filer x

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

On February 28, 2007, the registrant’s common stock was not publicly traded.

The number of shares outstanding of the registrant’s common stock, $0.01 par value, was 21,387,704 shares as of November 23, 2007.

Zep Inc.

Table of Contents


		Page No.
Part I

Item 1.	Business	1
Item 1a.	Risk Factors	6
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Submission of Matters to a Vote of Security Holders	17

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7a.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 8.	Financial Statements and Supplementary Data	38
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	66
Item 9a.	Controls and Procedures	66
Item 9b.	Other Information	66

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	67
Item 11.	Executive Compensation	71
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	101
Item 13.	Certain Relationships and Related Transactions, and Director Independence	102
Item 14.	Principal Accountant Fees and Services	102

Part IV

Item 15.	Exhibits and Financial Statement Schedules	103
Signatures		108
Financial Statement Schedules		109

PART I

Item 1. Business

Zep Inc. (“Zep”) is a leading producer, marketer, and service provider of a wide range of cleaning and maintenance solutions for commercial, industrial, institutional, and consumer end-markets. Our product portfolio includes anti-bacterial and industrial hand care products, cleaners, degreasers, deodorizers, disinfectants, floor finishes, sanitizers, and pest and weed control products. We continually expand our product portfolio and service offerings through the introduction of new products and formulations as well as new services to meet the demands of the industry and our customers. We market these products and services under well recognized and established brand names, such as Zep^®, Zep Commercial^®, Enforcer^®, and Selig^™ , some of which have been in existence for more than 70 years. We reach our customers through an experienced, international organization composed of approximately 1,600 sales representatives, supported by highly skilled research and development and technical services teams, who collectively provide creative solutions for our customers’ diverse cleaning and maintenance needs by utilizing their extensive product expertise and providing customized value added services that we believe distinguish us among our competitors. Our highly trained and experienced representatives further differentiate us from our competition by providing knowledge and consultation that reduces our customers’ total cost of ownership.

Through our direct sales organization, we provide convenient, highly effective cleaning and maintenance solutions to approximately 350,000 customers in a broad array of commercial, industrial, and institutional end-markets, including transportation, food processing and service, manufacturing, government, and housekeeping. These customers include government entities and businesses ranging from small sole proprietorships to large corporations. In addition, our products are sold to contractors, small business owners, and homeowners who want to purchase professional strength cleaning products through large and small home improvement retailers. The home improvement channel is supported by sales and management personnel who focus on customers such as The Home Depot, Wal-Mart, Ace Hardware, True Value, Lowe’s, Menard’s, and HD Supply.

We sell our products to customers primarily in the United States (81% of 2007 net sales), Canada (11% of 2007 net sales), and Western Europe (8% of 2007 net sales). For the fiscal year ended August 31, 2007, we generated net sales of $565.9 million and net income of $14.1 million.

We were incorporated in 2007 under the laws of Delaware. We formerly were a wholly owned subsidiary of Acuity Brands, Inc. (“Acuity Brands”). On July 23, 2007, Acuity Brands announced its intention to spin-off its specialty products business from its other businesses. On October 31, 2007, Acuity Brands completed the spin-off of Zep Inc. Acuity Brands distributed all of the shares of Zep common stock, par value $.01 per share, to Acuity Brands’ stockholders of record as of October 17, 2007. The spin-off was completed through a pro rata distribution to Acuity Brands stockholders consisting of one share of our common stock for every two shares of Acuity Brands shares owned by Acuity Brands’ stockholders as of the close of business on October 17, 2007, the record date for the distribution. Acuity Brands has received a ruling from the Internal Revenue Service that, based on certain facts, assumptions, representations, and undertakings set forth in the ruling, the distribution will be tax-free to Acuity Brands and its stockholders for U.S. federal income tax purposes, except with respect to cash received in lieu of fractional share interests, which generally will be taxable. Also, Acuity Brands and Zep Inc. have received an opinion from their external counsel supporting the spin-off’s tax-free status. Zep’s common stock is listed on the New York Stock Exchange under the ticker symbol “ZEP.”

Brands

Zep Inc. markets its products and services under well recognized and established brand names, such as Zep^®, Zep Commercial^® , Enforcer^®, and Selig^™, some of which have been in existence for more than 70 years. A summary of our strong portfolio of brands, which provide customers with highly valued products and services across a broad array of commercial, industrial, institutional, and consumer end-markets is provided below:

•

Zep^® is our flagship brand and represents our largest portfolio of cleaning and maintenance solutions for commercial, industrial, and institutional customers needing highly effective product solutions and professional technical support.

•

Zep Commercial^® provides professional cleaning and plumbing chemical products targeted to contractors and small business owners and are currently sold through The Home Depot and HD Supply.

•

The Enforcer^® brand provides retail plumbing and pest and weed control products sold through home improvement retailers.

•

Selig^™ offers commercial, industrial, and institutional customers a broad range of cleaning solutions sold largely in the Southeastern U.S through a direct sales force. Selig is also now available through home improvement retailers under the Selig Commercial brand.

We have licenses for two other brands, the ArmorAll^® Professional brand and a line of cleaners under the Rubbermaid^® Commercial brand name. We licensed the ArmorAll Professional name from The Clorox Company in 2002 to produce and sell a premium line of cleaning products for the transportation end-market. In 2003, we licensed and developed a line of cleaners under the Rubbermaid brand name that we currently sell primarily to Wal-Mart and Menard’s.

Industry

According to the 2006 Kline Group report, the United States commercial, industrial, and institutional cleaning chemicals market is an estimated $9.6 billion market. We believe we are one of the top four market leaders, which together hold slightly more than 40% of the total market share. We estimate that our greater than 3% market share trails only that of Ecolab and JohnsonDiversey. The market is highly fragmented and is served by hundreds of regional and niche participants who sell either directly to end-users or through distributors. Approximately two-thirds of the market is currently served through distributors while one-third of the market is currently served through direct sales. We are a market leader in the direct sales channel and the significant majority of our historical revenues have come from this channel. In general, the commercial, industrial, and institutional end-market enjoys growth consistent with GDP due to favorable end-market demographics, increasing government regulations, health and safety concerns, and consumer demand for cleanliness.

Additionally, based on our estimates and industry research, we estimate the total size of the retail cleaning chemicals market is approximately $5.5 billion. This market is served through channels including grocery, mass merchandisers, home improvement, drug, and other specialty retailers. We primarily sell through the home improvement channel, which only serves a portion of the overall retail cleaning chemicals market. We believe sales through the home improvement channel are experiencing above market growth as customers diversify their purchasing locations.

While consumption of cleaning and maintenance products is somewhat discretionary, in health-driven, sophisticated markets such as North America and Western Europe, health and safety regulations and customer expectations buffer demand downturns. Increased legislation regulating food, health, and safety requires increased frequency of use, thus fueling increases in demand. Health and safety regulations are also shrinking the pool of available chemicals. Together, these trends are driving demand and development of improved product formulations and application methods.

We believe end-users in our markets are beginning to demand more effective and efficient products. Additionally, many corporate buyers are increasing centralized corporate buying activities and consolidating their respective purchases and suppliers. These demand factors should offer opportunities for broad product line suppliers like us, with national presence and support, formulation expertise, and distribution capabilities.

Our Products, Services, and Customers

Products. We produce a wide range of cleaning and maintenance solutions for commercial, industrial, institutional, and consumer customers. We have more than 2,300 unique formulations that are used in manufacturing products for our customers.

Services. We have a well-trained and experienced sales team, supported by our highly skilled research and development and technical services teams that provide creative customized solutions for our customers’ diverse cleaning and maintenance needs. We provide value-added services to customers on application uses, safety aspects, product selection, specific formulations, inventory management, customer employee training, and equipment and dispensers. Accordingly, our customers benefit from a more effective solution that includes a total cost of ownership for their cleaning and maintenance needs that we believe is superior to our competitors’ offerings.

Customers. We sell cleaning and maintenance solutions directly to approximately 350,000 customers. Our commercial, industrial, and institutional customers include government entities and businesses ranging from small sole proprietorships to large corporations. In addition, our cleaning and maintenance solutions are sold to contractors, small business owners, and homeowners who want to purchase professional strength cleaning products through home improvement retailers such as The Home Depot, Wal-Mart, Ace Hardware, True Value, Lowe’s, Menard’s, and HD Supply. Net sales from The Home Depot, our largest customer, accounted for approximately 11% of our total net sales during the fiscal year ended August 31, 2007, and 12% of our net sales during the fiscal years ended August 31, 2006 and 2005. Our next largest customer accounted for less than 1% of our net sales during the fiscal years ended August 31, 2007, 2006, and 2005.

Our cleaning and maintenance solutions are developed for customers in targeted end-markets, including the transportation, food processing and service, manufacturing, government, housekeeping, and contractors and small business owners markets. A summary of our product offerings, our representative brands, and the customers served in each of these end-markets is provided in the table below.


END-MARKETS	KEY PRODUCTS OFFERED	BRANDS	CUSTOMERS
Transportation	Interior and exterior vehicle cleaning products, solvents, degreasers, parts washers, lubricants, and hand care products	• Zep • Selig • ArmorAll Professional	Automotive repair facilities, car washes, car dealers, aircraft, public transport, car rental facilities, trucks, trains, and construction vehicles

Food Processing and Service	Cleaners and sanitizers, kitchen cleaners, deodorizers, hand care products, and dispensing equipment	• Zep • Selig	Farms, meat processing facilities, bakeries, grocery stores, and full and quick-serve restaurants

Manufacturing	Cleaners, degreasers, solvents, parts washers, lubricants, and hand care products	• Zep • Selig	Federal, state and local government agencies, including cities, school districts, military, and police and fire departments

Government	Cleaners, degreasers, floor care, hand care products, deodorizers, and dispensing equipment	• Zep • Selig	Federal, state and local government agencies, including cities, school districts, military, and police and fire departments

Housekeeping	Floor care, laundry systems, bathroom care, glass care, deodorizers, hand care products, and other janitorial products	• Zep • Selig	Hospitality, healthcare, entertainment, and other industries that use janitorial housekeeping products

Contractors and Small Business Owners	Cleaners, degreasers, floor care, bathroom care, glass care, drain care, pressure wash products, and pest control products	• Zep Commercial • Enforcer • Selig Commercial • Rubbermaid Commercial	Small business owners, contractors, and homeowners

Sales

Our sales organization consists of approximately 1,600 sales representatives worldwide. Our compensation model is primarily commission-based. Net sales are largely dependent on the hiring, training, and retention of the commissioned sales representatives.

Our sales organization covers the United States, Canada, Italy, Belgium, Luxemburg, the Netherlands, and certain other smaller markets. As of August 31, 2007, the commercial, industrial, and institutional end-markets are serviced primarily through approximately 1,150 sales representatives in the United States, 145 sales representatives in Canada, and 270 sales representatives throughout Europe, supplemented by customer and technical service personnel. Our customers in the home improvement channel are served by approximately 35 salaried sales and management personnel.

Manufacturing

We manufacture products at six facilities located in the United States, Canada, the Netherlands, and Italy. The three United States facilities produce approximately 89% of our manufactured product; the Canadian facility produces approximately 7%; and the two European facilities produce approximately 4%. Certain finished goods purchased from contract manufacturers and finished goods suppliers supplement the manufactured product line. Sales of outsourced product currently account for approximately 19% of our net sales volume. Outsourced product is predominately manufactured in the United States. Management does not believe the loss of any one supplier of outsourced product would have a material adverse impact on our results of operations.

Distribution

Products sold to commercial, industrial, and institutional end-markets are shipped from 46 strategically located branch warehouses throughout North America and Europe, which are supplied directly from our production facilities, and by one large distribution center in Atlanta, Georgia. The products sold to home improvement retailers are distributed nationwide from the Emerson, Georgia plant and one other warehouse. Products are primarily delivered through common and local carriers.

Research and Development

We employ approximately 40 chemists who develop product systems that provide comprehensive solutions for broad-based customer applications and who work in our technical services area supporting both our sales representatives and customers. Efforts to enhance existing formulations by utilizing new raw materials or combinations of raw materials have resulted in both new and improved products. Special emphasis has been placed on the development of environmentally preferable products based on renewable and environmentally preferred raw materials, such as the recent expansion of our GreenLink^™ product line. Technical expertise is employed to incorporate proven technologies into new applications. Our research and development expense for each of the fiscal years ended August 31, 2007 and 2006, excluding technical services and packaging engineering, was $2.3 million, and was $2.2 million for the fiscal year ended August 31, 2005.

Competition

The cleaning and maintenance solutions industry is highly competitive. Overall, competition is fragmented in the commercial, industrial, and institutional end-markets, with numerous local and regional operators selling directly to customers, distributors, and a few national competitors. Many of these competitors offer products in some, but not all, of the markets we serve. Competition is based primarily on brand name recognition, price, product quality, and customer service. Competitors in the commercial, industrial, and institutional end-market include but are not limited to Ecolab, Inc., JohnsonDiversey, Inc., NCH Corporation, Rochester Midland Corporation, and State Chemical Manufacturing Company. Many companies compete within the broader retail market for cleaning chemical products including but not limited to Church & Dwight Co., Inc., Procter and Gamble, Reckitt Benckiser plc, S.C. Johnson & Sons, Inc., Sunshine Makers, Inc., and The Clorox Company. We also compete in the home improvement channel with pest control companies such as Bayer, A.G., Spectrum Brands, Inc., and The Scott’s Company. Furthermore, barriers to entry and expansion in the industry are low, which may lead to additional competitive pressure in the future.

Patents, Licenses, and Trademarks

We own or have licenses to use various domestic and foreign patents and trademarks related to our formulations and products, processes, and businesses. These intellectual property rights, particularly the trademarks relating to our products, are important factors for our businesses. While patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us.

To protect these proprietary rights, we rely on copyright, patent, trade secret, and trademark laws. Despite these protections, unauthorized parties may attempt to infringe on our intellectual property. Our management is not aware of any such material unauthorized use or of any pending claims where we do not have the right to use any intellectual property material to our business.

Raw Materials

The key raw materials we use in our products are surfactants, polymers and resins, fragrances, solvents and other petroleum-based materials, and packaging materials. We purchase most raw materials on the open market and rely on third parties for the sourcing of some finished goods. Accordingly, the cost of products sold may be affected by changes in the market price of the above-mentioned raw materials or the sourcing of finished goods. Due to the mix of purchases (raw materials, components parts, and finished goods), timing of price increases, and other economic and competitive forces within the supply chain, it is not possible to determine the financial impact of future changes in the market price of these raw materials.

We do not expect to engage in significant commodity hedging transactions for raw materials, though we have committed and will continue to commit to purchase certain materials for specified periods of time. Many of the raw materials we use are petroleum-based and, therefore, subject to the availability and price of oil. Significant increases in the prices of our products due to increases in the cost of raw materials could have a negative effect on demand for products and on profitability. While we have generally been able to pass along these increases in cost in the form of higher selling prices for our products, some customer conservation may have a negative impact on our sales volume. There can be no assurance that future disruptions in either supply or price of these materials will not negatively affect future results.

We constantly monitor and investigate alternative suppliers and materials based on numerous attributes including quality, service, and price. Additionally, we have conducted internet auctions as a method of competitive bidding. Our ongoing efforts to improve the cost effectiveness of our products and services may result in a reduction in the number of our suppliers. A reduction in the number of suppliers could cause increased risk associated with reliance on a limited number of suppliers for certain raw materials and finished goods.

Seasonality and Cyclicality

Our business exhibits some seasonality, with net sales being affected by weather and the annual budget cycles of major customers. Historically, due to this seasonality, the second half of our fiscal year is much stronger in terms of sales, earnings, and cash flow than the first half. In addition, our net sales are dependent on the retail, wholesale, and industrial markets and demand for these markets is generally associated with GDP in the United States. Economic downturns and the potential decline in key markets and demand for cleaning and maintenance products may have a material adverse effect on our net sales and operating income.

Environmental Regulation

operations to limit air and water pollution, and these permits are subject to modification, renewal, and revocation by issuing authorities. We will incur capital and operating costs relating to environmental compliance on an ongoing basis. Environmental laws and regulations have generally become stricter in recent years, and the cost of responding to future changes may be substantial. While we believe that we are currently in substantial compliance with all material environmental laws and regulations, there can be no assurance that we will not incur significant costs to remediate violations of such laws and regulations, particularly in connection with acquisitions of existing operating facilities, or to comply with changes in, or stricter or different interpretations of, existing laws and regulations. Such costs could have a material adverse effect on our results of operations.

Employees

As of August 31, 2007, we had approximately 2,830 employees, including 2,180 in the United States, 320 in Canada, and 330 in Europe. Of our approximate 2,830 employees, we estimate that 220 were members of nine unions in the United States and Europe.

International Operations

See Note 11: Geographic Distribution of Operations of the Notes to Combined Financial Statements for information regarding the geographic distribution of net sales, operating profit, and long-lived assets.

Information Concerning Zep Inc.

We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K (and all amendments to these reports), together with all reports filed pursuant to Section 16 of the Securities Exchange Act of 1934 by our officers, directors, and beneficial owners of 10% or more of our common stock, available free of charge through the “SEC Filings” link on our website, located at www.zepinc.com, as soon as reasonably practicable after they are filed with or furnished to the SEC. Information included on our website is not incorporated by reference into this Annual Report on Form 10-K. Our reports are also available at the Securities and Exchange Commission’s Public Reference Room at 100 F. Street, NE, Washington, DC 20549 or on their website at www.sec.gov.

Additionally, we have adopted a written Code of Ethics and Business Conduct that applies to all of our directors, officers, and employees, including its principal executive officer and senior financial officers. This Code of Ethics and Business Conduct is being filed as Exhibit 14 to this Annual Report on Form 10-K. The Code of Ethics and Business Conduct and our Corporate Governance Guidelines are available free of charge through the “Corporate Governance” link on our website at www.zepinc.com. Additionally, the charters for our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, and the rules and procedures relating thereto, are available free of charge through the “Corporate Governance” link on our website. Each of the Code of Ethics and Business Conduct, the Corporate Governance Guidelines, and the aforementioned committee charters is available in print to any of our stockholders that request such document by contacting our Investor Relations department.

Item 1a. Risk Factors

Risks Related to our Business

Our results can be adversely affected by fluctuations in the cost or availability of materials used in our manufacturing processes.

The key raw materials we use in our products are surfactants, polymers and resins, fragrances, water, and solvents, and other petroleum-based materials. We do not expect to engage in significant commodity hedging transactions for raw materials, though we have committed and will continue to commit to purchase certain materials for specified periods of time. Significant increases in the prices of our products due to increases in the

cost of raw materials or packaging materials could have a negative effect on demand for products and on profitability. Many of the raw materials that we use are petroleum-based and, therefore, subject to the availability and price of oil. Failure to effectively manage future increases in the costs of these materials could adversely affect our ability to achieve operating margins acceptable to stockholders. Furthermore, there are a limited number of suppliers for some of our raw materials, packaging materials, and finished goods. Our profitability and volume could be negatively impacted by limitations inherent within the supply chain of certain of these materials, including competitive conditions, governmental issues, legal issues, natural disasters, and other events that could impact both the availability and price of the materials.

We face significant competition and may face more significant competition in the future.

The cleaning and maintenance solutions industry is highly competitive. Overall, competition is fragmented in the commercial, industrial, and institutional end-market, with numerous local and regional operators selling directly to customers, distributors, and a few national competitors. Many of these competitors offer products in some of the markets we serve. Competition is based primarily on brand name recognition, price, product quality, and customer service. Competitors in the commercial, industrial, and institutional end-market include but are not limited to Ecolab, Inc., JohnsonDiversey, Inc., NCH Corporation, Rochester Midland Corporation, and State Chemical Manufacturing Company. Many companies compete within the broader retail market for cleaning chemical products including but not limited to Church & Dwight Co., Inc., Procter and Gamble, Reckitt Benckiser plc, S.C. Johnson & Sons, Inc., Sunshine Makers, Inc., and The Clorox Company. We also compete in the home improvement channel with pest control companies such as Bayer, A.G., Spectrum Brands, Inc., and The Scott’s Company. Furthermore, barriers to entry and expansion in the industry are low, which may lead to additional competitive pressure in the future. We cannot assure you that we will be able to continue to compete successfully against current or future competitors or that change in the source or intensity of competitive pressure in the industry will not result in reduced market share that could negatively impact our results of operations, financial condition, or cash flows.

We may develop unexpected legal contingencies or lose insurance coverage.

We are subject to various claims, including legal claims arising in the normal course of business. We are insured up to specified limits for certain types of claims with a self-insurance retention of $0.5 million per occurrence, including toxic tort and other product liability claims, and are fully self-insured for certain other types of claims, including environmental, product recall, commercial disputes, patent infringement and errors and omissions. We establish reserves for legal claims when the costs associated with the claims become probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts reserved for such claims. In the event of unexpected future developments, it is possible that the ultimate resolutions of such matters, if unfavorable, could have a material adverse effect on our results of operations, financial position or cash flows. In addition, we cannot assure you that we will be able to maintain current levels of insurance coverage for all matters that are currently insured for costs that we consider reasonable. Our insurance coverage is negotiated on an annual basis, and our insurance policies in the future may have coverage exclusions that would cause our costs for claims to rise.

We are subject to a broad range of environmental, health, and safety laws and regulations in the jurisdictions in which we operate, and we may be exposed to substantial environmental, health, and safety costs and liabilities.

We are subject to a broad range of environmental, health, and safety laws and regulations in the jurisdictions in which we operate. These laws and regulations impose increasingly stringent environmental, health, and safety protection standards and permitting requirements regarding, among other things, air emissions, wastewater storage, treatment, and discharges, the use and handling of hazardous or toxic materials, waste disposal practices, and the remediation of environmental contamination and working conditions for our employees. Some environmental laws, such as Superfund, the Clean Water Act, and comparable laws in U.S. states and other jurisdictions world-wide, impose joint and several liability for the cost of environmental remediation, natural resource damages, third party claims, and other expenses, without regard to the fault or the legality of the original

conduct, on those persons who contributed to the release of a hazardous substance into the environment. These laws may impact the manufacture and distribution of our products and place restrictions on the products we can sell in certain geographical locations.

The costs of complying with these laws and regulations, including participation in assessments and remediation of contaminated sites and installation of pollution control facilities, have been, and in the future could be, significant. In addition, these laws and regulations may also result in substantial environmental liabilities associated with divested assets, third party locations, and past activities. We have established reserves for environmental remediation activities and liabilities where appropriate. However, the cost of addressing environmental matters (including the timing of any charges related thereto) cannot be predicted with certainty, and these reserves may not ultimately be adequate, especially in light of potential changes in environmental conditions, changing interpretations of laws and regulations by regulators and courts, the discovery of previously unknown environmental conditions, the risk of governmental orders to carry out additional compliance on certain sites not initially included in remediation in progress, our potential liability to remediate sites for which provisions have not previously been established and the adoption of more stringent environmental laws. Such future developments could result in increased environmental costs and liabilities and could require significant capital and other ongoing expenditures, any of which could have a material adverse effect on our financial condition or results. Furthermore, the failure to comply with our obligations under the environmental laws and regulations could subject us to administrative, civil, or criminal penalties, obligations to pay damages or other costs, and injunctions or other orders, including orders to cease operations. In addition, the presence of environmental contamination at our properties could adversely affect our ability to sell property, receive full value for a property, or use a property as collateral for a loan.

In June 2007, we reached a final resolution of the investigation by the United States Department of Justice (DOJ) of certain environmental issues at our primary manufacturing facility, located in Atlanta, Georgia. The DOJ’s investigation focused principally on past conduct involving the inaccurate reporting of certain wastewater sampling results to the City of Atlanta and conduct that interfered with the City of Atlanta’s efforts to sample our wastewater pretreatment plant effluent. We entered a guilty plea to one felony count of failure to comply with our wastewater permit, agreed to pay a fine of $3.8 million and to be subject to a three-year probation period incorporating a compliance agreement with the United States Environmental Protection Agency (EPA). A material breach by us of the compliance agreement could lead to a material loss of business, a material disruption of production, and materially higher operating costs.

We are currently a party to federal and state administrative proceedings arising under federal and state laws enacted for the protection of the environment where a state or federal agency or a private party alleges that hazardous substances generated by Zep have been discharged into the environment and a state or federal agency is requiring a cleanup of soil and/or groundwater pursuant to federal or state superfund laws. In each of these proceedings in which Zep has been named as a party that allegedly generated hazardous substances that were transported to a waste site owned and operated by another party, (1) Zep is one of many other identified generators who have reached an agreement on the allocation of costs for cleanup among the various generators and Zep’s potential liability is not material; or (2) Zep has been identified as a potential generator and the sites have been remediated by EPA or by a state for a cost that is not material; or (3) other generators have cleaned up the site and have not pursued a claim against Zep and Zep’s liability, if any, would not be material.

With respect to the only active site involving property which we own and where we have been named as a potentially responsible party—our property on Seaboard Industrial Boulevard in Atlanta, Georgia—we and the current and former owners of adjoining properties had reached agreement to share the expected costs and responsibilities of implementing an approved corrective action plan under the Georgia Hazardous Response Act (HSRA) to periodically monitor property along a nearby stream for a period of five years ending in 2009. Subsequently, samples were taken from certain sumps at the Seaboard facility in connection with the DOJ investigation, and sample results from some of the sump tests indicated the presence of certain hazardous substances. As a result, we notified the Georgia Environmental Protection Division and are conducting additional soil and groundwater studies pursuant to HSRA.

We use hazardous materials and chemicals in our manufacturing processes which could result in claims against us.

We use a variety of hazardous materials and chemicals in our manufacturing processes and in connection with maintenance work on our manufacturing facilities. Because of the nature of these substances or related residues, we may be liable for certain costs, including, among others, costs for health-related claims or removal or re-treatment of such substances. In addition, although we have developed environmental, health, and safety programs for our employees, including measures to reduce employee exposure to hazardous substances, and conduct regular assessments at our facilities, we may be involved in claims and litigation filed on behalf of persons alleging injury as a result of occupational exposure to substances or other hazards at our current or former facilities. Due to the unpredictable nature of personal injury litigation, it is not possible to predict the ultimate outcome of any such claims or lawsuits that may arise. If any such claims and lawsuits, individually or in the aggregate, were resolved against us, our results of operations and cash flows could be adversely affected.

If our products are improperly manufactured, packaged, or labeled or become adulterated, we may need to recall those items and may experience product liability claims if consumers are injured.

We may need to recall some of our products if they are improperly manufactured, packaged, or labeled or if they become adulterated. Our quality control procedures relating to the raw materials, including packaging, that we receive from third-party suppliers as well as our quality control procedures relating to our products after our products are formulated and packaged may not be sufficient. We have previously initiated a product recall as a result of potentially faulty packaging of our products, and widespread product recalls could result in significant losses due to the costs of a recall, the destruction of product inventory, and lost sales due to the unavailability of product for a period of time. We may also be liable if the use of any of our products causes injury, and could suffer losses from a significant product liability judgment against us. A significant product recall or product liability case could also result in adverse publicity, damage to our reputation, and a loss of consumer confidence in our products, which could have a material adverse effect on our business and financial results.

We rely on a variety of third party service providers for transportation of our products between our facilities and from our facilities to our customers.

We rely upon third party carriers for safe and timely delivery of our shipments. As a result, we are subject to carrier disruptions and increased costs due to factors that are beyond our control, including labor difficulties, inclement weather, terrorist activity, and increased fuel costs. Furthermore, mishandling of our products by the third party carriers could subject us to product liability claims or other costs and liabilities.

Disruptions at our most significant facilities could affect our profitability and harm our relationship with significant customers.

Over the past three years, more than 50% of our manufactured products were produced at our Atlanta, Georgia (Seaboard) facility. In addition, our Emerson, Georgia facility packages the majority of our products sold to retail end-markets. We also maintain a national distribution center in Atlanta, Georgia and a centralized customer service call center in Marietta, Georgia. A material disruption of the operations of any of these facilities due to a natural disaster, work stoppages, power outages, or any other cause could have an adverse effect on our ability to maintain desired levels of profitability and volume and could affect our relationship with our most significant customers.

We may be unable to sustain significant customer relationships.

Relationships forged with customers, including The Home Depot, which represented approximately 11% of our total net sales in the fiscal year ended August 31, 2007, and 12% of our total net sales in each of the fiscal years ended August 31, 2006 and August 31, 2005, are directly impacted by our ability to deliver high quality products and service. We do not have a written contract obligating The Home Depot to purchase our products. The loss of or substantial decrease in the volume of purchases by The Home Depot would harm our sales and profitability.

We may not be able to attract and retain sufficiently qualified sales representatives and other personnel.

Our success is dependent upon the continued service of our highly skilled workforce and our ability to attract and retain new personnel. The challenge to attract top talent is a formidable one given the competition for such talent within our markets. In particular, we have historically experienced substantial turnover in sales representatives who have less than two years experience. This turnover in our sales force on a monthly basis increases our hiring and training expenses and can interrupt continuity with some of our customers. In addition, one of our strategies is to expand our sales efforts into alternative sales channels, including wholesale distribution. Widespread sales of our products through wholesale distribution could reduce the sales of our products by sales representatives in certain regions, which could lead to the loss of sales representatives and/or disputes over the terms of sales and commission agreements. Significant employee turnover and failure to maintain a qualified workforce could have a material adverse effect on our results of operations.

If we are unable to protect our information and telecommunication systems against disruptions or failures, our operations could be disrupted.

We are increasingly dependent on information technology networks and systems, including the Internet, to process, transmit and store electronic information. In particular, we depend on our information technology infrastructure for fulfilling and invoicing customer orders, applying cash receipts, determining reorder points and placing purchase orders on our suppliers, making cash disbursements, blending chemicals, and conducting digital marketing activities, data processing, and electronic communications among our locations and between company personnel and our customers and suppliers. We also depend on our telecommunication systems for communications between company personnel and our customers and suppliers. We have experienced system disruptions in the past that have adversely affected our ability to effectively manage our operations and service our customers. Future system disruptions, security breaches, or shutdowns could significantly disrupt our operations or may result in financial damage or loss because of lost or misappropriated information.

We may not properly execute, or realize anticipated cost savings or benefits from, our ongoing customer service, supply chain, information technology, or other initiatives.

Our success is partly dependent upon properly executing, and realizing cost savings or other benefits from, our ongoing customer supply chain, information technology, and other initiatives. These initiatives are primarily designed to make us more efficient in the sales, manufacture, and distribution of our products. These initiatives are often complex, and a failure to implement them properly may, in addition to not meeting projected cost savings or benefits, result in an interruption to our sales, manufacturing, logistics, customer service, or accounting functions. Furthermore, we have invested a significant amount of capital into a number of these initiatives, which might have been more efficiently used if the full cost savings or benefits are not realized. Any of these results could have a material adverse effect on our business and financial results including the requirement to reduce the book value of some assets.

We may pursue future growth through strategic acquisitions from which we may not receive the benefits that we anticipate.

We may endeavor to expand and improve our business through strategic acquisitions. We will gain from such activity only to the extent that we can effectively leverage the assets, including personnel, and operating processes of the acquired businesses. Uncertainty is inherent within the acquisition process, and unforeseen

circumstances arising from future acquisitions could offset our anticipated benefits. Any of these factors could adversely affect our results of operations, including our ability to generate positive operating cash flows.

We are subject to risks related to our operations outside the United States.

We have operations outside the United States. Net sales outside the United States represented approximately 19% of our total net sales for the fiscal year ended August 31, 2007. Furthermore, as of August 31, 2007, approximately 11% of our products were manufactured outside the United States. In addition to the risks that are common to both our U.S. and non-U.S. operations, we face risks related to our foreign operations such as:

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foreign currency fluctuations;

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unstable political, economic, financial, and market conditions;

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trade restrictions;

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increases in tariffs and taxes;

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high levels of inflation;

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restrictions on repatriating foreign profits back to the United States;

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greater difficulty collecting accounts receivable and longer payment cycles;

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higher social and legal costs;

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reliance on local management;

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interpretation of foreign laws and regulations; and

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changes in labor conditions and difficulties in staffing and managing international operations.

Some of these risks have affected our business in the past and may have a material adverse effect on our business, financial condition, results of operations, and cash flows in the future.

Our results depend upon the continued vitality of the markets we serve.

Economic downturns, and in particular downturns that affect the transportation, food processing and service, manufacturing, government and housekeeping markets, can adversely impact our end-users. During such downturns, these end-users typically reduce their volume of purchases of cleaning products, which would likely, in turn, have an adverse impact on our results of operations, financial condition, or cash flows.

If we fail to manage our growth effectively, our operating results could be adversely affected.

In the future we may expand our operations by developing new or complementary products and continuing to expand our sales and marketing and customer service organizations. We currently do not have specific plans for any expansion that would require significant capital investment. However, we also intend to explore alternative channels of distribution for our products, which could conflict with our current methods of distribution and our commission-based compensation structure for our sales representatives. These changes may harm our relationship with our sales force and lead to increased turnover of our sales representatives. If we are unable to effectively implement these plans and to otherwise manage our expanding operations, we may not be able to execute our business strategy and our operating results could significantly decrease.

If we are unable to keep and protect our intellectual property rights, our ability to compete may be negatively impacted.

The market for our products depends to a significant extent upon the goodwill associated with our brand names. We own, or have licenses to use, all of the material trademark and trade name rights used by us in connection with the packaging, marketing, and distribution of our major products both in the United States and in other countries where our products are principally sold. In addition, we possess trade secret product formulations and other product information, some of which are patented, which are competitively sensitive. Intellectual property protection is important to our business. Although most of our trademarks are registered in the United States and in the foreign countries in which we operate, we may not be successful in asserting trademark or trade

name protection. In addition, the laws of some foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. The costs required to protect our intellectual property rights may be substantial.

We cannot be certain that we will be able to assert our intellectual property rights successfully in the future or that they will not be invalidated, circumvented, or challenged. Other parties may infringe on our intellectual property rights and may thereby dilute the value of our brand names in the marketplace. Any infringement of our intellectual property rights would also likely result in a diversion of our time and resources to protect these rights through litigation or otherwise. Finally, others may claim that our business or products infringe on their intellectual property rights. Any failure by us to protect our trademarks and trade names, or any adverse judgment with respect to infringement of others’ intellectual property rights, may have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our business could suffer in the event of a work stoppage or increased organized labor activity.

As of August 31, 2007, approximately 220 of our 2,830 employees were members of nine unions in the United States and Europe. While we consider our relations with employees to be generally good, we cannot assure you that we will not experience work stoppages, strikes, or slowdowns in the future. A prolonged work stoppage, strike, or slowdown could have a material adverse effect on our results of operations. In addition, we cannot assure you that, upon expiration of any of our existing collective bargaining agreements, new agreements will be reached without union action or that any new agreement will be on terms satisfactory to us. Moreover, we cannot assure you that our non-union facilities will not become subject to labor union organizing efforts. If any current non-union facilities were to unionize, we would incur increased risk of work stoppages and possibly higher labor costs.

As part of the spin-off from Acuity Brands, we incurred indebtedness, which subjects us to various restrictions that could limit our operating flexibility.

In connection with the spin-off, we entered into a $100.0 million revolving credit facility that will mature in 2012 as well as a $40.0 million receivables securitization facility. Upon the consummation of the spin-off we borrowed $62.5 million under these new facilities, all of which was distributed to Acuity Brands in connection with the spin-off. In addition, we are responsible for $7.2 million in industrial revenue bonds due in 2018 and $0.3 million in additional debt. These financing arrangements contain customary restrictions, covenants, and events of default. The terms of these financing arrangements impose and any future indebtedness may impose various restrictions and covenants on us that could limit our ability to respond to market conditions, provide for capital investment needs or take advantage of business opportunities.

Local, state, and federal governments are placing increasingly stringent regulations on the security of chemical plant locations, the transportation of hazardous chemicals, and the environmental impact of chemical production.

Growing public and political attention has been placed on protecting critical infrastructure, including the chemical industry, from security threats. Terrorist attacks and natural disasters have increased concern regarding the security of chemical production and distribution. In addition, local, state, and federal governments have enacted, and may in the future enact, increasingly stringent regulations that impact the security of chemical plant locations, the transportation of hazardous chemicals, and the environmental impact of chemical production, which could result in higher operating costs and interruptions in normal business operations.

The market price for our common stock may be volatile, and you may not be able to sell our stock at a favorable price.

Our common stock is traded on the New York Stock Exchange. The market price of our common stock may fluctuate significantly in the future for many reasons, including for reasons unrelated to our performance, such as reports by industry analysts, investor perceptions, or negative announcements by our customers, competitors, or

suppliers regarding their own performance, as well as general economic and industry conditions. Additional factors that could cause the market price of our common stock to rise and fall include but are not limited to the following:

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variations in our quarterly results;

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announcements of technological innovations by us or by our competitors;

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introductions of new products or services or new pricing policies by us or by our competitors;

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acquisitions or strategic alliances by us or by our competitors;

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recruitment or departure of key personnel or key groups of personnel;

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the gain or loss of significant orders;

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the gain or loss of significant customers;

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significant changes in regulatory requirements;

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increased litigation resulting from product or employee claims;

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adverse developments concerning environmental matters;

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changes in the estimates of our operating performance or changes in recommendations by any securities analysts that elect to follow our stock; and

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market conditions in our industry, the industries of our customers, and the economy as a whole.

The requirements of complying with the Exchange Act and the Sarbanes-Oxley Act as a stand-alone company may strain our resources, and our internal control over financial reporting may not be sufficient to ensure timely and reliable external financial reports.

As part of Acuity Brands we were subject to the Sarbanes-Oxley Act of 2002 and the Securities Exchange Act of 1934, but relied significantly upon personnel of Acuity Brands to interpret and apply those laws as they apply to us. We are now directly subject to the reporting requirements of the Securities Exchange Act of 1934 in addition to the Sarbanes-Oxley Act of 2002. Beginning with our fiscal year ending August 31, 2008, we expect that we will be required to comply with Section 404 of the Sarbanes-Oxley Act relating to internal control over financial reporting. Although we have been subject to Section 404 of the Sarbanes-Oxley Act and certain disclosure requirements under the Exchange Act as a part of Acuity Brands, the materiality judgments associated with compliance with these requirements may be different for us as a smaller stand-alone entity. In addition, under the Exchange Act, we are required to file annual, quarterly, and current reports with respect to our business and financial condition. The ongoing compliance with public company reporting requirements and compliance with applicable provisions of the Sarbanes-Oxley Act is likely to require additional resources following our spin-off from Acuity Brands and may place a strain on our systems and resources, including our information systems. Furthermore, we cannot assure you that we will be able to implement any required changes to correct any possible material weaknesses in internal control over financial reporting and sufficiently document and test the revised internal control procedures in order to make a positive conclusion as to the effectiveness of internal control over financial reporting by August 31, 2008.

Risks Related to our Spin-off from Acuity Brands

We have a limited operating history as an independent public company and may be unable to operate as profitably a stand-alone company as we operated as a segment of Acuity Brands.

We have a limited operating history as an independent public company. Historically, because the businesses that comprise each of Acuity Brands and us were under one ultimate parent, they were able to rely, to some degree, on the earnings, assets, and cash flow of each other for capital requirements. After the spin-off, we are able to rely only on the specialty products business for such requirements. While the specialty products business was a profitable segment of Acuity Brands, we cannot assure you that, as an independent company, profits will

continue at the same level. Additionally, we previously relied on Acuity Brands for various financial, administrative, and managerial expertise in conducting our operations. Following the spin-off, we maintain our own credit and banking relationships and perform our own financial and investor relations functions. While certain key former employees of Acuity Brands are now employed by us, we cannot assure you that we will be able to successfully put in place the financial, administrative, and managerial structure necessary to operate as an independent public company, or that the development of such structure will not require a significant amount of management’s time and other resources.

Historical financial information may be of limited relevance.

The historical financial information included in this Annual Report on Form 10-K does not reflect our results of operations, financial position, and cash flows in the future and only estimates our results of operations, financial position, and cash flows had we operated as a separate stand-alone public entity during the periods presented. The financial information included herein does not reflect any changes that may have occurred or may occur in our funding and operations as a result of the spin-off.

Failure of the spin-off to qualify as a tax-free transaction could result in substantial liability.

Acuity Brands has received a private letter ruling from the Internal Revenue Service to the effect that, among other things, the spin-off (including certain related transactions) qualifies as tax-free to Acuity Brands, us, and Acuity Brands stockholders for United States federal income tax purposes under Section 355 and related provisions of the Internal Revenue Code. Although a private letter ruling generally is binding on the Internal Revenue Service, if the factual assumptions or representations made in the private letter ruling request are untrue or incomplete in any material respect, then Acuity Brands will not be able to rely on the ruling. Moreover, the Internal Revenue Service will not rule on whether a distribution of shares satisfies certain requirements necessary to obtain tax-free treatment under Section 355 of the Internal Revenue Code. Rather, the private letter ruling is based upon representations by Acuity Brands that those requirements have been satisfied, and any inaccuracy in those representations could invalidate the ruling.

Acuity Brands and Zep Inc. have received an opinion of King & Spalding LLP, counsel to Acuity Brands and us, to the effect that, with respect to the requirements referred to above on which the Internal Revenue Service will not rule, those requirements will be satisfied. The opinion is based on, among other things, certain assumptions and representations as to factual matters made by Acuity Brands and us which, if untrue or incomplete in any material respect, could jeopardize the conclusions reached by counsel in its opinion. The opinion is not binding on the Internal Revenue Service or the courts, and the Internal Revenue Service or the courts may not agree with the opinion.

Even if the spin-off otherwise qualifies as tax-free, Acuity Brands nevertheless could incur a substantial corporate tax liability under Section 355(e) of the Internal Revenue Code, if 50 percent or more of our stock or the stock of Acuity Brands were to be acquired as part of a “plan (or a series of related transactions)” that includes the distribution. For this purpose, any acquisitions of the stock of Acuity Brands or of our stock that occur within two years before or after the spin-off are presumed to be part of such a plan, although Acuity Brands may be able to rebut that presumption. If such an acquisition of the stock of Acuity Brands or of our stock triggers the application of Section 355(e), Acuity Brands would recognize taxable gain as described above, but the spin-off would generally remain tax-free to the Acuity Brands stockholders. If acquisitions of our stock

trigger the application of Section 355(e), we would be obligated to indemnify Acuity Brands for the resulting corporate-level tax liability. This indemnification obligation would have a material adverse effect on our results of operations and financial position.

Certain provisions of our certificate of incorporation, bylaws and rights plan and the tax disaffiliation agreement may discourage takeovers.

Our certificate of incorporation and bylaws contain certain anti-takeover provisions that may make more difficult or expensive or that may discourage a tender offer, change in control or takeover attempt that is opposed by our board of directors. In particular, our certificate of incorporation and bylaws:

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classify our board of directors into three groups, so that stockholders elect only one-third of the board each year;

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permit stockholders to remove directors only for cause and only by the affirmative vote of at least 80% of our voting shares;

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permit a special stockholders’ meeting to be called only by a majority of the board of directors;

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do not permit stockholders to take action except at an annual or special meeting of stockholders;

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require stockholders to give us advance notice to nominate candidates for election to our board of directors or to make stockholder proposals at a stockholders’ meeting;

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permit our board of directors to issue, without stockholder approval, preferred stock with such terms as the board may determine;

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require the vote of the holders of at least 80% of our voting shares for stockholder amendments to our bylaws; and

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require, for the approval of a business combination with stockholders owning 5% or more of our voting shares, the vote of at least 50% of our voting shares not owned by such stockholder, unless certain “fair price” requirements are met or the business combination is approved by our continuing directors.

The preferred stock purchase rights attached to our shares of common stock, in effect, prevent a person or group from acquiring more than 15% of the total number of our common stock outstanding at any time after the spin-off without approval from our board of directors. In addition, Delaware law generally restricts mergers and other business combinations between us and any holder of 15% or more of our common stock, unless the transaction or the 15% acquisition is approved in advance by our board of directors.

These provisions of our certificate of incorporation and bylaws, Delaware law, and the preferred stock purchase rights could discourage potential acquisition proposals and could delay or prevent a change in control of our company, even though a majority of our stockholders may consider such proposals, if effected, desirable. Such provisions could also make it more difficult for third parties to remove and replace the members of our board of directors. Moreover, these provisions could diminish the opportunities for stockholders to participate in certain tender offers, including tender offers at prices above the then-current market value of our common stock, and may also inhibit increases in the trading price of our common stock that could result from takeover attempts or speculation.

If the spin-off is considered part of a “plan (or series of related transactions)” pursuant to which 50% or more of our stock is acquired, the spin-off will be taxable to Acuity Brands (but not to its stockholders) under Section 355(e) of the Internal Revenue Code. For this purpose, any acquisitions of our stock that occur within two years after the spin-off (subject to certain exceptions including an exception for public trading) will be presumed to be part of such a plan, although Acuity Brands may be able to rebut that presumption. Under the tax disaffiliation agreement, we have agreed to indemnify Acuity Brands for any tax liability to Acuity Brands under Section 355(e) of the Code that results from acquisitions of our stock. This provision of the tax disaffiliation agreement may have the effect of discouraging or preventing an acquisition of our company or a disposition of our business.

Item 2. Properties


Use	Location	Owned	Leased	Total	Square Ft.	Manufactured Materials
Manufacturing; Warehouse; Sales; Administrative Offices	Atlanta, GA	1	—	1	435,800	Liquids; aerosols; solvents
	Other U.S. Locations	2	—	2	344,250	Liquids; powders
	Other International Locations	1	2	3	140,800	Liquids; powders

National Distribution Center	Atlanta, GA	—	1	1	408,600	N/A

Warehouse; Sales;	Other U.S. Locations	3	22	25	643,011	N/A
Administrative Offices	Other International Locations	—	16	16	232,869	N/A

Sales & Administrative Offices	Other U.S. Locations	—	7	7	51,479	N/A
	Other International Locations	—	1	1	2,500	N/A

	Total	7	49	56

We manufacture products at six facilities located in the United States, Canada, the Netherlands, and Italy. Our sales organization covers the United States, Canada, Italy, Belgium, Luxemburg, the Netherlands, and certain other smaller markets.

Item 3. Legal Proceedings

Legal Proceedings

We are subject to various legal claims arising in the normal course of business. We are self-insured up to specified limits for certain types of claims, including product liability, and are fully self-insured for certain other types of claims, including environmental, product recall, and patent infringement as part of the distribution agreement with Acuity Brands. Based on information currently available, it is the opinion of management that the ultimate resolution of pending and threatened legal proceedings will not have a material adverse effect on our results of operations, financial position, or cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of such matters, if unfavorable, could have a material adverse effect our results of operations, financial position, or cash flows in future periods. We establish reserves for legal claims when the costs associated with the claims become probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts reserved for such claims. However, we cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the amounts reserved.

Environmental Regulation

Our operations are subject to federal, state, local, and foreign laws and regulations relating to the generation, storage, handling, transportation, and disposal of hazardous substances and solid and hazardous wastes, and to the remediation of contaminated sites. Permits and environmental controls are required for certain of our operations to limit air and water pollution, and these permits are subject to modification, renewal, and revocation by issuing authorities. We will incur capital and operating costs relating to environmental compliance on an ongoing basis. Environmental laws and regulations have generally become stricter in recent years, and the cost of responding to future changes may be substantial. While we believe that we are currently in substantial compliance with all material environmental laws and regulations, there can be no assurance that we will not incur significant costs to remediate violations of such laws and regulations, particularly in connection with acquisitions of existing operating facilities, or to comply with changes in, or stricter or different interpretations of, existing laws and regulations. Such costs could have a material adverse effect on our results of operations.

wastewater pretreatment plant effluent. We entered a guilty plea to one felony count of failure to comply with our wastewater permit, agreed to pay a fine of $3.8 million and to be subject to a three-year probation period incorporating a compliance agreement with the United States Environmental Protection Agency (EPA). Under the compliance agreement, we will be required to maintain an enhanced compliance program. We recorded an additional $1.8 million charge in the second quarter of fiscal 2007 to reflect the entire $3.8 million fine. The resolution of this matter is not expected to lead to a material loss of business, any disruption of production, or materially higher operating costs. However, in the event of our material breach of the compliance agreement, those consequences could occur.

With respect to the only active site involving property which we own and where we have been named as a previously responsible party—our property on Seaboard Industrial Boulevard in Atlanta, Georgia—we and the current and former owners of adjoining properties had reached agreement to share the expected costs and responsibilities of implementing an approved corrective action plan under the Georgia Hazardous Response Act (HSRA) to periodically monitor property along a nearby stream for a period of five years ending in 2009. Subsequently, in connection with the DOJ investigation, we and the EPA each analyzed samples taken from certain sumps at the Seaboard facility. The sample results from some of the sump tests indicated the presence of certain hazardous substances. As a result, we notified the Georgia Environmental Protection Division and are conducting additional soil and groundwater studies pursuant to HSRA.

Based on the results to date of the above-mentioned studies, we plan to conduct voluntary subsurface remediation of the site. Our current estimate is that over approximately the next five years we will expend between $1.0 million and $7.5 million for the voluntary subsurface remediation, primarily to remove contaminants from soil underlying one of our manufacturing buildings, and in May 2007 we accrued a pre-tax liability of $5.0 million representing our best estimate of costs associated with remediation and other related environmental issues. Further sampling and engineering studies could cause us to revise the current estimate. We believe that additional expenditures after five years of remediation may be necessary and that those expenditures could range up to an additional $10.0 million during the subsequent twenty-five year period. It may be appropriate to capitalize certain of the expenditures that might be incurred in this twenty-five year period. We arrived at the current estimates on the basis of preliminary studies prepared by two, independent third party environmental consulting firms. The actual cost of remediation will vary depending upon the results of additional testing and geological studies, the success of initial remediation efforts in the first five years addressing the most significant areas of contamination, the rate at which site conditions may change, and the requirements of the Georgia Environmental Protection Division of the State of Georgia.

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

No matters were submitted for a vote of the security holders during the three months ended August 31, 2007.

PART II

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

Our common stock began trading “regular way” on the New York Stock Exchange under the symbol “ZEP” on November 1, 2007. There were 4,244 stockholders of record as of November 23, 2007. This figure does not include an estimate of the indeterminate number of beneficial holders whose shares may be held of record by brokerage firms and clearing agencies.

Our common stock was not publicly traded and we did not pay any dividends during the period covered by this Annual Report on Form 10-K. Accordingly, otherwise required disclosure pertaining to stock performance, sales of unregistered securities, and issuance and or purchase of equity securities is not applicable to this filing.

We expect to pay a regular quarterly dividend at an initial annual rate of $0.16 per share. Our ability to fund a regular quarterly dividend is impacted by our financial results and the availability of surplus funds. Delaware law prohibits the payment of dividends or otherwise distributing funds to our stockholders absent a legally available surplus. Our ability to generate positive cash flows from operating activities directly affects our ability to make dividend payments. Also, restrictions under the instruments governing our indebtedness could impair our ability to make such payments.

All decisions regarding the declaration and payment of dividends, including with respect to our initial dividend, are at the discretion of our board of directors and are evaluated periodically in consideration of our financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors our board of directors deems relevant. We do not currently have plans to change our annual dividend rate.

Item 6. Selected Financial Data

The following table sets forth our selected combined financial data, which have been derived from our combined financial statements for each of the five years in the period ended August 31, 2007. Zep Inc. was a wholly owned subsidiary of Acuity Brands, Inc. during all periods presented in the below listed tabular disclosure. The information set forth below should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Combined Financial Statements and the notes related to those combined financial statements included elsewhere in this report. Operating expenses in the historical income statements reflect direct expenses of our business together with allocations of certain Acuity Brands corporate expenses that have been charged to us based on usage or other methodologies appropriate for such expenses. In our opinion, these assumptions and allocations have been made on a reasonable and appropriate basis under the circumstances. Actual per share data has not been presented since our business was a wholly owned subsidiary of Acuity Brands during the periods presented. Our combined financial information may not be indicative of our future performance and does not necessarily reflect what our financial condition and results of operations would have been had we operated as a separate, stand-alone entity during the periods presented, particularly since many changes will occur in our operations and capitalization as a result of our spin-off from Acuity Brands.


	Years Ended August 31,
	2007		2006		2005		2004		2003
	(In thousands, except per share amounts)
Summary of Operations Data:
Net sales	$	565,886	$	552,084	$	534,952	$	523,669	$	510,557
Net Income		14,083		21,275		23,060		20,320		16,328
Pro forma earnings per share
Basic (1)	$	0.66	$	0.97
Diluted (1)	$	0.64	$	0.93
Pro forma weighted average shares outstanding
Basic (1)		21,293		21,942
Diluted (1)		21,949		22,790

Balance Sheet Data (at period end):
Cash and cash equivalents	$	9,142	$	8,128	$	11,794	$	3,065	$	4,139
Total assets		249,473		248,373		249,516		232,439		226,371
Total debt		75,000		75,000		75,000		75,000		75,000
Parent’s equity		74,834		81,048		80,398		69,638		69,357

(1)

The calculation of pro forma basic earnings per share and shares outstanding is based on the number of shares of Acuity Brands common stock outstanding for the years ended August 31, 2007 and 2006, adjusted for a distribution ratio of one share of our common stock for every two shares of Acuity Brands common stock. The calculation of pro forma diluted earnings per share and shares outstanding is based on the number of shares of Acuity Brands common stock outstanding for the years ended August 31, 2007 and 2006, and diluted shares of common stock outstanding for those periods adjusted for that same distribution ratio. This calculation may not be indicative of the dilutive effect that resulted from the actual replacement of Acuity Brands stock-based awards held by Zep’s employees and employees of Acuity Brands or the grant of new stock-based awards.

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

The following discussion should be read in conjunction with the Item 6: Selected Financial Data, the Item 8: Combined Financial Statements and Supplementary Data, including the notes thereto, and the other financial information included elsewhere in this Annual Report on Form 10-K. Please see “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

Company

We are a leading producer, marketer, and service provider of a wide range of cleaning and maintenance solutions for commercial, industrial, institutional, and consumer end-markets. Our product portfolio includes anti-bacterial and industrial hand care products, cleaners, degreasers, deodorizers, disinfectants, floor finishes, sanitizers, and pest and weed control products. We continually expand our product portfolio and service offerings through the introduction of new products and formulations as well as new services to meet the demands of the industry and our customers. We market these products and services under well recognized and established brand names, such as Zep^®, Zep Commercial^®, Enforcer^®, and Selig^™, some of which have been in existence for more than 70 years. We reach our customers through an experienced, international organization composed of approximately 1,600 sales representatives, supported by highly skilled research and development and technical services teams, who collectively provide creative solutions for our customers’ diverse cleaning and maintenance needs by utilizing their extensive product expertise and providing customized value added services that we believe distinguish us among our competitors.

The Separation of Zep Inc. from Acuity Brands, Inc.

On July 23, 2007, Acuity Brands, Inc. (“Acuity Brands”) announced its intention to separate its lighting and specialty products businesses by spinning off the specialty products business of Acuity Specialty Products Group, Inc. into an independent, publicly traded company named Zep Inc. to Acuity Brands stockholders (the “spin-off”). The Board of Directors of Acuity Brands approved the completion of the spin-off on September 28, 2007, subject to the setting of the record date and the distribution date by the Executive Committee of the Acuity Brands Board of Directors. The Executive Committee established the record date and distribution date for the spin-off on October 6, 2007.

Prior to the spin-off, Acuity Brands engaged in an internal restructuring, including a holding company reorganization. As part of the internal restructuring, the business that had previously been conducted by Acuity Specialty Products Group, Inc. was merged into the parent company and was subsequently transferred to Acuity Specialty Products, Inc. (“ASP”). ASP is now a wholly-owned subsidiary of Zep Inc.

Acuity Brands distributed to its stockholders, on a pro rata basis, all of the shares of Zep Inc. (“Zep”) common stock by means of a stock dividend on October 31, 2007 (the “Distribution”). The stock dividend of one share of Zep common stock for every two shares of Acuity Brands common stock was paid pro rata to holders of record of Acuity Brands common stock at the close of business on October 17, 2007, which is the record date for the Distribution. No fractional shares of Zep common stock were distributed. Instead of fractional shares, Zep stockholders received cash. Following the Distribution, Acuity Brands does not own any shares of Zep as the spin-off rendered Zep an independent public company. In conjunction with the separation of their businesses, Zep Inc. and Acuity Brands entered into various agreements that address the allocation of assets and liabilities between them and that define their relationship after the separation, including the Agreement of Plan of Distribution, which we refer to as the distribution agreement, the tax disaffiliation agreement, the employee benefits agreement, and the transition services agreement. The spin-off is intended to be tax-free to affected shareholders, and Acuity Brands has received a favorable ruling from the Internal Revenue Service supporting

the spin-off’s tax-free status. Acuity Brands and Zep Inc. have also received an opinion from their external counsel supporting the spin-off’s tax-free status. The stock of Zep Inc. is listed on the New York Stock Exchange under the ticker symbol “ZEP”.

Basis of Presentation

The Combined Financial Statements have been prepared on the historical cost basis in accordance with U.S. generally accepted accounting principles and present our financial position, results of operations, and cash flows as derived from the historical financial statements of Acuity Brands as adjusted for certain corporate allocations.

Certain of Acuity Brands’ corporate assets, liabilities, and expenses have been allocated to us based on an estimate of the proportion of corporate amounts allocable to us and utilizing such factors as revenues, number of employees, and other relevant factors. Management believes that amounts allocated to us reflect a reasonable representation of the costs that would have been incurred if we had performed these functions as a stand-alone company. However, these combined financial statements do not include all of the actual expenses that would have been incurred had we been a stand-alone entity during the periods presented and do not reflect our combined results of operations, financial position, and cash flows had we actually been a stand-alone company during the periods presented. The combined financial statements reflect an allocation of debt and related interest expense, as further described in Note 4 to the Notes to Combined Financial Statements.

Liquidity and Capital Resources

Our principal sources of liquidity are operating cash flows generated primarily from operating activities and various sources of borrowings. Our ability to generate sufficient cash flow from operations and to access certain capital markets, including banks, is necessary for us to fund our operations, to pay dividends, to meet obligations as they become due, and to maintain compliance with covenants contained within our financing agreements. Our ongoing liquidity will depend on a number of factors, including available cash resources, cash flow from operations, compliance with covenants contained in certain of our financing agreements, and the ability to access capital markets. Based on our current cash on hand, current financing arrangements, and current projections of cash flow from operations, management believes that we will be able to meet our liquidity needs over the next twelve months.

Total borrowings, as presented in our historical combined financial statements, are representative of the debt that we expected to incur as a result of our separation from Acuity Brands. Historically, Acuity Brands centrally managed the majority of the financing activities for Acuity Brands’ consolidated group (including us) in order to optimize its costs of funding and financial flexibility at a corporate level. However, the debt carried in our historical combined financial statements has been adjusted to reflect our initial debt level on or about the distribution date.

On October 19, 2007, we executed two debt facilities that were utilized to finance the $62.5 million dividend payment to Acuity Brands remitted by us on October 31, 2007. Further detail regarding these debt instruments is provided in the Capitalization section below as well as in Note 4 of the Notes to Combined Financial Statements.

In conjunction with the separation of their businesses, Zep Inc. and Acuity Brands entered into various agreements that address the allocation of assets and liabilities between them and that define their relationship after the separation, including the distribution agreement, the tax disaffiliation agreement, the employee benefits agreement, and the transition services agreement. Pursuant to the distribution agreement, we remitted to Acuity Brands approximately all of our domestic available cash on hand via ordinary course intracompany transfers until the distribution date. Therefore, approximately $5 million of the total $70.0 million of debt refinanced in connection with the spin-off will be utilized to service near term working capital needs. Additionally, the distribution agreement stipulated that we, after the spin-off, would true-up the cash settlement between Acuity

Brands and us based on the combined result of our better than expected cash flow during fiscal year 2007, plus or minus the actual cash flow during the period from September 1, 2007 until the distribution date (less any cash held by us on the distribution date). The cash settlement stipulated in the distribution agreement has not been finalized as of November 29, 2007. Adherence to the remaining terms outlined in the aforementioned agreements is not expected to materially impact our operating results or financial position.

Cash Flow

We use available cash and cash flow provided by operating activities primarily to fund operations and capital expenditures. Historically, after these obligations were met, any excess domestic as well as periodic repatriation of certain foreign cash balances have been remitted to Acuity Brands.

Net cash flow provided by operating activities for the years ended August 31, 2007 and 2006 was $30.9 million and $28.5 million, respectively. Cash flow provided by operating activities during the year ended August 31, 2007 was favorably impacted by the $14.1 million of net income generated during the fiscal year. The majority of the share-based compensation expense generated through the administration of our share-based award programs does not affect Zep’s overall cash position. Accordingly, net cash provided by operating activities has been adjusted for approximately $2.3 million of share-based expense, which is reflected as “Other non-cash charges” within our Combined Statement of Cash Flows and Combined Statements of Parent’s Equity and Comprehensive Income. Net cash flow provided by operating activities during fiscal 2007 was minimally impacted by fluctuations in operating working capital as such changes were largely offsetting during that period. Operating working capital is calculated by adding accounts receivable, net, plus inventories, and subtracting accounts payable. Accounts receivables, net increased $3.2 million or 3.5% in fiscal 2007 compared with the prior fiscal year. This increase was primarily driven by the 2.5% increase in net sales attained in that period. Zep successfully implemented certain inventory and accounts payable management initiatives during fiscal 2007. The successful implementation of these programs contributed $2.8 million to Zep’s total cash provided by operating activities. Zep recorded a $5.0 million charge in the third quarter of fiscal 2007 in connection with certain environmental matters. We also increased our property and casualty insurance reserves by $3.7 million during fiscal 2007. While these increases in our accrued liabilities were cash flow neutral, we paid $3.8 million in fines during the second quarter of fiscal 2007 in connection with an environmental legal settlement reached that quarter. Of the $3.8 million fine, $2.0 million was reserved prior to fiscal 2007. Environmental matters affecting Zep are discussed further in Note 7 of Notes to Combined Financial Statements.

Net cash flow provided by operating activities declined in fiscal 2006 compared with fiscal 2005 by $6.1 million due primarily to an increase in accounts receivable resulting from higher net sales, the payment of liabilities related to the restructuring initiative executed in fiscal 2005, increased tax payments, payment of certain of our long-term liabilities, the timing of payments associated with our self-insurance programs, and a decrease in net income that was in part attributable to higher allocated corporate expenses from the parent company. The increase in allocated corporate expenses was influenced by the cost of incentive-compensation based programs, which increased due to both improved operating performance as well as the adoption of Statement of Financial Accounting Standards No. 123(R), Share-Based Payment. The impact of these activities was partially offset by the increase in accounts payable.

Management believes that investing in assets and programs that will over time increase the overall return on our invested capital is a key factor in driving stockholder value. We invested $5.8 million and $5.5 million in fiscal 2007 and 2006, respectively, primarily for machinery, equipment, and information technology. We continue to invest in these items primarily to improve productivity and product quality, increase manufacturing efficiencies, and enhance customer service capabilities. We expect to invest approximately $10.0 million to $12.0 million in fiscal 2008 for machinery, equipment, and information technology expected to enhance our operations and financial performance in the future.

Contractual Obligations

The following table summarizes our contractual obligations at August 31, 2007:


			Payments Due by Period
	Total		Less than One Year		1 to 3 Years		4 to 5 Years		After 5 Years
Long-Term Debt (1)	$	75,000	$	296	$	649	$	66,905	$	7,150
Interest Obligations (1)		27,990		5,081		10,176		10,178		2,555
Operating Leases (2)		32,179		8,185		10,196		6,711		7,087
Purchase Obligations (3)		10,296		10,296		—		—		—
Other Long-term Liabilities (4)		3,343		232		800		965		1,346

Total	$	148,808	$	24,090	$	21,821	$	84,759	$	18,138

(1)

These long-term debt obligations are included in our Combined Balance Sheets. Borrowings under our revolving credit facility and made in connection with the spin-off have been presented as being due in “4 to 5 Years” because the revolving credit facility will mature in 2012. Amounts pertaining to our industrial revenue bond which matures in 2018 have been reflected as due “After 5 Years.” We have assumed an interest rate of 6.56% for our revolving credit facility for purposes of calculating interest expense for all periods presented above based on market rates available as of August 31, 2007. For the remainder of our outstanding long-term indebtedness, we used rates in effect as of August 31, 2007 in calculating our interest obligations. Financing fees associated with these facilities are expected to approximate $0.4 million on an annual basis. See Note 4 of Notes to Combined Financial Statements for additional information regarding our debt obligations.

(2)	Our operating lease obligations are described in Note 7 of Notes to Combined Financial Statements.

(3)	Purchase obligations include commitments to purchase goods or services that specify all significant terms. This amount is primarily comprised of open purchase orders.

(4)

These amounts are included in our Combined Balance Sheets and largely represent other liabilities on which we are obligated to make future payments pursuant to certain long-term incentive programs addressed within Note 6 of Notes to Combined Financial Statements. These amounts also include liabilities related to various severance agreements originated during the fiscal 2005 restructuring initiative. Estimates of the value and timing of these amounts are based on various assumptions, including interest rates and other variables.

Capitalization

The debt levels reflected within our historical Combined Financial Statements reflect assumptions regarding prospective debt issuances based upon Zep’s anticipated financial condition on or about the time of the spin-off. A primary measure used in assessing this condition is Zep’s EBITDA, which has remained consistent throughout the periods presented in these historical financial statements. Therefore, outstanding debt in the amount of $75.0 million has been presented within Zep’s historical Combined Statements of Financial Position for the years ended August 31, 2007, 2006 and 2005. Zep has reflected the interest expense associated with these borrowings within its historical Combined Statements of Income as though the $75.0 million in total borrowings had been outstanding during all periods presented therein.

Our current capital structure is composed principally of borrowings under debt instruments utilized at the time of the spin-off as well as the equity of our stockholders. We executed a new receivables facility and a new revolving credit facility in anticipation of the spin-off. We drew $62.5 million from that revolving credit facility on October 31, 2007, and the resulting proceeds were immediately distributed to Acuity Brands. Additionally, we are responsible for a $7.2 million industrial revenue bond due in 2018 as well as approximately $0.3 million of other debt following the spin-off. Additional borrowings may be necessary in the event that we become obligated

to remit further payment to Acuity Brands pursuant to the provisions of the distribution agreement summarized above in the Liquidity and Capital Resources section. Further detail regarding our debt instruments is provided below:

Revolving Credit Facility

On October 19, 2007, we entered into a new $100 million five-year unsecured revolving credit facility (“Revolving Credit Facility”) with a syndicate of commercial banks consisting of Bank of America, JPMorgan Chase Bank (“Administrative Agent”), KeyBank, Regions Bank, Wachovia Bank, and Wells Fargo Bank. The material terms of the Revolving Credit Facility are as set forth below. Additionally, on the same date we entered into a Credit and Security Agreement (“Receivables Facility”) that allows us to borrow, on an ongoing basis, up to $40 million secured by undivided interests in a defined pool of our trade accounts receivable. Counterparties to the Receivables Facility include Variable Funding Capital Company LLC, as Lender, and Wachovia Bank as backstop liquidity provider and agent for the Lender. The material terms of the Receivables Facility are as set forth below.

Generally, amounts outstanding under the Revolving Credit Facility bear interest at a “base rate” or a “Eurocurrency Rate”. Base rate advances are denominated in U.S. Dollars, and amounts outstanding bear interest at a fluctuating rate equal to JPMorgan’s base rate. Eurocurrency rate advances can be denominated in a variety of currencies, including U.S. Dollars, and amounts outstanding bear interest at a periodic fixed rate equal to LIBOR for the applicable currency plus an applicable margin. The applicable margins are based on our leverage ratio, as defined in the Revolving Credit Facility, with such margins ranging from 0.50% to 1.00%. Interest on both base rate and Eurocurrency rate advances are payable upon the earlier of maturity of the outstanding loan or quarterly if the loan is for a period greater than three months. The Revolving Credit Facility will mature and all amounts outstanding thereunder will be due and payable on October 19, 2012.

We are required to pay certain fees in connection with the Revolving Credit Facility. For example, we must pay an annual facility fee. This fee is payable quarterly in arrears and is determined by our leverage ratio as defined in the Revolving Credit Facility. This facility fee ranges from 0.125% to 0.250% of the aggregate $100 million commitment of the lenders under the Revolving Credit Facility. Additionally, we are also required to pay certain fees to the Administrative Agent for administrative services.

The Revolving Credit Facility contains customary covenants regarding the preservation and maintenance of our corporate existence, material compliance with laws, payment of taxes, and maintenance of insurance and of our properties. Further, the Revolving Credit Facility contains financial covenants including a leverage ratio (“Maximum Leverage Ratio”) of total indebtedness to EBITDA (earnings before interest, taxes, depreciation and amortization expense), as such terms are defined in the Revolving Credit Facility agreement, and a minimum interest coverage ratio. These ratios are computed at the end of each fiscal quarter for the most recent 12-month period. The Revolving Credit Facility allows for a Maximum Leverage Ratio of 3.25x and a Minimum Interest Coverage Ratio of 2.50x. The Revolving Credit Facility includes customary events of default, including, but not limited to, the failure to pay any interest, principal or fees when due, the failure to perform any covenant or agreement, inaccurate or false representations or warranties, a material adverse change, insolvency or bankruptcy, change of control, the occurrence of certain ERISA events and judgment defaults.

Receivables Facility

The Receivables Facility allows us to borrow, on an ongoing basis, up to $40 million secured by undivided interests in a defined pool of our trade accounts receivable. Interest rates under the Receivables Facility vary with asset-backed commercial paper rates plus an applicable margin of 0.325%. The commitment fees on the Receivables Facility are 0.125% per annum on the average unused balances. The Receivables Facility contains customary reporting and compliance covenants as well as a cross-default provision whereby we would be in default should an occurrence of a default or an event of a default result under any other financing arrangement where we are a debtor or an obligor which relates to debt in excess of $25 million.

Industrial Revenue Bonds

The industrial revenue bonds due 2018 were issued by the City of DeSoto Industrial Development Authority, Inc. in May 1991 in connection with the construction of a Zep Inc. facility located in that city, and the proceeds from the sale of the bonds were loaned to National Service Industries, Inc. (NSI). In 2001, in connection with the spin-off of Acuity Brands from NSI, the loan agreement was assigned to Acuity Brands and Acuity Specialty Products Group Inc., which assumed all of the obligations of NSI with respect to the industrial revenue bonds. In connection with our spin-off from Acuity Brands, Acuity Brands was released from its obligations with respect to the industrial revenue bonds, and we remained as an obligor under the loan agreement. Pursuant to the loan agreement, we are obligated to make principal and interest payments on the bonds. The payment of principal and interest on the bonds is secured by an irrevocable letter of credit issued by Wachovia Bank, National Association. The bonds currently bear interest at a weekly rate. The interest rate was approximately 3.7% and 3.4% at August 31, 2007 and August 31, 2006, respectively.

Letters of Credit

Subsequent to August 31, 2007 and in connection with the spin-off, we have either issued or expect to assume outstanding letters of credit totaling $9.8 million primarily for the purpose of securing collateral requirements under Zep’s casualty insurance programs and for providing credit support for our industrial revenue bonds. At October 31, 2007, a total of $2.3 million of the letters of credit were issued under the Revolving Credit Facility, thereby reducing the total availability under the facility by such amount.

Dividends

All decisions regarding the declaration and payment of dividends, including with respect to our initial dividend, are at the discretion of our Board of Directors and are evaluated periodically in consideration of our financial condition, earnings, growth prospects, funding requirements, applicable law, and any other factors our Board of Directors deems relevant. We do not currently have plans to change our annual dividend rate.

Results of Operations

Fiscal 2007 Compared with Fiscal 2006

The following table sets forth information comparing the components of net income for the year ended August 31, 2007 with the year ended August 31, 2006:


*(Dollars in millions)*	Years Ended August 31,						Percent Change
	2007			2006			Percent Change
Net Sales	$	565.9		$	552.1		2.5	%
Gross Profit		325.9			317.2		2.7	%
Percent of net sales		57.6	%		57.5	%
Operating Profit		29.6			40.0		(26.0	)%
Percent of net sales		5.2	%		7.3	%
Income before Provision for Taxes		24.8			35.8		(30.7	)%
Percent of net sales		4.4	%		6.5	%
Net Income	$	14.1		$	21.3		(33.8	)%

Net Sales

Net sales were $565.9 million in 2007 compared with $552.1 million in 2006, representing an increase of $13.8 million or 2.5%. The increase in net sales was due to more favorable price realization captured in all of Zep’s markets, and, to a lesser extent the effect of foreign currency translation on international sales. Higher selling prices and foreign currency fluctuation favorably impacted net sales in 2007 by approximately $11.9 million and $4.7 million, respectively. These benefits were partially offset by lower overall unit volume of approximately $3.4 million as greater shipments to our European customer base were more than offset by volume declines in our domestic markets. Volume within the domestic commercial, industrial, and institutional end market was negatively impacted by softening demand from customers concentrated in the transportation and food industries. Demand from home improvement retail customers was adversely affected by those customers’ inventory rebalancing efforts and timing of certain of those customers’ promotional activities. Sales in the third and fourth quarters of fiscal 2007 outpaced those generated in the first half of the fiscal year due to the seasonal nature of our business. Also, second quarter net sales are typically adversely impacted by the above mentioned inventory rebalancing efforts that are routinely undertaken towards the end of those customers’ fiscal years.

Gross Profit


*(Dollars in millions)*	Years Ended August 31,						Increase (Decrease)		Percent Change
	2007			2006			Increase (Decrease)		Percent Change
Net Sales	$	565.9		$	552.1		$	13.8	2.5	%
Cost of Products Sold		240.0			234.9			5.1	2.2	%
Percent of net sales		42.4	%		42.5	%
Gross Profit	$	325.9		$	317.2		$	8.7	2.7	%
Percent of net sales		57.6	%		57.5	%

Gross profit increased $8.7 million, or 2.7% to $325.9 million in fiscal 2007 compared with $317.2 million in the year-ago period. Improvement in gross profit was driven primarily by the pricing gains that resulted in $11.9 million of the total increase in net sales. The benefits from higher sales were partially offset by raw materials cost increases of approximately $4 million compared with the same period in fiscal 2006. While the cost of raw materials increased compared with the same period in the previous year, the rate of increase decelerated during fiscal 2007. Gross profit margin of 57.6% in fiscal 2007 remained consistent with that of the prior fiscal year.

Operating Profit


*(Dollars in millions)*	Years Ended August 31,						Increase (Decrease)			Percent Change
	2007			2006			Increase (Decrease)			Percent Change
Gross Profit	$	325.9		$	317.2		$	8.7		2.7	%
Percent of net sales		57.6	%		57.5	%
Selling, Distribution, and Administrative Expenses		296.0			276.8			19.2		6.9	%
Loss (Gain) on sale of fixed assets		0.2			0.3			(0.2	)	(44.7	)%
Operating Profit	$	29.6		$	40.0		$	(10.4	)	(26.0	)%
Percent of net sales		5.2	%		7.3	%

Operating profit decreased $10.4 million, or 26.0%, in 2007 to $29.6 million from $40.0 million reported in 2006. Operating profit margins were 5.2% in 2007 compared with 7.3% in 2006. Fiscal 2007 improvement in gross profit was more than offset by several items affecting operating profit during that period. Operating profit and margins in 2007 were adversely impacted by costs related to environmental matters affecting our business. In May 2007, we recorded a $5.0 million pre-tax charge representing our best estimate of costs associated with a company-initiated remediation plan addressing subsurface contamination identified at our primary manufacturing facility located in Atlanta, Georgia. In June 2007, we reached final resolution with regard to a previously disclosed investigation into certain of our environmental practices, and we recorded a $1.8 million charge during the year in connection with this settlement. Environmental matters affecting the Company are discussed further in Note 7 of the Notes to Combined Financial Statements. Additionally, operating profit was negatively affected by a $3.7 million increase in reserves related to our property and casualty insurance programs; by the approximate $4 million increase in costs associated with raw materials; and by a $3.1 million increase in costs that typically vary with sales including commissions paid to our sales force, bonuses designed to reward profitable growth of our revenues, and freight pertaining to shipments to our customers. Also, in 2007 we experienced higher organizational costs in preparing our business to become an independent, public company. The adverse impact of these increased expenses on operating profit was only partially offset by the benefits of higher net sales.

Income before Provision for Taxes


*(Dollars in millions)*	Years Ended August 31,						Increase (Decrease)			Percent Change
	2007			2006			Increase (Decrease)			Percent Change
Operating Profit	$	29.6		$	40.0		$	(10.4	)	(26.0	)%
Percent of net sales		5.2	%		7.3	%
Other Expense (Income)
Interest Expense, net		5.0			4.4			0.6		12.6	%
Miscellaneous Expense (Income)		(0.2	)		(0.2	)		—		13.3	%
Total Other Expense (Income)		4.8			4.2			0.6		13.9	%
Income before Provision for Taxes	$	24.8		$	35.8			(11.0	)	(30.7	)%
Percent of net sales		4.4	%		6.5	%

Other expense consisted primarily of interest expense incurred as a result of our outstanding debt obligations, most of which represent variable-rate debt instruments. Interest expense, net, was $5.0 million and $4.4 million fiscal years 2007 and 2006, respectively. These increases were attributable to higher weighted-average interest rates experienced in fiscal 2007 compared with fiscal 2006 as the amount of debt outstanding over those periods was constant at $75.0 million.

Provision for Taxes and Net Income


*(Dollars in millions)*	Years Ended August 31,						Increase (Decrease)			Percent Change
	2007			2006			Increase (Decrease)			Percent Change
Income before Provision for Income Taxes	$	24.8		$	35.8		$	(11.0	)	(30.7	)%
Percent of net sales		4.4	%		6.5	%
Provision for Income Taxes		10.8			14.5			(3.8	)	(26.1	)%
Effective tax rate		43.3	%		40.6	%
Net Income	$	14.1		$	21.3		$	(7.2	)	(33.8	)%

Net income for fiscal year 2007 decreased $7.2 million, or 33.8%, to $14.1 million from $21.3 million reported in fiscal year 2006. The decrease in net income resulted primarily from the decrease in operating profit noted above as well as an increase in our effective tax rate.

The effective tax rate for fiscal year 2007 was 43.3%, compared with 40.6% in fiscal year 2006. The fiscal 2007 tax rate was adversely affected by approximately 5.0% due to the non-deductible fine that was paid in connection with the wastewater investigation discussed further in Note 7 of the Notes to Combined Financial Statements. Our effective tax rate is anticipated to approximate 37% going forward.

Fiscal 2006 Compared with Fiscal 2005

The following table sets forth information comparing the components of net income for the year ended August 31, 2006 with the year ended August 31, 2005:


*(Dollars in millions)*	Years Ended August 31,						Percent Change
	2006			2005			Percent Change
Net Sales	$	552.1		$	535.0		3.2	%
Gross Profit		317.2			311.8		1.7	%
Percent of net sales		57.5	%		58.3	%
Operating Profit		40.0			37.2		7.6	%
Percent of net sales		7.3	%		7.0	%
Income before Provision for Taxes		35.8			35.1		2.0	%
Percent of net sales		6.5	%		6.6	%
Net Income	$	21.3		$	23.1		(7.7	)%

Net Sales

Our net sales were $552.1 million in 2006 compared with $535.0 million in 2005, representing an increase of $17.1 million or 3.2%. The increase in net sales was due to higher selling prices in the domestic industrial and institutional and retail channels, and, to a lesser extent the effect of foreign currency translation on international sales. Higher selling prices and foreign currency fluctuation favorably impacted net sales in fiscal year 2006 by approximately $20.5 million and $2.6 million, respectively. These benefits were partially offset by overall lower unit volume of approximately $3.5 million, which was experienced primarily in the commercial, industrial, and institutional end-market. Volume within this end-market was affected by our separation from certain lower margin customers. Sales in the third and fourth quarters of fiscal 2006 outpaced those generated in the first half of the fiscal year due to the seasonal nature of our business. Also, second quarter net sales are typically adversely impacted by the decreased demand associated with inventory rebalancing efforts routinely undertaken by certain of our retail customers towards the end of those customers’ fiscal years.

Gross Profit


*(Dollars in millions)*	Years Ended August 31,						Increase (Decrease)		Percent Change
	2006			2005			Increase (Decrease)		Percent Change
Net Sales	$	552.1		$	535.0		$	17.1	3.2	%
Cost of Products Sold		234.9			223.1			11.8	5.3	%
Percent of net sales		42.5	%		41.7	%
Gross Profit	$	317.2		$	311.8		$	5.4	1.7	%
Percent of net sales		57.5	%		58.3	%

Gross profit increased $5.4 million, or 1.7%, to $317.2 million in 2006 compared with $311.8 million in 2005. Gross profit benefited from the contributions of higher selling prices that resulted in the $17.1 million increase in net sales. Gross profit margins declined 80 basis points to 57.5% of net sales in fiscal 2006 from 58.3% reported in 2005. In fiscal 2006 our gross profit and gross profit margin were negatively affected by continuing raw material and related freight cost increases. Costs associated with raw materials increased almost $9 million in fiscal 2006 compared with fiscal 2005. These increased costs followed a fiscal year during which the costs of certain commodities utilized in our manufacturing process had already reached record highs. Also, increased costs for labor, waste disposal, and utilities adversely impacted gross profit and related margin by $2.1 million in fiscal 2006 compared with the prior fiscal year. Although the impact of certain of these factors was offset by higher selling prices, the gross profit margin percentage was reduced due to the magnitude of the above mentioned increases.

Operating Profit


*(Dollars in millions)*	Years Ended August 31,						Increase (Decrease)			Percent Change
	2006			2005			Increase (Decrease)			Percent Change
Gross Profit	$	317.2		$	311.8		$	5.4		1.7	%
Percent of net sales		57.5	%		58.3	%
Selling, Distribution, and Administrative Expenses		276.8			272.5			4.3		1.6	%
Special Charge		—			4.5			(4.5	)	—
Loss (Gain) on sale of fixed assets		0.3			(1.9	)		2.2		118.4	%
Gain on sale of businesses		—			(0.5	)		0.5		—
Operating Profit	$	40.0		$	37.2		$	2.8		7.6	%
Percent of net sales		7.3	%		7.0	%

Operating profit increased $2.8 million, or 7.6%, in 2006 to $40.0 million from $37.2 million reported in 2005. Operating profit margin improved to 7.3% in 2006 from 7.0% in 2005. Selling, distribution, and administrative expenses were $276.8 million, or 50.1% of net sales, in fiscal 2006 compared with $272.5 million, or 50.9% of net sales, in fiscal 2005. Operating profit in 2005 included $4.5 million of the above mentioned special charge. This restructuring initiative was undertaken in fiscal 2005 to streamline operations, improve customer service, and reduce transaction costs. We began to realize the benefits of actions undertaken in the second fiscal quarter 2005 restructuring prior to the end of that fiscal year, and we experienced additional incremental restructuring benefits in fiscal 2006. Additional expenses unique to fiscal 2005 included consulting and professional fees related to the purchase of an enterprise resource planning system and non-recurring bad debt expense associated with two unexpected customer bankruptcies.

In addition to the absence of the special charge, operating profit was favorably impacted by the $20.5 million profit contribution from pricing, benefits from programs implemented to streamline operations, and benefits from cost containment programs. The pricing actions taken by us were necessary to offset increases in raw materials costs of almost $9 million. The benefits of higher selling prices and the aforementioned programs were further offset by a $4.7 million increase in costs that typically vary with sales including commissions paid

to our sales force, bonuses designed to reward profitable growth of revenues, and freight pertaining to shipments to customers; by increased consulting fees of $2.3 million related to our productivity improvement initiatives; by increased legal expenses of $1.6 million related to environmental matters; and by a pre-tax charge of $1.2 million related to a product recall due to defective containers purchased from a vendor. Selling, distribution, and administrative costs in fiscal 2006 were also affected by the allocation of expenses previously recorded by Acuity Brands’ corporate office. These allocated expenses increased approximately $1.8 million compared with the year-ago period due in part to the higher costs of Acuity Brands incentive-based compensation programs. The increased cost of these programs was attributable to both improved performance and the adoption of SFAS No. 123(R) Share-Based Payments. Additionally, operating profit was reduced by losses from asset sales that totaled $0.3 million in fiscal year 2006, whereas similar transactions resulted in a net gain of $1.9 million in the prior fiscal year.

Income before Provision for Taxes


*(Dollars in millions)*	Years Ended August 31,						Increase (Decrease)		Percent Change
	2006			2005			Increase (Decrease)		Percent Change
Operating Profit	$	40.0		$	37.2		$	2.8	7.6	%
Percent of net sales		7.3	%		7.0	%
Other Expense (Income)
Interest Expense, net		4.4			2.6			1.8	67.8	%
Miscellaneous Expense (Income)		(0.2	)		(0.5	)		0.3	60.1	%
Total Other Expense (Income)		4.2			2.1			2.1	98.4	%
Income before Provision for Taxes	$	35.8		$	35.1		$	0.7	2.0	%
Percent of net sales		6.5	%		6.6	%

Other expense in fiscal 2006 consisted primarily of interest expense incurred as a result of our outstanding debt obligations, most of which represent variable-rate debt instruments. Interest expense, net, was $4.4 million and $2.6 million in the fiscal years ended August 31, 2006 and 2005, respectively. These increases were attributable to higher weighted-average interest rates experienced in fiscal 2006 compared with fiscal 2005 as the amount of debt outstanding over those periods was constant at $75.0 million.

Provision for Taxes and Net Income


*(Dollars in millions)*	Years Ended August 31,						Increase (Decrease)			Percent Change
	2006			2005			Increase (Decrease)			Percent Change
Income before Provision for Taxes	$	35.8		$	35.1		$	0.7		2.0	%
Percent of net sales		6.5	%		6.6	%
Provision for Income Taxes		14.5			12.0			2.5		20.8	%
Effective tax rate		40.6	%		34.3	%
Net Income	$	21.3		$	23.1		$	(1.8	)	(7.7	)%

Net income for fiscal 2006 decreased $1.8 million to $21.3 million from $23.1 million reported in fiscal 2005, which included the pre-tax special charge of $4.5 million. This decrease reflects higher net interest expense, lower gains from asset sales, and a higher effective tax rate which offset the above mentioned increased operating profit.

The effective income tax rate was 40.6% and 34.3% in 2006 and 2005, respectively. The year-over-year variance is due primarily to a change in the valuation allowance on state tax credits as well as adjustments to deferred tax balances in our Italian operations and incremental income taxes resulting from the fiscal 2006 repatriation of undistributed earnings from certain of our foreign subsidiaries under the American Jobs Creation Act of 2004.

Outlook and Strategy

Previously, as a wholly-owned subsidiary of a public company, Zep’s role was that of a cash generating, low risk and relatively slow growth entity. Now that we are a stand-alone business, however, Zep’s focus and mission have dramatically changed. The Company is now positioned to transform itself into a dynamic, market-driven enterprise that not only delivers superior products and customer service, but that continuously strengthens its top to bottom line financial performance and generates favorable earnings per share.

In order to penetrate the industrial and institutional (I&I) channel — a $3.2 billion sector of the cleaning and maintenance chemicals market that currently contributes 84% of our revenues — we utilize a combination of our highly effective products, our experienced, well-trained and widely distributed sales force and our skilled technical support. This mix of strengths creates our unmatched, single greatest resource — our consistent ability to provide Superior Solutions. While we are a leading provider in the highly-fragmented I&I channel, there is room for significant improvement and growth. This is our historical core business, and it will continue to be a critical element of our ongoing strategic initiatives. We have also identified key opportunities, however, in both the $5.5 billion retail and the $6.4 billion distribution channels of industry. We believe that we can effectively position our Superior Solutions approach in these areas of opportunity, where we currently have minimal market penetration, and can thereby achieve accelerated growth.

The implementation and ongoing refinement of our growth strategies will assist us in achieving both our near-term and long-term objectives of:

•

Improving margins;

•

Expanding into new sales channels;

•

Producing steadily increasing revenue and operating profit growth in our current sales models;

•

Increasing existing solid cash flows and return on invested capital; and

•

Delivering consistent dividends and robust earnings per share growth.

Our tactics are focused on creating a stronger, more effective organization capable of generating sustainable value for our stockholders as measured by the following long-term financial objectives:

•

Revenue growth in excess of market growth rates on an annualized basis, which in the United States has approximated Gross Domestic Product in the past. We anticipate realizing these results absent the benefits gained through any significant acquisitions.

•

Annualized EBIT margin improvement of 50 basis points per year;

•

Earnings per share increases of 11-13% per year; and

•

Returns on invested capital of 15% or greater.

While these long-term financial objectives are expressed in terms of annualized improvement, we are in the beginning stages of implementing our three-pronged strategic plan. Accordingly, we expect that our goals will be realized over a series of quarters and benchmark achievements. For example, as a result of the spin-off, management now has the financial commitment to make needed investments that will enhance our current operations. These efforts should yield results that can be seen in strengthening margins and returns on invested capital.

We believe we may achieve our objectives inconsistently at first, but that we will hit our targeted levels of performance consistently over a four to five year time horizon, with our periods of success increasing as our operations become streamlined and we continue to grow our existing market segments and to expand into new, untapped channels.

Our fundamental approach to attaining our goals is simple: we will utilize and continue to develop our highly-trained and focused sales force and technical support staff to consistently provide a superior customer

experience for our exceptional, well-recognized product lines. We have taken our proven sales model and, in order to achieve our objectives and to profitably grow our company, we are developing and have begun to implement strategies to optimize operating efficiencies, further enhance our sales organization, expand our access in our current markets, move into new markets and channels, and instill a culture of continuous improvement to strengthen our business. We believe these strategies, along with management’s previous successful experiences with corporate expansion, will provide the foundation necessary to dynamically grow the business and thereby produce attractive returns for our stockholders.

Some of our vital initiatives include:

Enhance Sales Productivity. We intend to build upon the strength of our existing sales force and the benefits of the service we provide our customers by investing in the continued development of our team of sales representatives and managers through improved recruitment, training, professional development and new compensation incentives.

Optimize Operating Efficiency through Continuous Improvement. We intend to improve operations and increase our profit margins by streamlining our business processes to lower operating expenses, improving company-wide productivity, redesigning our production lines for maximum manufacturing and distribution flexibility, reducing non-value added activities and working capital needs, consolidating operations where appropriate and improving overall quality.

Grow Position in Targeted Market Segments. We continue to target the fastest growing categories in our core channels where we can leverage our competitive strengths, such as transportation, food processing and service, hospitality, government, and schools. We intend to continue investing in our brands and building upon our brand awareness through promotional efforts, product repackaging, and targeted advertising.

Expand into Additional Sales Channels. We believe we can grow our business by selling our product and service solutions through new channels of distribution where we have not previously focused our resources. We will continue to leverage the skills and capabilities of our well-trained and experienced sales organization as well as to build new organizational capabilities to grow and profitably develop new channels.

Pursue Strategic Acquisitions that Complement our Strong Platform. Our growth strategy includes making potential complementary acquisitions that could increase our scale and provide access to new markets, brands, products, and sales capabilities, as well as locating selected production closer to our customers.

To achieve our goals, we may potentially undertake various restructuring initiatives in order to streamline and improve our operations. While the cost of this restructuring effort is undetermined at this time, related expenses could range to $8 million.

There are some challenges that we must address and manage in order to accomplish our key strategic initiatives, including the continuing rapid increase of commodity costs which may require us to raise prices more frequently and has, historically, had a negative impact on unit volumes. We will continue to monitor economic variables such as costs for energy and raw materials, potential economic repercussions that could result from instability caused by worldwide political events, and the potential for changes in competition, including pricing. In addition, we are faced with execution risk around accomplishing our key strategic initiatives.

Notwithstanding these challenges, we believe that we are poised to take advantage of the exciting and new prospects that face us as a new publicly-traded company. There are enormous opportunities for accelerated growth, and we are led by a Chief Executive Officer whose primary professional focus over the past two decades was to grow the lighting business of Acuity Brands. With a great team orchestrating the growth, that company grew – organically and through acquisitions – from $600 million to $2 billion in annualized sales. Our management team recognizes the same opportunities exist at Zep.

Our five year plan will be implemented aggressively, but with exceptional direction, careful deliberation and skill. We intend to make meaningful progress in the execution of our strategic initiatives in the coming year, and we anticipate introducing new products and exploring opportunities to enter new channels to further fuel growth and expand our presence in the market. We look forward to achieving our objectives and to continuing to build a vibrant, market-driven company that delivers enhanced shareholder value.

Accounting Standards Adopted in Fiscal 2007

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Emerging Issues Task Force (“EITF”) 06-03, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross Versus Net Presentation) (“EITF 06-03”). The consensus reached in EITF 06-03 provides that the presentation of taxes assessed by a governmental authority that are directly imposed on revenue-producing transactions (e.g. sales, use, value added and excise taxes) between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. In addition, for any such taxes that are reported on a gross basis, the amounts of those taxes should be disclosed in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. EITF 06-03 is effective for interim and annual reporting periods beginning after December 15, 2006, and thus became effective for us during the third quarter of fiscal 2007. As a matter of accounting policy, we record all taxes within the scope of EITF 06-03 on a net basis.

In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS No. 158”). SFAS No. 158 requires an employer to: (a) recognize in its statement of financial position the funded status of a benefit plan; (b) measure defined benefit plan assets and obligations as of the end of the employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise but are not recognized as components of net periodic benefit costs pursuant to prior existing guidance. The provisions governing recognition of the funded status of a defined benefit plan and related disclosures are effective as of the end of fiscal years ending after December 15, 2006, and are therefore effective for us at the end of fiscal year 2007. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008, and is therefore effective for us in fiscal year 2009. The adoption of SFAS No. 158 did not materially affect our operating results or statement of financial position.

Accounting Standards Yet to be Adopted

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits companies, at their election, to measure specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. The election, called the “fair value option,” will enable some companies to reduce the volatility in reported earnings caused by measuring related assets and liabilities differently, and it is less complex than using the hedge-accounting requirements in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, to achieve similar results. Subsequent changes in fair value for designated items will be required to be reported in earnings in the current period. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and is therefore effective for the company beginning in fiscal year 2009. We are currently assessing the effect of implementing this guidance, which is dependent upon the nature and extent of eligible items elected to be measured at fair value upon initial application of the standard. However, we do not expect the adoption of SFAS No. 159 to have a material impact on our results of operations.

value, and expands disclosure requirements pertaining to fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years, and is therefore effective for us beginning in fiscal year 2009. We are currently evaluating the impact that this guidance will have on its results of operations and financial position.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a recognition threshold and measurement attribute for the financial statement implications of tax positions taken or expected to be taken in a company’s tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure of such positions. FIN 48 is effective for fiscal years beginning after December 15, 2006, and is therefore effective for us in fiscal year 2008. We are in the process of evaluating the impact FIN 48, however we do not anticipate adoption of this standard will have a material impact on our results of operations and financial position.

Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses the financial condition and results of operations as reflected in our Combined Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. As discussed in Note 2 of the Notes to Combined Financial Statements, the preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 revenue and expense during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to inventory valuation; depreciation, amortization, and the recoverability of long-lived assets, including intangible assets; share-based compensation expense; medical, product warranty, and other reserves; litigation; and environmental matters. Management bases its estimates and judgments on its substantial historical experience and other relevant factors, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Management discusses the development of accounting estimates with our Audit Committee. See Note 2 of the Notes to Combined Financial Statements for a summary of our accounting policies. We believe the following represent our critical accounting estimates:

Inventories

Inventories include materials, direct labor, and related manufacturing overhead, and are stated at the lower of cost (on a first-in, first-out or average cost basis) or market. Management reviews inventory quantities on hand and records a provision for excess or obsolete inventory primarily based on estimated future demand as a function of historical buying patterns and current market conditions. A significant change in customer demand or market conditions could render certain inventory obsolete and thus could have a material adverse impact on our operating results in the period the change occurs.

Long-Lived and Intangible Assets and Goodwill

We review goodwill and intangible assets with indefinite useful lives for impairment on an annual basis or on an interim basis if an event occurs that might reduce the fair value of the long-lived asset below its carrying value. All other long-lived and intangible assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment loss would be recognized based on the difference between the carrying value of the asset and its estimated fair value, which would be determined based on either discounted future cash flows or other appropriate fair value methods. The evaluation of goodwill and intangibles with indefinite useful lives for impairment requires management to use significant judgments and estimates including, but not limited to, projected future net sales, operating results, and cash flows of our business.

Although management currently believes that the estimates used in the evaluation of goodwill and intangibles with indefinite lives are reasonable, differences between actual and expected net sales, operating results, and cash flows could cause these assets to be deemed impaired. If this were to occur, we would be required to charge to operations the write-down in value of such assets, which could have a material adverse effect on our results of operations and financial position, but not our cash flow from operations.

Self-Insurance

It is our policy to self-insure, up to certain limits, certain risks including workers’ compensation, comprehensive general liability, and auto liability. Our self-insured retention for each claim involving workers’ compensation, comprehensive general liability (including toxic tort and other product liability claims), and auto liability is limited to $0.5 million per occurrence of such claims. A provision for claims under this self-insured program, based on our estimate of the aggregate liability for claims incurred, is revised and recorded annually. The estimate is derived from both internal and external sources including but not limited to our independent actuary. We are also self-insured up to certain limits for certain other insurable risks, primarily physical loss to property ($0.5 million per occurrence) and business interruptions resulting from such loss lasting three days or more in duration. Insurance coverage is maintained for catastrophic property and casualty exposures as well as those risks required to be insured by law or contract. We are fully self-insured for certain other types of liabilities, including environmental, product recall, patent infringement and errors and omissions. The actuarial estimates are subject to uncertainty from various sources, including, among others, changes in claim reporting patterns, claim settlement patterns, judicial decisions, legislation, and economic conditions. Although we believe that the actuarial estimates are reasonable, significant differences related to the items noted above could materially affect our self-insurance obligations, future expense, and cash flow.

We are also self-insured for the majority of our medical benefit plans. We estimate our aggregate liability for claims incurred by applying a lag factor to our historical claims and administrative cost experience. The appropriateness of the lag factor is evaluated at least annually and, if necessary, revised upon review. Although management believes that the current estimates are reasonable, significant differences related to claim reporting patterns, plan designs, legislation, and general economic conditions could materially affect our medical benefit plan liabilities, future expense, and cash flow.

Share-Based Compensation Expense

On September 1, 2005, we adopted SFAS No. 123(R), which requires compensation cost relating to share-based payment transactions be recognized in the financial statements based on the estimated fair value of the equity or liability instrument issued. We adopted SFAS No. 123(R) using the modified prospective method and applied it to the accounting for stock options, restricted shares, and share units representing certain deferrals into the Supplemental Deferred Savings Plan (which is discussed further in Note 6 of the Notes to Combined Financial Statements). Under the modified prospective method, share-based expense recognized after adoption includes: (a) share-based expense for all awards granted prior to, but not yet vested as of September 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation, and (b) share-based expense for all awards granted subsequent to September 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). Share-based expense includes expense related to restricted stock and options issued, as well as share units deferred into the Supplemental Deferred Savings Plan. We incurred $3.2 million, $3.4 million, and $2.3 million of share-based expense for the years ended August 31, 2007, 2006, and 2005, respectively. Prior to September 1, 2005, as permitted by SFAS No. 123, we accounted for share-based payments to employees using Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) and, therefore, recorded no share-based expense for employee stock options. Results for prior periods have not been restated. We continue to account for any awards with graded vesting on a straight-line basis.

SFAS No. 123(R) does not specify a preference for a type of valuation model to be used when measuring the fair value of share-based payments, and we will continue to employ the Black-Scholes model in deriving the

fair value estimates of such awards. SFAS No. 123(R) requires forfeitures of share-based awards to be estimated at time of grant and revised in subsequent periods if actual forfeitures differ from initial estimates. Therefore, expense related to share-based payments and recognized in fiscal 2007 has been reduced for estimated forfeitures. Our assumptions used in the Black-Scholes model remain otherwise unaffected by the implementation of this pronouncement. As of August 31, 2007, there was $7.2 million of total unrecognized compensation cost related to unvested restricted stock. That cost is expected to be recognized over a weighted- average period of two years. As of August 31, 2007, there was $0.7 million of total unrecognized compensation cost related to unvested options. That cost is expected to be recognized over a weighted-average period of two years. The cumulative effect of adoption of SFAS No. 123(R) was insignificant to our results of operations. Also, the majority of the share-based compensation expense generated through the administration of our share-based award programs does not affect Zep’s overall cash position. Therefore, certain of these expenses have been reflected as other non-cash charges within our Combined Statement of Cash Flows and Combined Statements of Parent’s Equity and Comprehensive Income. Forfeitures were estimated based on historical experience. If factors change causing different assumptions to be made in future periods, compensation expense recorded pursuant to SFAS No. 123(R) may differ significantly from that recorded in the current period. See Notes 2 and 6 of the Notes to Combined Financial Statements for more information regarding the assumptions used in estimating the fair value of stock options as well as for the financial implications associated with the adoption of SFAS No. 123(R).

Litigation

We recognize expense for legal claims when payments associated with the claims become probable and can be reasonably estimated. Due to the difficulty in estimating costs of resolving legal claims, actual costs may be substantially higher or lower than the amounts reserved.

Environmental Matters

We recognize expense for known environmental claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual cost of resolving environmental issues may be higher or lower than that reserved primarily due to difficulty in estimating such costs and potential changes in the status of government regulations. We are self-insured for most environmental matters.

Cautionary Statement Regarding Forward-Looking Information

This filing contains, and other written or oral statements made by or on behalf of us may include, forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. In addition, we, or the executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the SEC or in connection with oral statements made to the press, potential investors or others. Specifically, forward-looking statements may include, but are not limited to:

•

statements relating to our future economic performance, business prospects, revenue, income, and financial condition;

•

statements relating to the tax-free nature of the distribution of Zep common stock to stockholders of Acuity Brands in the spin-off; and

•

statements preceded by, followed by, or that include the words “expects,” “believes,” “intends,” “anticipates,” and similar terms that relate to future events, performance, or results of the company.

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results, expectations, or outcomes to differ materially from our historical experience and the historical experience of Acuity Brands as well as management’s present expectations or projections. These risks and uncertainties include, but are not limited to:

•

underlying assumptions or expectations related to the spin-off transaction proving to be inaccurate or unrealized;

•

customer and supplier relationships and prices;

•

competition;

•

ability to realize anticipated benefits from initiatives and timing of benefits;

•

market demand;

•

litigation and other contingent liabilities, such as environmental matters; and

•

economic, political, governmental, technological, and natural disaster related factors affecting the company’s operations, tax rate, markets, products, services, and prices, among others.

In evaluating these forward-looking statements, you should consider various factors, including those described in Item 1a: Risk Factors. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Annual Report and Form 10-K. Except as required by law, we undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this Annual Report and Form 10-K or to reflect the occurrence of unanticipated events.

Item 7a. Quantitative and Qualitative Disclosures about Market Risk

General. We are exposed to market risks that may impact our financial statements due primarily to changing interest rates and foreign exchange rates. The following discussion provides additional information regarding our market risks.

Interest Rates. Interest rate fluctuations expose our variable-rate debt to changes in interest expense and cash flows. The substantial majority of long-term debt outstanding at August 31, 2007 was attributable to facilities with variable interest rates. Based on our borrowings as of the distribution date, the potential change in annual interest expense resulting from a hypothetical 10% fluctuation in market interest rates would be approximately $0.4 million. See Note 4 of the Notes to Combined Financial Statements for additional information regarding our long-term debt.

Foreign Exchange Rates. The majority of our net sales, expense, and capital purchases are transacted in United States dollars. However, exposure with respect to foreign exchange rate fluctuation exists due to our operations in Canada and Europe. A hypothetical fluctuation in the Canadian dollar and Euro of 10% would impact operating profit by approximately $0.6 million and $0.6 million, respectively. The impact of these hypothetical currency fluctuations has been calculated in isolation from any response we would undertake to address such exchange rate changes in our foreign markets.

Fluctuations in Commodity Prices. The key raw materials used in our products are surfactants, polymers and resins, fragrances, water, solvents, and other petroleum-based materials and packaging materials. We do not expect to engage in significant commodity hedging transactions for raw materials, though we have committed and will continue to commit to purchase certain materials for specified periods of time. Many of the raw materials that we use are petroleum-based and, therefore, subject to the availability and price of oil. Significant increases in the prices of our products due to increases in the cost of raw materials or packaging materials could have a negative effect on demand for products and on profitability. Failure to effectively manage future increases in the costs of these materials could adversely affect our operating margins and cash flow. Furthermore, there are a limited number of suppliers for some of our raw materials, packaging materials, and finished goods. Our profitability, volume, and cash flow could be negatively impacted by limitations inherent within the supply chain of certain of these materials, including competitive conditions, governmental issues, legal issues, natural disasters, and other events that could impact both the availability and price of the materials.

Item 8. Financial Statements and Supplementary Data

Index to Combined Financial Statements


		Page
Report of Independent Registered Public Accounting Firm		39
Combined Balance Sheets as of August 31, 2007 and 2006		40
Combined Statements of Income for the years ended August 31, 2007, 2006, and 2005		41
Combined Statements of Cash Flows for the years ended August 31, 2007, 2006, and 2005		42
Combined Statements of Stockholders’ Equity and Comprehensive Income for the years ended August 31, 2007, 2006, and 2005		43
Notes to Combined Financial Statements		44-65
Schedule II—Valuation and Qualifying Accounts		109

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Zep Inc.

We have audited the accompanying combined balance sheets of Zep Inc. as of August 31, 2007 and 2006, and the related combined statements of income, parent’s equity and comprehensive income, and cash flows for each of the three years in the period ended August 31, 2007. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements and schedule 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. We were not engaged to perform an audit of the Company’s 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 Company’s 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of Zep Inc. at August 31, 2007 and 2006, and the combined results of its operations and its cash flows for each of the three years in the period ended August 31, 2007, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the combined financial statements, during the year ended August 31, 2007, the Company adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statement Nos. 87, 88, 106, and 132(R).”

As discussed in Note 2 to the combined financial statements, during the year ended August 31, 2006, the Company began recording share-based expense in accordance with Statement of Financial Accounting Standards No. 123(R) “Share-Based Payment”.

/s/ Ernst & Young LLP

Atlanta, Georgia

November 28, 2007

Zep Inc.

COMBINED BALANCE SHEETS

(In thousands)


	August 31,
	2007		2006
ASSETS
Current assets:
Cash and cash equivalents	$	9,142	$	8,128
Accounts receivable, less reserve for doubtful accounts of $3,503 and $3,788 at August 31, 2007 and 2006, respectively		93,102		89,940
Inventories		45,534		46,483
Prepayments and other		4,902		4,325
Deferred income taxes		6,283		6,573

Total current assets		158,963		155,449

Property, plant, and equipment, at cost:
Land		3,276		3,261
Buildings and leasehold improvements		51,293		50,351
Machinery and equipment		78,329		83,482

Total property, plant, and equipment		132,898		137,094
Less accumulated depreciation and amortization		81,215		83,518

Property, plant, and equipment, net		51,683		53,576

Other assets:
Goodwill		31,864		31,555
Intangible assets		118		145
Deferred income taxes		6,725		7,289
Other long-term assets		120		359

Total other assets		38,827		39,348

Total assets	$	249,473	$	248,373

LIABILITIES AND PARENT’S EQUITY
Current liabilities:
Current maturities of long-term debt	$	296	$	643
Accounts payable		37,279		35,410
Accrued compensation		17,830		20,492
Other accrued liabilities		31,744		26,952

Total current liabilities		87,149		83,497
Long-term debt, less current maturities		74,704		74,357

Deferred income taxes		413		616

Self-insurance reserves, less current portion		7,747		6,134

Other long-term liabilities		4,626		2,721

Commitments and contingencies (See Note 7)
Parent’s equity:
Parent’s equity investment		61,518		72,077
Accumulated other comprehensive loss items		13,316		8,971

Total parent’s equity		74,834		81,048

Total liabilities and parent’s equity	$	249,473	$	248,373

The accompanying Notes to Combined Financial Statements are an integral part of these statements.

Zep Inc.

COMBINED STATEMENTS OF INCOME

(In thousands)


	Years Ended August 31
	2007			2006			2005
Net Sales	$	565,886		$	552,084		$	534,952
Cost of Products Sold		240,028			234,894			223,113

Gross Profit		325,858			317,190			311,839
Selling, Distribution, and Administrative Expense		296,016			276,792			272,506
Loss (Gain) on sale of fixed assets		193			349			(1,896	)
Gain on sale of businesses		—			—			(538	)
Special Charge		—			—			4,533

Operating Profit		29,649			40,049			37,234
Other Expense (Income):
Interest expense, net		4,988			4,429			2,639
Miscellaneous (income), net		(176	)		(203	)		(509	)

Total Other Expense (Income)		4,812			4,226			2,130

Income before Provision for Income Taxes		24,837			35,823			35,104
Provision for Income Taxes		10,754			14,548			12,044

Net Income	$	14,083		$	21,275		$	23,060

The accompanying Notes to Combined Financial Statements are an integral part of these statements.

Zep Inc.

COMBINED STATEMENTS OF CASH FLOWS

(In thousands)


	Years Ended August 31
	2007			2006			2005
Cash (Used for) Provided by Operating Activities:
Net income	$	14,083		$	21,275		$	23,060
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation and amortization		7,101			8,397			9,090
Loss (Gain) on the sale or disposal of fixed assets		193			349			(1,896	)
Gain on the sale of business		—			—			(538	)
Other non-cash charges		2,342			2,427			1,286
Changes in assets and liabilities
Accounts receivable		(3,162	)		(4,218	)		(2,134	)
Inventories		949			261			(181	)
Deferred income taxes		651			(1,376	)		(4,309	)
Prepayments and other current assets		(577	)		(189	)		1,855
Accounts payable		1,869			3,471			3,767
Accrued compensation and other current liabilities		2,130			(2,246	)		1,778
Self insurance reserves and other long-term liabilities		3,518			(1,735	)		1,194
Other assets		1,834			2,063			1,642

Net Cash Provided by Operating Activities		30,931			28,479			34,614

Cash Used for Investing Activities:
Purchases of property, plant, and equipment		(5,809	)		(5,533	)		(12,921	)
Proceeds from sale of property, plant, and equipment		127			34			2,390
Proceeds from sale of businesses		164			151			251

Net Cash Used for Investing Activities		(5,518	)		(5,348	)		(10,280	)

Cash Provided by (Used for) Financing Activities:
Proceeds from issuances of long-term debt		647			473			544
Repayments of long-term debt		(647	)		(473	)		(544	)
Net activity with Acuity Brands, Inc.		(24,831	)		(27,158	)		(15,492	)

Net Cash Provided by (Used For) Financing Activities		(24,831	)		(27,158	)		(15,492	)

Effect of Exchange Rate Changes on Cash		432			361			(113	)

Net Change in Cash and Cash Equivalents		1,014			(3,666	)		8,729
Cash and Cash Equivalents at Beginning of Period		8,128			11,794			3,065

Cash and Cash Equivalents at End of Period	$	9,142		$	8,128		$	11,794

Supplemental Cash Flow Information:
Income taxes paid during the year	$	9,413		$	15,077		$	12,790
Interest paid during the period	$	5,211		$	4,429		$	2,579

The accompanying Notes to Combined Financial Statements are an integral part of these statements.

Zep Inc.

COMBINED STATEMENTS OF PARENT’S EQUITY AND COMPREHENSIVE INCOME

(In thousands)


	Parent’s Equity			Accumulated Other Comprehensive Income			Total Equity			Comprehensive Income
Balance at August 31, 2004	$	70,265		$	(627	)	$	69,638
Net Income		23,060			—			23,060		$	23,060
Foreign currency translation adjustment (net of tax expense of $585)		—			4,566			4,566			4,566
Other non-cash charges		1,286			—			1,286

Comprehensive income										$	27,626

Net transaction with Acuity Brands, Inc.		(18,152	)		—			(18,152	)

Balance at August 31, 2005	$	76,459		$	3,939		$	80,398
Net Income		21,275			—			21,275		$	21,275
Foreign currency translation adjustment (net of tax expense of $73)		—			5,032			5,032			5,032
Other non-cash charges		2,427			—			2,427
Equity Adjustment for Deferred Compensation Plan Amendment		1,394			—			1,394

Comprehensive income										$	26,307

Net transaction with Acuity Brands, Inc.		(29,478	)		—			(29,478	)

Balance at August 31, 2006	$	72,077		$	8,971		$	81,048
Net Income		14,083			—			14,083		$	14,083
Foreign currency translation adjustment (net of tax expense of $0)		—			4,345			4,345			4,345
Other non-cash charges		2,342			—			2,342

Comprehensive income										$	18,428

Net transaction with Acuity Brands, Inc.		(26,984	)		—			(26,984	)

Balance at August 31, 2007	$	61,518		$	13,316		$	74,834

The accompanying Notes to Combined Financial Statements are an integral part of these statements.

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per-share data and as indicated)

Note 1: Distribution, Description of Business and Basis of Presentation

Distribution and Description of the Business

Acuity Brands distributed to its stockholders, on a pro rata basis, all of the shares of Zep Inc. common stock by means of a stock dividend on October 31, 2007 (the “Distribution”). The stock dividend of one share of Zep common stock for every two shares of Acuity Brands common stock was paid pro rata to holders of record of Acuity Brands common stock at the close of business on October 17, 2007, which is the record date for the Distribution. No fractional shares of Zep common stock were distributed. Instead of fractional shares, Zep stockholders received cash. Following the Distribution, Acuity Brands does not own any shares of Zep as the spin-off rendered Zep an independent public company. In conjunction with the separation of their businesses, Zep Inc. and Acuity Brands entered into various agreements that address the allocation of assets and liabilities between them and that define their relationship after the separation, including the Agreement of Plan of Distribution, which we refer to as the distribution agreement, the tax disaffiliation agreement, the employee benefits agreement, and the transition services agreement. The spin-off is intended to be tax-free to affected shareholders, and Acuity Brands has received a favorable ruling from the Internal Revenue Service supporting the spin-off’s tax-free status. Acuity Brands and Zep Inc. have also received an opinion from their external counsel supporting the spin-off’s tax-free status. The stock of Zep Inc. is listed on the New York Stock Exchange under the ticker symbol “ZEP”.

These Combined Financial Statements include the accounts comprising Acuity Brands’ chemical business (referred to herein as “Zep” or the “Company”). Zep is a producer, marketer, and service provider of a wide range of cleaning and maintenance solutions for commercial, industrial, institutional, and consumer end-markets. Zep’s product portfolio includes anti-bacterial and industrial hand care products, cleaners, degreasers, deodorizers, disinfectants, floor care, sanitizers, and pest and weed control products. Utilizing a base of more than 2,300 unique formulations, Zep sells over 12,000 products, through its salaried and commissioned direct sales force, operates six plants, and serves approximately 350,000 customers through a network of distribution centers and warehouses.

Basis of Presentation

The Combined Financial Statements have been prepared on the historical cost basis in accordance with U.S. generally accepted accounting principles and present Zep’s financial position, results of operations, and cash flows as derived from historical financial statements of Acuity Brands as of August 31, 2007 and 2006 and for the three years ended August 31, 2007, 2006, and 2005. Certain functions including treasury, tax, executive and employee benefits, financial reporting, risk management, legal, corporate secretary and investor relations have historically been managed by the corporate division of Acuity Brands on behalf of its subsidiaries. The assets, liabilities, and expenses related to the support of these centralized corporate functions have been allocated to Zep

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

on a specific identification basis to the extent possible. Otherwise, allocations related to these services were primarily based upon an estimate of the proportion of corporate amounts applicable to Zep given Zep’s contribution to both its consolidated parent company’s revenues and employee base. Allocation ratios derived from these contribution factors are similar in amount and remained consistent throughout the historical periods presented. Examples of expenses that were allocated in accordance with these proportional estimates include charges related to accounting and legal services undertaken to ensure the consolidated parent company’s compliance with various regulatory requirements as well as the salaries of certain corporate officers and employees. In the opinion of management, the assumptions and allocations have been made on a reasonable and appropriate basis under the circumstances. Management believes that amounts allocated to Zep reflect a reasonable representation of the types of costs that would have been incurred if Zep had performed these functions as a stand-alone company. However, these combined financial statements do not include all of the actual expenses that would have been incurred had Zep been a stand-alone entity during the periods presented and do not reflect Zep’s combined results of operations, financial position, and cash flows had Zep actually been a stand-alone company during the periods presented. The combined financial statements reflect an allocation of corporate expense, assets and liabilities including but not limited to debt and related interest expense, of which these two are further described in Note 4 to the Notes to Combined Financial Statements.

Note 2: Summary of Significant Accounting Policies

Principles of Combination

The Combined Financial Statements include the accounts of Zep after elimination of significant intercompany transactions and accounts.

Revenue Recognition

Zep records revenue when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price to the customer is fixed and determinable, and collectibility is reasonably assured. Delivery is not considered to have occurred until the customer assumes the risks and rewards of ownership. Customers take delivery at the time of shipment for terms designated free on board shipping point. For sales designated free on board destination, customers take delivery when the product is delivered to the customer’s delivery site. Provisions for rebates, sales incentives, product returns, and discounts to customers are recorded as an offset to revenue in the same period the related revenue is recorded. The Company also maintains one-time or on-going marketing and trade-promotion programs with certain customers that require the Company to estimate and accrue the expected costs of such programs. These arrangements include cooperative marketing programs, merchandising of the Company’s products and introductory marketing funds for new products and other trade-promotion activities conducted by the customer. Costs associated with these programs are recorded as a reduction of revenues.

The Company provides for limited product return rights to certain distributors and customers primarily for slow moving or damaged items subject to certain defined criteria. The Company monitors product returns and records, at the time revenue is recognized, a provision for the estimated amount of future returns based primarily on historical experience and specific notification of pending returns. Although historical product returns generally have been within expectations, there can be no assurance that future product returns will not exceed historical amounts. A significant increase in product returns could have a material impact on the Company’s operating results in future periods.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions, which include estimates of

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Acuity Brands’ costs allocated to Zep, that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash in excess of daily requirements is invested in marketable securities and is included in the accompanying balance sheets at fair value. Zep considers time deposits and marketable securities purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

The Company records accounts receivable at net realizable value. This value includes an allowance for estimated uncollectible accounts to reflect losses anticipated on accounts receivable balances. The allowance is based on historical write-offs, an analysis of past due accounts based on the contractual terms of the receivables, and the economic status of customers, if known. Management believes that the allowance is sufficient to cover uncollectible amounts; however, there can be no assurance that unanticipated future business conditions of customers will not have a negative impact on the Company’s results of operations.

Concentrations of Credit Risk

Concentrations of credit risk with respect to receivables, which are typically unsecured, are generally limited due to the wide variety of customers and markets using Zep’s products, as well as their dispersion across many different geographic areas. Receivables due from The Home Depot were approximately $14.3 million as of August 31, 2007 and $15.2 million and $14.4 million for the years ended August 31, 2006 and 2005, respectively. No other single customer accounted for more than 10% of combined receivables at August 31, 2007. Additionally, net sales to The Home Depot by Zep accounted for approximately 11% of combined net sales in fiscal year 2007, and for approximately 12% in fiscal years 2006 and 2005, respectively.

Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, and debt instruments. The book values of cash and cash equivalents, trade receivables, and trade payables are considered to be representative of their respective fair values. As discussed further in Note 4 of the Notes to Combined Financial Statements, the debt levels reflected within our historical Combined Balance Sheets reflect assumptions regarding prospective debt issuances based upon Zep’s anticipated financial condition on or about the time of the spin-off. Therefore, it is not practicable to make estimates regarding the fair value of our outstanding indebtedness.

Inventories

Inventories include materials, direct labor, and related manufacturing overhead, are stated at the lower of cost (on a first-in, first-out or average cost basis) or market, and consist of the following:


	August 31,
	2007			2006			2005
Raw materials and supplies	$	13,277		$	11,788		$	12,365
Work in progress		178			249			429
Finished goods		33,831			36,308			35,807

		47,286			48,345			48,601
Less: Reserves		(1,752	)		(1,862	)		(1,857	)

	$	45,534		$	46,483		$	46,744

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Goodwill and Other Intangibles

Of the $31.9 million in goodwill reflected as of August 31, 2007 on the Combined Balance Sheets, approximately $21.0 million is attributable to the fiscal 1997 acquisition of Enforcer Products, Inc. (“Enforcer”). The Enforcer brand provides retail plumbing and pest and weed control products sold through home improvement retailers. The remainder of the goodwill resulted from several smaller acquisitions. Zep tests goodwill for impairment on an annual basis in the fiscal fourth quarter or sooner if events or changes in circumstances indicate that the carrying amount of goodwill may exceed its fair value. The goodwill impairment test has two steps. The first step identifies potential impairments by comparing the fair value of the reporting unit, Zep, with its carrying value, including goodwill. The fair value of Zep is determined based on a combination of valuation techniques including the expected present value of future cash flows, a market multiple approach, and a comparable transaction approach. If the calculated fair value of a reporting unit exceeds the carrying value, goodwill is not impaired and the second step is not necessary. If the carrying value of a reporting unit exceeds the fair value, the second step calculates the possible impairment loss by comparing the implied fair value of goodwill with the carrying value. If the implied fair value of the goodwill is less than the carrying value, an impairment charge is recorded. This analysis did not result in an impairment charge during fiscal years 2007, 2006, or 2005.

Zep’s intangible assets subject to amortization primarily include the trademarks, patents, and formulations acquired through the purchase of Enforcer. The Company amortizes trademarks associated with specific products with finite lives over their estimated useful lives of 30 years. Other amortized intangible assets consist primarily of patented technology that is amortized over its estimated useful life of 12 years. The Company recorded amortization expense of less than $0.1 million related to intangible assets with finite lives during fiscal years 2007, 2006, and 2005. In each of the next five years amortization expense is projected to remain consistent with that reported during fiscal years 2007, 2006, and 2005. No adjustments were made during fiscal year 2007 to intangible assets related to trademarks, patents, and formulations other than normal accumulated amortization.

Other Long-Term Liabilities

Other long-term liabilities consist of the following:


	August 31,
	2007		2006		2005
Deferred compensation and postretirement benefits (1)	$	3,219	$	2,629	$	4,643
Miscellaneous		1,407		92		103

	$	4,626	$	2,721	$	4,746

(1)

Postretirement benefits—Acuity Brands has historically maintained a non-qualified deferred compensation plan whose participants have included eligible employees of Zep Inc. The deferred compensation plan administered by Acuity Brands provided for elective deferrals of an eligible employee’s compensation and, in some cases, matching contributions by Acuity Brands. In addition, the plan provided for an automatic contribution by Acuity Brands of 3% of an eligible employee’s compensation. On June 29, 2006, the Acuity Brands Board of Directors amended this plan to provide that related share unit deferrals would be distributed in stock rather than cash upon settlement. Zep Inc. reclassified amounts previously accrued in connection with the pre-amendment cash based settlement obligation to the appropriate equity account concurrent with the amendment to the plan’s settlement provisions. The effect of this reclassification is presented within the Equity Adjustment for Deferred Compensation Plan Amendment line item off our

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Combined Statements of Parent’s Equity and Comprehensive Income, and the reclassification is the primary reason for the decrease in this liability during fiscal 2006. See Note 6 of the Notes to Combined Financial Statements for more information regarding this plan.

We adopted our own non-qualified deferred compensation plan effective October 31, 2007 for the benefit of our eligible employees.

Shipping and Handling Fees and Costs

Zep includes shipping and handling fees billed to customers in Net Sales. Shipping and handling costs associated with inbound freight and freight between manufacturing facilities and distribution centers are generally recorded in Cost of Products Sold. Certain customer related shipping and handling costs are included in Selling, Distribution, and Administrative Expense, and those costs totaled $37.0 million, $35.4 million, and $26.3 million for fiscal years 2007, 2006, and 2005, respectively.

Earnings Per Share

Earnings per share data has not been presented within our Combined Financial Statements since the businesses that comprise Zep were wholly owned subsidiaries of Acuity Brands, or businesses thereof, during the three years ended August 31, 2007.

Share-Based Compensation

During the three years ended August 31, 2007, Zep employees participated in Acuity Brands’ stock-based compensation programs that provided for the granting of Acuity Brands stock options, restricted stock awards, and employee stock purchase plan rights to employees and other key individuals. The majority of the share-based compensation expense generated through the administration of these award programs does not affect Zep’s overall cash position. Therefore, certain of these expenses have been reflected as other non-cash charges within our Combined Statement of Cash Flows and Combined Statements of Parent’s Equity and Comprehensive Income. Effective September 1, 2005, Acuity Brands adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment using the modified prospective method in its accounting for Acuity Brands’ stock options, restricted shares, and share units representing certain deferrals into the Supplemental Deferred Savings Plan (see Note 6 of the Notes to Combined Financial Statements for further discussion of these plans).

Had share-based expense for Acuity Brands’ stock option plans and employee stock purchase plans been determined based on a calculated fair value using the Black-Scholes model at the grant date for awards consistent with the recognition provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R) (“SFAS No. 123(R)”), Zep’s net income would have been impacted as follows for the years ended August 31, 2005:


	Years Ended August 31, 2005
Net income, as reported	$	23,060
Less: Compensation expense related to the Employee Stock Purchase Plan, net of tax		(94	)
Less: Stock-based compensation determined under fair value based method for stock option awards, net of tax		(774	)

Net income, pro forma	$	22,192

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

The pro forma effect of applying SFAS No. 123(R) may not be representative of the effect on Zep’s future reported net income as awards currently issued in Acuity Brands’ equity could be replaced with those issued by Zep on or about the Distribution date.

Prior to the adoption of SFAS No. 123(R), Acuity Brands recognized the full fair value of restricted stock awards upon issuance within stockholders’ equity. At the end of fiscal year 2005, approximately $3.5 million of deferred compensation costs attributable to Zep had been recognized in paid-in capital, offset by an equal amount recorded in unearned compensation on restricted stock. These amounts were reversed pursuant to the adoption of SFAS No. 123(R) and were recognized as equity instruments pertaining to restricted stock awards in accordance with the related awards’ vesting provisions.

Share-based expense includes expense related to restricted stock and options issued, as well as share units deferred into the Supplemental Deferred Savings Plan. Zep incurred $3.2 million, $3.4 million, and $2.3 million of share-based expense for the years ended August 31, 2007, 2006, and 2005, respectively. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $1.4 million, $1.4 million, and $0.8 million for the years ended August 31, 2007, 2006, and 2005, respectively. Zep did not capitalize any expense related to share-based payments and has recorded share-based expense in selling, distribution, and administrative expenses. Equity awards having graded vesting provisions are accounted for on a straight-line basis.

On November 10, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. FAS 123(R)-3 Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards. Acuity Brands elected to adopt the alternative transition method permissible under this FASB Staff Position for calculating the tax effects of stock-based compensation pursuant to SFAS No. 123(R). The alternative transition method simplifies establishment of the beginning balance of the additional paid-in capital pool related to the tax effects of employee stock-based compensation. SFAS No. 123(R) requires that the benefit of tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under prior guidance. Any excess tax benefits associated with share-based awards issued to Zep officers and key employees will remain with Acuity Brands. See Note 6 of Notes to Combined Financial Statements for additional information pertaining to share-based award programs affecting Zep personnel.

Depreciation

For financial reporting purposes, depreciation is determined principally on a straight-line basis using estimated useful lives of plant and equipment (20 to 40 years for buildings and 5 to 12 years for machinery and equipment) while accelerated depreciation methods are used for income tax purposes. Leasehold improvements are amortized over the life of the lease or the useful life of the improvement, whichever is shorter.

Research and Development

Research and development costs, which are included in Selling, Distribution, and Administrative Expense in our Combined Statements of Income, are expensed as incurred. Research and development expenses amounted to $2.3 million during fiscal years 2007 and 2006, and $2.2 million during fiscal year 2005.

Advertising

Advertising costs are expensed as incurred and are included within Selling, Distribution, and Administrative Expense in our Combined Statements of Income. These costs totaled $0.7 million, $1.4 million, and $1.3 million during fiscal years 2007, 2006, and 2005, respectively.

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Foreign Currency Translation

The functional currency for the foreign operations of Zep is the local currency. The translation of foreign currencies into United States dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet dates and for revenue and expense accounts using a weighted average exchange rate each month during the year. The gains or losses resulting from the translation are included in Comprehensive Income in the Combined Statements of Parent’s Equity and Comprehensive Income and are excluded from net income.

Gains or losses resulting from foreign currency transactions are included in Miscellaneous expense (income), net in the Combined Statements of Income and were insignificant during fiscal years 2007, 2006, and 2005.

Interest Expense, Net

Interest expense, net, is composed primarily of interest expense on long-term debt, revolving credit facility borrowings, and short-term borrowings, partially offset by interest income on cash and cash equivalents. As discussed in Note 4 of the Notes to Combined Financial Statements, outstanding debt in the amount of $75.0 million has been presented within Zep’s historical Combined Statements of Financial Position for years ended August 31, 2007, 2006, and 2005. Zep has reflected interest expense associated with these borrowings within the historical Combined Statements of Income as though the $75.0 million in total borrowings had been outstanding during all periods presented therein.

The following table summarizes the components of interest expense, net:


	Years Ended August 31,
	2007			2006			2005
Interest expense	$	5,218		$	4,641		$	2,935
Interest income		(230	)		(212	)		(296	)

Interest expense, net	$	4,988		$	4,429		$	2,639

Miscellaneous Expense (Income), Net

Miscellaneous expense (income), net, is composed primarily of gains or losses on foreign currency transactions.

Accounting Standards Adopted in Fiscal 2007

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

effective for us during the third quarter of fiscal 2007. As a matter of accounting policy, we record all taxes within the scope of EITF 06-03 on a net basis.

Accounting Standards Yet to be Adopted

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 establishes a single authoritative definition of fair value, establishes a framework for measuring fair value, and expands disclosure requirements pertaining to fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years, and is therefore effective for us beginning in fiscal year 2009. We are currently evaluating the impact that this guidance will have on its results of operations and financial position.

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Note 3: Employee Benefit Plans

During the three years ended August 31, 2007, our employees participated in Zep’s qualified defined contribution plans to which both employees and Zep make contributions. The cost to Zep for these plans during the years ended August 31, 2007, 2006, and 2005 was $2.8 million, $2.4 million, and $2.2 million, respectively. Employer matching amounts are allocated in accordance with the participants’ investment elections for elective deferrals. Historically, plan participants could invest a percentage of their contributions into an Acuity Brands common stock fund. Zep was a wholly-owned subsidiary of Acuity Brands prior to the October 31, 2007 spin-off. At August 31, 2007, assets of the domestic defined contribution plans included shares of Acuity Brands’ common stock with a market value of approximately $12.1 million, which represented approximately 6.4% of the total fair market value of the assets in Zep’s domestic defined contribution plans. In addition, Acuity Brands maintains a non-qualified deferred compensation plan in which certain employees of Zep participate. The deferred compensation plan provided for elective deferrals of an eligible employee’s compensation and, in some cases, matching contributions by Acuity Brands. The plan also provided for an automatic contribution by Acuity Brands of 3% of an eligible employee’s compensation. Costs and related liabilities incurred by Zep employees’ participation in this plan have been reflected in the accompanying Combined Financial Statements.

Following the spin-off, plan participants will be able to invest a certain percentage of contributions into a Zep common stock fund that will be added to Zep’s qualified defined contribution plan. Also, we adopted our own non-qualified deferred compensation plan effective October 31, 2007 for the benefit of our eligible employees.

Note 4: Long-Term Debt and Lines of Credit

Long-Term Debt

The debt levels reflected within the historical Combined Financial Statements reflect assumptions regarding prospective debt issuances based upon Zep’s anticipated financial condition on or about the time of the spin-off. A primary measure used in assessing this condition is Zep’s EBITDA (earnings before interest expense, provision for income taxed, depreciation and amortization), which has remained consistent throughout the periods presented in these historical financial statements. Therefore, outstanding debt in the amount of $75.0 million has been presented within Zep’s historical Combined Statements of Financial Position for the years ended August 31, 2007, 2006, and 2005. Zep has reflected the interest expense associated with these borrowings within its historical Combined Statements of Income as though the $75.0 million in total borrowings had been outstanding during all periods presented therein.

On October 19, 2007 we executed a new receivables facility and a new revolving credit facility in anticipation of the spin-off, and the significant terms of each of those facilities are discussed below. We drew $62.5 million from that revolving credit facility on October 31, 2007. The resulting proceeds of $62.5 million were immediately distributed to Acuity Brands. Additionally, we are responsible for a $7.2 million industrial revenue bond due in 2018 as well as approximately $0.3 million of other debt following the spin-off. Additional borrowings may be necessary in event that we become obligated to remit further payment to Acuity Brands pursuant to the provisions of the distribution agreement.

Revolving Credit Facility

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Chase Bank (“Administrative Agent”), KeyBank, Regions Bank, Wachovia Bank, and Wells Fargo Bank. The material terms of the Revolving Credit Facility are as set forth below. Additionally, on the same date we entered into a Credit and Security Agreement (“Receivables Facility”) that allows us to borrow, on an ongoing basis, up to $40 million secured by undivided interests in a defined pool of trade accounts receivable of the Company. Counterparties to the Receivables Facility include Variable Funding Capital Company LLC, as Lender, and Wachovia Bank as backstop liquidity provider and agent for the Lender. The material terms of the Receivables Facility are as set forth below.

The Revolving Credit Facility contains customary covenants regarding the preservation and maintenance of our corporate existence, material compliance with laws, payment of taxes, and maintenance of insurance and of our properties. Further, the Revolving Credit Facility contains financial covenants including a leverage ratio (“Maximum Leverage Ratio”) of total indebtedness to EBITDA, as such terms are defined in the Revolving Credit Facility agreement, and a minimum interest coverage ratio. These ratios are computed at the end of each fiscal quarter for the most recent 12-month period. The Revolving Credit Facility allows for a Maximum Leverage Ratio of 3.25x and a Minimum Interest Coverage Ratio of 2.50x. The Revolving Credit Facility includes customary events of default, including, but not limited to, the failure to pay any interest, principal or fees when due, the failure to perform any covenant or agreement, inaccurate or false representations or warranties, a material adverse change, insolvency or bankruptcy, change of control, the occurrence of certain ERISA events and judgment defaults.

Receivables Facility

The Receivables Facility allows us to borrow, on an ongoing basis, up to $40 million secured by undivided interests in a defined pool of trade accounts receivable of the Company. Interest rates under the Receivables Facility vary with asset-backed commercial paper rates plus an applicable margin of 0.325%. The commitment fees on the Receivables Facility are 0.125% per annum on the average unused balances. The Receivables Facility contains customary reporting and compliance covenants as well as a cross-default provision whereby the Company would be in default should an occurrence of a default or an event of a default result under any other financing arrangement where the Company is a debtor or an obligor which relates to debt in excess of $25 million.

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Industrial Revenue Bonds

The industrial revenue bonds due 2018 were issued by the City of DeSoto Industrial Development Authority, Inc. in May 1991 in connection with the construction of Zep’s facility in that city. In 2001, in connection with the spin-off of Acuity Brands from NSI, the loan agreement was assigned to Acuity Brands and Acuity Specialty Products Group Inc., which assumed all of the obligations of NSI with respect to the industrial revenue bonds. In connection with our spin-off from Acuity Brands, Acuity Brands was released from its obligations with respect to the industrial revenue bonds, and we remained as an obligor under the loan agreement. Pursuant to the loan agreement, we are obligated to make principal and interest payments on the bonds. The payment of principal and interest on the bonds is secured by an irrevocable letter of credit issued by Wachovia Bank, National Association. The bonds currently bear interest at a weekly rate. The interest rate was approximately 3.7% and 3.4% at August 31, 2007 and August 31, 2006, respectively.

Letters of Credit

Note 5: Parent’s Equity and Related Matters

Acuity Brands’ Equity Investment

Acuity Brands’ equity investment includes the original investments in Zep, accumulated income of Zep, and the net intercompany balances with Acuity Brands. In connection with the Distribution, net intercompany balances with Acuity Brands have been capitalized and reflected within Parent’s Equity on Zep’s Combined Balance Sheets.

Stockholder Protection Rights Agreement

Zep’s Board of Directors adopted a Stockholder Protection Rights Agreement (the “Rights Agreement”) effective October 30, 2007. The Rights Agreement contains provisions that are intended to protect our stockholders in the event of an unsolicited offer to acquire the Company, including offers that do not treat all stockholders equally and other coercive, unfair, or inadequate takeover bids and practices that could impair the ability of the Company’s Board of Directors to fully represent stockholders’ interests. Pursuant to the Rights Agreement, our Board of Directors declared a dividend of one “Right” for each outstanding share of the Company’s common stock as of October 30, 2007. The Rights will be represented by, and trade together with, the Company’s common stock until and unless certain events occur, including the acquisition of 15% or more of the Company’s common stock by a person or group of affiliated or associated persons (with certain exceptions, “Acquiring Persons”). Unless previously redeemed by the Company’s Board of Directors, upon the occurrence of one of the specified triggering events, each Right that is not held by an Acquiring Person will entitle its holder to purchase one share of common stock or, under certain circumstances, additional shares of common stock at a discounted price. The Rights will cause substantial dilution to a person or group that attempts to acquire the Company on terms not approved by the Company’s Board of Directors. Thus, the Rights are intended to encourage persons who may seek to acquire control of the Company to initiate such an acquisition through negotiation with the Board of Directors.

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Common and Preferred Stock

Zep has 500 million shares of common stock, par value $.01 per share, and 50 million shares of preferred stock (“Preferred Stock”), authorized as of October 31, 2007. No shares of preferred stock were issued as of that date.

Note 6: Share-Based Payments

Pre-spin equity award issuances

Prior to the October 31, 2007 spin-off, Zep participated in Acuity Brands’ long-term incentive programs that provided qualified and non-qualified stock options to officers and employees of Acuity Brands at exercise prices not less than the fair market value on the date of grant. Effective November 30, 2001, Acuity Brands adopted the Acuity Brands, Inc. Long-Term Incentive Plan (the “Plan”) for the benefit of officers and other key management personnel (“Participants”). An aggregate of 8.1 million shares was originally authorized for issuance under that plan. In October 2003, the Board of Directors approved the Acuity Brands, Inc. Amended and Restated Long-Term Incentive Plan (the “Amended Plan”), including an increase of 5.0 million in the number of shares available for grant. However, the Board of Directors subsequently committed that not more than 3.0 million of the 5.0 million share increase would be available for grant without further shareholder approval. In December 2003, the stockholders approved the Amended Plan. The Amended Plan provides for issuance of share-based awards, including stock options, stock appreciation rights, and performance-based and time-based restricted stock and restricted stock unit awards. The majority of the share-based compensation expense generated through the administration of these award programs does not affect Zep’s overall cash position. Therefore, certain of these expenses have been reflected as other non-cash charges within our Combined Statement of Cash Flows and Combined Statements of Parent’s Equity and Comprehensive Income. Generally, stock options awarded pursuant to those programs vest proportionately over a three-year period and are exercisable for ten years from the grant date. Certain of the long-term incentive programs also provide for awards of restricted shares of Acuity Brands’ common stock, which generally vest proportionally over a four-year period. A total of 11.1 million shares of Acuity Brands common stock were reserved for issuance under the plans and a total of 1.7 million and 2.0 million shares remained available for future grants at August 31, 2007 and August 31, 2006 respectively. Zep incurred $3.2 million, $3.4 million and $2.3 million of compensation expense related to Acuity Brands’ share-based long-term incentive programs in fiscal years 2007, 2006 and 2005, respectively.

Restricted Stock Awards

Under the Amended Plan, Acuity Brands awarded restricted stock to officers and other key employees of Zep in September 2006, December 2005, January 2005, and December 2003. Shares issued under the Amended Plan vest over a four-year period from the respective grant dates. In December 2002, the Company reserved shares of performance-based restricted stock for issuance to officers and other key employees of Zep under the Plan. Those shares vest at the later of (a) determination by the compensation committee of the Board of Directors that at least two of the three performance measures have been achieved or (b) November 30 of the specified target year following achievement of related performance targets. In connection with an October 2000 National Service Industries, Inc. (“NSI”) award and the distribution of Acuity Brands from its former parent, NSI, in November 2001, Acuity Brands distributed restricted shares, matching NSI shares that were vesting, and reserved performance based restricted shares, representing conversion of the remaining October 2000 award which had not reached a vesting start date. These shares vest ratably in four equal annual installments beginning one year from the vesting start date based on achievement of progressive increases in the value of Acuity Brands stock, and certain Zep officers and key employees were included in this award. Additionally, Acuity Brands awarded

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

restricted stock to certain employees of Zep on an individual basis in fiscal years 2007, 2006, 2005, and 2004. The fair value of restricted stock at the date of grant is equal to the closing stock price on that date.

Restricted stock transactions related to the restricted stock agreements held by employees of Zep during the years ended August 31, 2005, and 2006 and 2007 were as follows:


	Number of Shares (in thousands)		Weighted Average Grant Date Fair Value
Outstanding at August 31, 2004	296		$	18.96

Granted	52		$	27.32
Vested	(58	)	$	15.88
Forfeited	(56	)	$	19.98

Outstanding at August 31, 2005	234		$	21.37

Granted	70		$	36.16
Vested	(94	)	$	20.17
Forfeited	(55	)	$	23.64

Outstanding at August 31, 2006	155		$	28.00

Granted	44		$	45.96
Vested	(40	)	$	24.72
Forfeited	(38	)	$	32.53

Outstanding at August 31, 2007	121		$	34.13

As of August 31, 2007, there was $7.2 million of total unrecognized compensation cost related to unvested restricted stock of Zep employees. That cost is expected to be recognized over a weighted-average period of two years. The total fair value of shares vested during the years ended August 31, 2007, 2006, and 2005, was approximately $2.6 million, $2.5 million, and $1.7 million, respectively.

Stock Options

Options issued under the Amended Plan are generally granted with an exercise price equal to the fair market value of the Acuity Brands’ stock on the date of grant and expire 10 years from the date of grant. These options generally vest and become exercisable over a three-year period. Shares available for grant under all plans totaled approximately 1,700,000 at August 31, 2007, with additional shares available upon further shareholder approval. Shares available for grant under all plans were 2,000,000 at August 31, 2006 and 2005, respectively. Forfeited shares and shares that are exchanged to offset taxes are returned to the pool of shares available for grant.

The fair value of each option was estimated on the date of grant using the Black-Scholes model. The dividend yield was calculated based on annual dividends paid and the trailing 12 month average closing stock price at the time of grant. Expected volatility was based on historical volatility of the Acuity Brands’ stock over the preceding number of years equal to the expected life of the options. The risk-free interest rate was based on the United States Treasury yield for a term equal to the expected life of the options at the time of grant. Acuity Brands used historical exercise behavior data of similar employee groups to determine the expected life of options. All inputs into the Black-Scholes model are estimates made at the time of grant. Actual realized value of each option grant could materially differ from these estimates, though without impact to future reported net income.

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

The following weighted average assumptions were used to estimate the fair value of stock options awarded by Acuity Brands to all of its employees, including Zep employees, in fiscal years ended August 31:


	2007			2006			2005
Dividend yield		1.6	%		2.2	%		2.3	%
Expected volatility		35.0	%		43.0	%		42.4	%
Risk-free interest rate		4.6	%		4.4	%		4.2	%
Expected life of options		5 years			5 years			6 years
Weighted-average fair value of options granted	$	15.01		$	12.21		$	10.89

Stock option transactions related to the stock option plans and stock option agreements held by Zep employees during the years ended August 31, 2005, 2006, and 2007 were as follows:


	Outstanding (share data in thousands)				Exercisable (share data in thousands)
	Number of Shares		Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price
Outstanding at August 31, 2004	1,159			19.40	703	$	20.62

Granted	—		$	—
Exercised	(654	)	$	16.11
Cancelled	(55	)	$	27.21

Outstanding at August 31, 2005	450		$	23.24	384	$	23.18

Granted	12		$	31.99
Exercised	(282	)	$	22.48
Cancelled	(21	)	$	28.33

Outstanding at August 31, 2006	159		$	24.57	131	$	24.74

Granted	—		$	—
Exercised	(90	)	$	25.51
Cancelled	—		$	—

Outstanding at August 31, 2007	69		$	23.36	69	$	23.36

Range of option exercise prices through August 31, 2007:
$10.00 – $15.00 (average life – 3.8 years)	13		$	13.80	13	$	13.80
$15.01 – $20.00 (average life – 3.0 years)	12		$	16.50	12	$	16.50
$20.01 – $25.00 (average life – 5.4 years)	22		$	23.76	22	$	23.76
$25.01 – $30.00 (average life – 1.4 years)	14		$	29.33	14	$	29.33
$30.01 – $52.28 (average life – 0.1 years)	8		$	37.85	8	$	37.85

The total intrinsic value of options exercised during the years ended August 31, 2007, 2006, and 2005 was $2.3 million, $3.7 million, and $7.3 million, respectively. The total intrinsic value of options outstanding, expected to vest, and exercisable as of the three years ended August 31, 2007 was $2.0 million, $2.9 million, and $2.9 million, respectively. As of August 31, 2007, there was $0.7 million of total unrecognized compensation cost related to unvested options. That cost is expected to be recognized over a weighted-average period of approximately two years.

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Share Units

Employees were allowed to defer a portion of restricted stock awards granted in fiscal years 2003 and 2004 into the Acuity Brands Supplemental Deferred Savings Plan and the value of that restricted stock was converted into share units. Those share units were adjusted to current market value at the end of each month. On June 29, 2006, the Board of Directors of Acuity Brands amended this plan to provide that share unit deferrals would be distributed in stock rather than cash upon settlement. Zep reclassified its accrued liability reflective of the cash based settlement obligation to the appropriate equity account concurrent with the amendment to the plan’s settlement provisions. The effect of this reclassification is presented within the Equity Adjustment for Deferred Compensation Plan Amendment line item of Combined Statements of Parent’s Equity and Comprehensive Income. Shares affected by the amendment were valued at the closing stock price on the date of conversion and expense related to the shares will no longer fluctuate with Acuity Brands’ stock price. As of August 31, 2007 and August 31, 2006, approximately 29,000 and 22,000, respectively, fully vested share units belonging to Zep employees were accounted for under this plan. We adopted our own non-qualified deferred compensation plan effective October 31, 2007 for the benefit of our eligible employees.

Adoption of Zep Inc. Long-Term Incentive Plan and Conversion of Equity Awards Pursuant to Spin-off

In connection with the spin-off, we established the Zep Inc. Long-Term Incentive Plan (“Zep LTIP”) on October 31, 2007. The purposes of the Zep LTIP are to provide additional incentives to our officers, key executives and directors whose substantial contributions are essential to our continued success. To accomplish these purposes, the Zep LTIP provides that the Company may grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares to key personnel and directors. A total of 4.3 million shares of Zep’s common stock have been reserved for issuance under the Zep LTIP. Generally, stock options awarded pursuant to the Zep LTIP will be issued with exercise prices equal to the fair market value of our common stock on the date of the grant, will vest proportionately over a four-year period, and will be exercisable for ten years from the grant date. Compensation expense related to these option grants will be recognized over the requisite service period. Restricted shares of Zep’s common stock awarded under the Zep LTIP will generally vest proportionally over a four-year period. The fair value of restricted stock awards will be measured based on their date of grant fair market value, and the related compensation expense will be recognized over a requisite service period equal to the award’s vesting period.

At the time of the spin-off, each of Acuity Brands and Zep’s current and former employees holding unvested shares of restricted stock of Acuity Brands received a dividend of one share of Zep restricted stock for each two shares of Acuity Brands unvested restricted stock held. The shares of Zep stock so received as a dividend are subject to the same restrictions and terms as the Acuity Brands restricted stock. The shares of Zep common stock will be fully paid and non-assessable and the holders thereof will not be entitled to preemptive rights. Restricted shares outstanding under the Zep LTIP totaled 0.4 million shares as a result of the October 31, 2007 dividend distribution.

At the time of the spin-off, Acuity Brands stock options held by Zep’s current employees (but not former employees) were generally converted to, and replaced by, Zep stock options in accordance with a conversion ratio such that the intrinsic value of the underlying awards remained unaffected by the spin-off. Also, Acuity Brands stock options held by current and former Acuity Brands employees and former Zep employees were adjusted with regard to the exercise price of and number of Acuity Brands shares underlying the Acuity Brands

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

stock options to maintain the intrinsic value of the options, pursuant to the applicable Acuity Brands long-term incentive plan. Options subjected to this conversion totaled 0.4 million. The exercise prices associated with converted options ranged from $4.62 to $10.71.

Effective immediately after the spin-off of the specialty products business, approximately 25,000 shares represented by restricted stock units were converted in the same manner as the above mentioned stock option awards.

Under the Zep LTIP and in connection with the spin-off, on November 5, 2007 our Board of Directors approved a restricted stock award and stock option grant to Zep’s officers and other key employees with an aggregate value of $8.4 million. Our Board of Directors determined that the majority of these awards would be issued on November 14, 2007. This award was composed of 1) an annual award that is typically granted in the fall of each calendar year in recognition of prior fiscal year performance, and 2) a one-time founders’ award intended to motivate recipients to contribute to the future growth and profitability of Zep. On November 14, 2007, we issued approximately 441,000 stock options and restricted stock awards in connection with performance provided by our employees during fiscal 2007, with approximately three-fourths of these awards composed of stock option grants. We issued approximately 927,000 stock options, restricted stock awards, and restricted stock units on that date in connection with the founders’ award, with approximately three-fourths of these awards composed of stock option grants. Additionally, on November 14, 2007 we issued each of our non-employee directors approximately 12,000 restricted stock awards.

Note 7: Commitments and Contingencies

Self-Insurance

It is the policy of Zep to self-insure, up to certain limits, risks including workers’ compensation, comprehensive general liability, and auto liability. Zep’s self-insured retention for each claim involving workers’ compensation, comprehensive general liability (including toxic tort and other product liability claims), and auto liability is limited to $0.5 million per occurrence of such claims. Based on Zep’s estimate of the aggregate liability for claims incurred, a provision for claims under this self-insured program is revised and recorded annually. This estimate is derived from both internal and external sources including but not limited to Zep’s independent actuary. Zep is also self-insured up to certain limits for certain other insurable risks, primarily physical loss to property ($0.5 million per occurrence) and business interruptions resulting from such loss and lasting three days or more in duration. Insurance coverage is maintained for catastrophic property and casualty exposures as well as those risks required to be insured by law or contract. Zep is fully self-insured for certain other types of liabilities, including environmental, product recall, patent infringement and errors and omissions.

Zep is also self-insured for the majority of its medical benefits plans. The Company estimates its aggregate liability for claims incurred by applying a lag factor to the Company’s historical claims and administrative cost experience. The appropriateness of the Company’s lag factor is evaluated and revised annually, as necessary.

Leases

Zep leases certain of its buildings and equipment under non-cancelable lease agreements. Minimum lease payments under noncancelable leases for years subsequent to August 31, 2007, are as follows: 2008—$8.2 million; 2009—$5.7 million; 2010—$4.5 million; 2011—$3.6 million; 2012—$3.1 million; after 2012—$7.1 million.

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Total rent expense was $7.6 million in 2007, $7.9 million in 2006, and $8.3 million in 2005.

Collective Bargaining Agreements

Approximately 8% of Zep’s total work force is covered by collective bargaining agreements. Collective bargaining agreements representing a de minimis amount (less than 1%) of the Company’s work force will expire within one year.

Litigation

Zep is subject to various legal claims arising in the normal course of business. Zep, as part of programs entered into by Acuity Brands, is self-insured up to specified limits for certain types of claims, including product liability, and is fully self-insured for certain other types of claims, including environmental, product recall, and patent infringement as part of the distribution agreement with Acuity Brands. Based on information currently available, it is the opinion of management that the ultimate resolution of pending and threatened legal proceedings will not have a material adverse effect on the results of operations, financial position, or cash flows of Zep. However, in the event of unexpected future developments, it is possible that the ultimate resolution of such matters, if unfavorable, could have a material adverse effect on results of operations, financial position, or cash flows of the Company in future periods. Zep establishes reserves for legal claims when the costs associated with the claims become probable and can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts reserved for such claims. However, the Company cannot make a meaningful estimate of actual costs to be incurred that could possibly be higher or lower than the amounts reserved.

Environmental Matters

In June 2007, we reached a final resolution of the investigation by the United States Department of Justice (DOJ) of certain environmental issues at our primary manufacturing facility, located in Atlanta, Georgia. The DOJ’s investigation focused principally on past conduct involving the inaccurate reporting of certain wastewater sampling results to the City of Atlanta and conduct that interfered with the City of Atlanta’s efforts to sample our wastewater pretreatment plant effluent. We entered a guilty plea to one felony count of failure to comply with our wastewater permit, agreed to pay a fine of $3.8 million and to be subject to a three-year probation period incorporating a compliance agreement with the United States Environmental Protection Agency (EPA). Under the compliance agreement, we will be required to maintain an enhanced compliance program. We recorded an additional $1.8 million charge in the second quarter of fiscal 2007 to reflect the entire $3.8 million fine. The

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

resolution of this matter is not expected to lead to a material loss of business, any disruption of production, or materially higher operating costs. However, in the event of our material breach of the compliance agreement, those consequences could occur.

With respect to the only active site involving property which we own and where we have been named as a potentially responsible party—our property on Seaboard Industrial Boulevard in Atlanta, Georgia—we and the current and former owners of adjoining properties had reached agreement to share the expected costs and responsibilities of implementing an approved corrective action plan under the Georgia Hazardous Response Act (HSRA) to periodically monitor property along a nearby stream for a period of five years ending in 2009. Subsequently, in connection with the DOJ investigation, we and the EPA each analyzed samples taken from certain sumps at the Seaboard facility. The sample results from some of the sump tests indicated the presence of certain hazardous substances. As a result, we notified the Georgia Environmental Protection Division and are conducting additional soil and groundwater studies pursuant to HSRA.

Guarantees and Indemnities

As further discussed in Note 1 of the Notes to Combined Financial Statements, in conjunction with the separation of their businesses, Zep Inc. and Acuity Brands entered into various agreements that address the allocation of assets and liabilities between them and that define their relationship after the separation, including the Agreement of Plan of Distribution, which we refer to as the distribution agreement, the tax disaffiliation agreement, the employee benefits agreement, and the transition services agreement. Included in these agreements are certain general indemnifications granted by Zep to Acuity Brands, and by Acuity Brands to Zep, as well as specific limited tax liability indemnifications in the event that the Distribution is deemed to be taxable, or if any of the internal reorganization steps taken to effect the Distribution are not deemed to be on a tax-free basis.

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

If the spin-off fails to qualify for tax-free treatment, a substantial corporate tax would be payable by Acuity Brands, measured by the difference between (1) the aggregate fair market value of the shares of our common stock on the date of the spin-off and (2) Acuity Brands’ adjusted tax basis in the shares of our common stock on the date of the spin-off. Even if the spin-off qualifies as tax-free, Acuity Brands nevertheless could incur a substantial corporate tax liability under Section 355(e) of the Internal Revenue Code, if 50 percent or more of our stock or the stock of Acuity Brands were to be acquired as part of a “plan (or a series of related transactions)” that includes the distribution. For this purpose, any acquisitions of the stock of Acuity Brands or of our stock that occur within two years before or after the spin-off are presumed to be part of such a plan, although Acuity Brands may be able to rebut that presumption. If such an acquisition of the stock of Acuity Brands or of our stock triggers the application of Section 355(e), Acuity Brands would recognize taxable gain as described above, but the spin-off would generally remain tax-free to the Acuity Brands stockholders. The corporate level tax would be payable by Acuity Brands. However, we have agreed under certain circumstances to indemnify Acuity Brands for this tax liability. We believe the payment of this obligation to be remote, and have not recorded any amounts in our combined financial statements.

Product Recall

The Company, in cooperation with the Consumer Product Safety Commission, initiated a voluntary product recall in May 2006 involving two Zep products packaged in approximately 15,000 five-gallon plastic pails manufactured by an outside supplier. The supplier informed Zep of the possibility that a crack could develop in the bottom of the pails. The two Zep products, which are potentially harmful in the event of skin contact, could leak from the cracked pails. In the third quarter of fiscal 2006, Acuity Brands recorded an accrual of $1.2 million for the estimated cost of the recall. At August 31, 2006, the Company had an accrued liability of $0.9 million with respect to this recall. During the third quarter of fiscal 2007, Acuity Brands was reimbursed for a portion of the costs incurred in connection with the recall by the manufacturer of the pails, and does not anticipate future costs associated with the recall will have a material impact on the operating costs of the Company.

Note 8: Special Charge

On February 22, 2005, Acuity Brands announced certain actions to accelerate its efforts to streamline and improve the effectiveness of its operations. As part of this program, Zep recorded a pretax charge of $4.5 million during fiscal year 2005 to reflect the costs associated with the elimination of approximately 70 salaried positions worldwide. This streamlining effort included facility consolidations and process improvement initiatives. The related charges included severance and related employee benefits.

The changes in the special charge reserve (included in Accrued compensation on the Combined Balance Sheets) during the year ended August 31, 2007 are summarized as follows:


Balance as of August 31, 2005	$	3,474
Payments made during the period		(1,245	)
Total non-cash items		(300	)

Balance as of August 31, 2006	$	1,929
Payments made during the period		(1,117	)

Balance as of August 31, 2007	$	812

Note 9: Income Taxes

Zep accounts for income taxes using the asset and liability approach as prescribed by SFAS No. 109, Accounting for Income Taxes. This approach requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns.

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Using the enacted tax rates in effect for the year in which the differences are expected to reverse, deferred tax liabilities and assets are determined based on the differences between the financial reporting and the tax basis of an asset or liability.

The provision for income taxes consists of the following components:


	Years Ended August 31,
	2007			2006		2005
Provision for current federal taxes	$	7,644		$	9,303	$	9,954
Provision for current state taxes		402			260		867
Provision for current foreign taxes		4,024			4,416		3,974
Provision for deferred taxes		(1,316	)		569		(2,751	)

Total provision for income taxes	$	10,754		$	14,548	$	12,044

A reconciliation from the federal statutory rate to the total provision for income taxes is as follows:


	Years Ended August 31,
	2007			2006		2005
Federal income tax computed at statutory rate	$	8,693		$	12,538	$	12,286
State income tax, net of federal income tax benefit		261			194		133
Foreign permanent differences and rate differential		209			542		57
Deferred Taxes		840			—		—
Change in Valuation Allowance		(65	)		630		(593	)
Repatriation of Foreign Earnings		420			541		—
Other, net		396			103		161

Total provision for income taxes	$	10,754		$	14,548	$	12,044

Components of the net deferred income tax asset at August 31, 2007 and 2006 include:


	Years Ended August 31,
	2007			2006
Deferred Income Tax Liabilities:
Depreciation	$	1,247		$	1,782
Goodwill and intangibles		681			228
Other liabilities		463			—

Total deferred income tax liabilities		2,391			2,010

Deferred Income Tax Assets:
Self-insurance		(4,420	)		(3,332	)
Deferred compensation		(3,981	)		(2,451	)
Bonuses		—			—
Foreign tax losses		(163	)		(380	)
Other accruals not yet deductible		(6,010	)		(4,892	)
Other assets		(1,134	)		(4,988	)

Total deferred income tax assets		(15,708	)		(16,043	)
Valuation allowance		722			787

Net deferred income tax asset	$	(12,595	)	$	(13,246	)

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

On October 22, 2004, the Jobs Creation Act was signed into law. The Jobs Creation Act created a temporary incentive for Unites States corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from its foreign subsidiaries. In August 2006, Acuity Brands repatriated a total of $9.2 million in Zep’s previously undistributed foreign earnings and basis under the Jobs Creation Act. The total income tax provision associated with the repatriation was approximately $0.5 million, which affected the current year’s effective tax rate by less than 1.5%. The repatriation executed under the Jobs Creation Act was done in response to the temporary benefit afforded by this legislation, which is not available in future periods.

Subsequent to the spin-off, Zep Inc. intends to indefinitely reinvest in its foreign subsidiaries all undistributed earnings of and original investments in such subsidiaries. If these earnings were distributed to the United States in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, the Company would be subject to additional United States income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes. Determination of the amount of unrecognized deferred income tax liability related to these earnings or investments is not practicable.

Deferred tax assets were partially offset by valuation allowances of $0.7 million and $0.8 million at August 31, 2007 and August 31, 2006, respectively. These allowances are required to reflect the net realizable value of certain foreign temporary differences and state tax credit carryforwards.

At August 31, 2007, foreign net operating loss carryforwards, which have no expiration, were approximately $0.6 million. Additionally, the Company has state tax credit carryforwards of approximately $1.3 million, which will expire between 2011 and 2016.

Note 10: Quarterly Financial Data (Unaudited)


	Net Sales		Gross Profit		Income Before Taxes		Net Income
2007
1st Quarter	$	136,871	$	78,638	$	3,906	$	2,432
2nd Quarter		131,050		74,511		2,578		910
3rd Quarter		145,397		84,915		6,361		3,550
4th Quarter		152,568		87,794		11,992		7,191

2006
1st Quarter	$	132,570	$	77,130	$	7,704	$	4,904
2nd Quarter		124,859		70,895		3,819		2,422
3rd Quarter		144,517		83,570		12,069		7,669
4th Quarter		150,138		85,595		12,231		6,280

Zep Inc.

NOTES TO COMBINED FINANCIAL STATEMENTS—(Continued)

(Dollar amounts in thousands, except share and per-share data and as indicated)

Note 11: Geographic Distribution of Operations

The geographic distribution of Zep’s net sales, operating profit, and long-lived assets is summarized in the following table for the years ended August 31:


	2007		2006		2005
Net sales (1)
Domestic (2)	$	453,606	$	449,336	$	437,610
International		112,280		102,748		97,342

	$	565,886	$	552,084	$	534,952

Operating profit (3)
Domestic (2)	$	21,221	$	30,110	$	27,926
International		8,428		9,939		9,308

	$	29,649	$	40,049	$	37,234

Long-lived assets (4)
Domestic (2)	$	52,295	$	55,230	$	57,524
International		6,233		5,994		5,909

	$	58,528	$	61,224	$	63,433

(1)	Net sales are attributed to each country based on the selling location. Sales generated in Canada approximated 11% of total net sales for the years ended August 31, 2007 and 2006, and 10% of total net sales for the year ended August 31, 2005.

(2)	Domestic amounts include net sales, operating profit, and long-lived assets for U.S. based operations.

(3)	Certain costs related to corporate functions performed within our Atlanta, Georgia based headquarters and supporting offices have not been allocated among our international operating results.

(4)	Long-lived assets include net property, plant, and equipment, long-term deferred income tax assets, and other long-term assets.

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

None.

Item 9a. Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of August 31, 2007 pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of August 31, 2007, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or that is reasonably likely to materially affect the Company’s internal control over financial reporting.

This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.

Item 9b. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Executive Officers and Directors

The following tables contain information concerning the executive officers and directors of Zep Inc.:

Executive Officers


Name	Age	Position	Position with Zep and Principal Business Affiliation During Past Five Years
John K. Morgan	53	Chairman, President, and Chief Executive Officer	Mr. Morgan is our Chairman, President and Chief Executive Officer and has served in these positions since October 2007. He was elected President and Chief Executive Officer of Acuity Specialty Products in July 2007. He served as an Executive Vice President of Acuity Brands until October 2007. He served as President and Chief Executive Officer of Acuity Brands Lighting, Inc. from August 2005 to July 2007. He served as President and Chief Development Officer of Acuity Brands from January 2004 to August 2005, as Senior Executive Vice President and Chief Operating Officer from June 2002 until January 2004, and as Executive Vice President from December 2001 until June 2002.

Mark R. Bachmann	49	Executive Vice President and Chief Financial Officer	Mr. Bachmann is our Executive Vice President and Chief Financial Officer, a position he has held since October 2007. He served Acuity Specialty Products as Executive Vice President and Chief Financial Officer from 2005 to October 2007, as Executive Vice President, Business Transformation from 2004 to 2005, and as Executive Vice President of Supply Chain from 2003 to 2004. Mr. Bachmann served as President of the Enforcer Products from 1999 to 2003 and as Vice President and Controller of National Service Industries, Inc. from 1996 to 1999.

William A. (Bill) Holl	50	Executive Vice President and Chief Commercial Officer	Mr. Holl is our Executive Vice President and Chief Commercial Officer, a position he has held since October 2007. He served as Executive Vice President and Chief Commercial Officer of Acuity Specialty Products from July 2007 to October 2007. He served as Executive Vice President of Acuity Brands and as President and Chief Executive Officer of Acuity Specialty Products from June 2006 to July 2007. From September 2003 to November 2005, he served as Chief Executive Officer of DS Waters of America, LP, a home-and-office water delivery company. He began his career with Coca-Cola Enterprises, Inc. serving as Senior Vice President, Marketing and Business Development from July 2001 to September 2003, as President of its Eastern North America Group from January 2000 to June 2001, and in various other positions from 1986 to December 1999.

Directors


Name	Age	Term Expires	Position	Principal Business Affiliation During Past Five Years
J. Veronica Biggins	60	2009	Director	Ms Biggins has served as a Director since October 2007. Ms. Biggins has served as a Director of HNCL Search, an executive search firm, since September 2007, prior to which she served as a senior partner of Heidrick & Struggles International, an executive search firm, since 1995. Ms. Biggins is a director of Avnet Corporation and AirTran Holdings Inc.

Earnest W. Deavenport, Jr.	69	2010	Director	Mr. Deavenport has served as a Director since October 2007. He is the retired Chairman and Chief Executive Officer of Eastman Chemical Company, serving in those positions from 1994 to 2002. Mr. Deavenport served as a director of Acuity Brands from June 2002 until October 2007. Mr. Deavenport is a director of King Pharmaceuticals, Inc. and Regions Financial, Inc.

Directors


Name	Age	Term Expires	Position	Position with Zep and Principal Business Affiliation During Past Five Years
Kenyon W. Murphy	51	2009	Director	Mr. Murphy has served as a Director since July 2007. Mr. Murphy has served Acuity Brands as Executive Vice President, Chief Administrative Officer, and General Counsel since September 2006. He served Acuity Brands as Senior Vice President and General Counsel from November 2001 until September 2006.

Sidney J. Nurkin	66	2010	Director	Mr. Nurkin has served as a Director since October 2007. Mr. Nurkin serves as Counsel to the law firm of Alston & Bird, LLP, a national law firm headquartered in Atlanta. Prior to his retirement on December 31, 2006, Mr. Nurkin was a Senior Partner in the law firm for more than five years. Mr. Nurkin is a director of Dayton Superior Corporation, a publicly owned manufacturing company.

Joseph Squicciarino	51	2011	Director	Mr. Squicciarino has served as a Director since October 2007. Mr. Squicciarino has served as the Chief Financial Officer of King Pharmaceuticals, Inc. since June 2005. Prior to joining King Pharmaceuticals, he served as Chief Financial Officer—North America for Revlon, Inc. from March 2005 until June 2005 and as Chief Financial Officer—International for Revlon International, Inc. from February 2003 until March 2005. He held the position of Group Controller Pharmaceuticals—Europe, Middle East, Africa with Johnson & Johnson from October 2001 until October 2002.

John K. Morgan has served since July 2007 as a director with a term expiring in 2011 as well as an executive officer. His business experience is referenced on the previous page in “Executive Officers.”

Board of Directors

As provided in our certificate of incorporation, our board of directors is divided into three classes. Directors in each class initially will serve until the annual meeting of stockholders held in the year in which the term for such class expires and will serve thereafter for three-year terms. The board of directors consists of six directors. Mr. Deavenport serves as our lead director.

Our board of directors has adopted Corporate Governance Guidelines that, along with the charters of our board committees and our Code of Conduct for employees and directors, provides the framework for the governance of our company.

Audit Committee

We have a separately-designated audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Joseph Squicciarino, Kenyon W. Murphy, and Sidney J. Nurkin serve as the initial members of the Audit Committee. Our Board of Directors has determined that Mr. Squicciarino qualifies as an audit committee financial expert and is an independent director.

Initially, we are relying on an exemption to the Audit Committee independence standards in Rule 10A-3(b)(1)(iv). We do not believe this reliance materially adversely affects the ability of the Audit Committee to act independently or satisfy its duties in accordance with the requirements of the Exchange Act.

Stockholder Director Nomination Process

The Nominating and Corporate Governance Committee will consider recommendations for director nominees from stockholders made in writing and addressed to the attention of the Chairman of the Nominating and Corporate Governance Committee, c/o Corporate Secretary, Zep Inc., 1310 Seaboard Industrial Boulevard, Atlanta, Georgia 30318. The Nominating and Corporate Governance Committee will consider such recommendations on the same basis as those from other sources.

Our By-Laws establish an advance notice procedure for stockholder proposals to be brought before any annual meeting of stockholders and for nominations by stockholders of candidates for election as directors at an annual meeting. Subject to any other applicable requirements, including, without limitation, Rule 14a-8 under the Exchange Act, nominations of persons for election to the Board of Directors and the proposal of business to be transacted by the stockholders may be made at an annual meeting of stockholders by any of our stockholders of record who was a stockholder of record at the time of the giving of notice for the annual meeting, who is entitled to vote at the meeting and who has complied with our notice procedures.

For nominations or other business to be properly brought before an annual meeting by a stockholder:

•

the stockholder must have given timely notice in writing to our Secretary;

•

such business must be a proper matter for stockholder action under Delaware Law;

•

if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided us with a Solicitation Notice (as defined below), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Company’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of our voting shares reasonably believed by such stockholder or beneficial holder to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice; and

•

if no Solicitation Notice relating to the proposal has been timely provided, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice.

To be timely, a stockholder’s notice must be delivered to our Secretary at our principal executive offices not later than the close of business on the later of (i) the 90th day prior to such annual meeting or (ii) the 10th day following the day on which public an Announcement of the date of such meeting is first made.

A stockholder’s notice must set forth each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Exchange Act and such person’s written consent to serve as a director if elected.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Company’s directors, officers and persons who beneficially own more than 10% of the Company’s common stock are required by Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) to file reports of ownership and changes in ownership of the Company’s common stock with the SEC, the New York Stock Exchange, and the Company. Since Zep was not a publicly traded company, such persons were not subject to the requirements of Section 16(a) of the Exchange Act during the fiscal period ended August 31, 2007.

Code of Ethics and Business Conduct

We have adopted a written Code of Ethics and Business Conduct that applies to all of the Company’s directors, officers, and employees, including its principal executive officer and senior financial officers. This Code of Ethics and Business Conduct is being filed as Exhibit 14 to this Annual Report on Form 10-K. The Code of Ethics and Business Conduct and our Corporate Governance Guidelines are available free of charge through the “Corporate Governance” link on our website at www.zepinc.com. Additionally, the charters for our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, and the rules and procedures relating thereto, are available free of charge through the “Corporate Governance” link on our website. Each of the Code of Ethics and Business Conduct, the Corporate Governance Guidelines, and the aforementioned committee charters is available in print to any of our stockholders that request such document by contacting the Company’s Investor Relations department.

Item 11. Executive Compensation

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed with management the following Compensation Discussion and Analysis section. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Zep Inc.’s annual report on Form 10-K for fiscal 2007 for filing with the SEC.

The Compensation Committee

Earnest W. Deavenport, Jr., Chairman

Kenyon W. Murphy

J. Veronica Biggins

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis describes the compensation philosophy applied by Acuity Brands to our named executive officers with respect to fiscal 2007, and the ways in which we anticipate that Zep’s compensation philosophy will differ after we become an independent public company. As our programs initially will be similar to those applicable to executives of Acuity Brands, we do not anticipate that there will be many differences immediately following the spin-off. The boards of directors of Acuity Brands and Zep are expected to review the impact of the spin-off on all facets of compensation during fiscal year 2008 and to make any appropriate adjustments.

For purposes of this Compensation Discussion and Analysis, our named executive officers for fiscal 2007 are Messrs. Morgan, Bachmann, Holl, Brown and Whitaker. Of these named executive officers, only Mr. Morgan was previously a named executive officer of Acuity Brands. Mr. Holl was an executive officer of Acuity Brands until July 23, 2007, and Messrs. Bachmann, Brown and Whitaker were non-executive officer employees of Acuity Brands in fiscal 2007. As a result, the compensation of Messrs. Bachmann, Brown and Whitaker was not subject to the executive compensation programs of Acuity Brands or the direct oversight of the Acuity Brands compensation committee. Throughout this Compensation Discussion and Analysis, references to the fiscal 2007 executive compensation program are relevant only with respect to Messrs. Morgan and Holl, and the compensation elements applicable to the other individuals are described separately where appropriate.

Compensation Philosophy

Our philosophy is to compensate management and other key associates through a combination of base salary and variable incentive compensation based on the Company’s performance. To create a true pay-for-performance

environment, total compensation is comprised of median base salary plus significant at-risk performance-based variable annual and long-term incentive compensation. Management aspires for Zep to be a premier industrial company capable of delivering consistent upper quartile performance to our stockholders.

Historically Acuity Brands’ executive compensation program was, and our executive compensation program will continue to be, guided by the following principles, which are intended to support each company’s philosophy of providing a strong relationship between executive compensation and the creation of stockholder value:

•

Total compensation programs should be designed to strengthen the relationship between pay and performance, with a resulting emphasis on variable, rather than fixed, forms of compensation;

•

Compensation should generally increase with position and responsibility. Total compensation should be higher for individuals with greater responsibility and greater ability to influence the company’s results; and

•

Management should focus on the long-term interests of stockholders.

The executive compensation program is designed to:

•

Attract and retain executives by providing a competitive reward and recognition program that is driven by our success;

•

Provide rewards to executives who create value for stockholders;

•

Consistently recognize and reward superior performers, measured by achievement of results and demonstration of desired behaviors; and

•

Provide a framework for the fair and consistent administration of pay policies.

General Compensation Levels

Historically. The total direct compensation (base salary and annual and long-term incentive) opportunities offered to Acuity Brands’ executive officers have been designed to ensure that they are competitive with market practices, support Acuity Brands’ executive recruitment and retention objectives, and are internally equitable among executives.

In determining total direct compensation opportunities, the Acuity Brands compensation committee considers: compensation information and input provided by its compensation consultant, Towers Perrin; the board of directors’ evaluation of the chief executive officer; and the chief executive officer’s performance review and recommendation for each other executive officer. The market data provides competitive compensation information for positions of comparable responsibilities with comparably-sized manufacturing companies that are representative of the companies with whom Acuity Brands competes for executive talent.

Going Forward. It is expected that Zep’s compensation committee will continue to take the approach described above in establishing compensation levels. Zep has not yet selected a compensation consultant.

Peer Group Analysis

Historically. Acuity Brands annually compares the various elements of its executive compensation program with respect to its chief executive officer in order to gauge its compensation levels relative to that of the market and its competitors through the use of publicly available market surveys, total compensation studies and long-term incentive compensation analyses, provided by the compensation committee’s compensation consultant, Towers Perrin. Acuity Brands performs similar comparisons for its other executive officers periodically.

During fiscal 2007, Towers Perrin provided compensation data for purposes of the chief executive officer’s compensation review. The compensation data was obtained from the Towers Perrin 2006 Compensation Data Bank Executive Compensation Database and the Watson Wyatt 2006/07 Top Management Compensation Calculator. In each case, the total sample of survey participants was narrowed to include only those companies with revenues comparable to Acuity Brands (approximately $2.1 billion).

For purposes of the chief executive officer’s compensation, Towers Perrin compiled a list of peer companies with whom Acuity Brands competes for executive talent. These companies represent a diverse, general industry composite, including consumer products, chemicals, industrial manufacturing, and/or retail/wholesale/trade companies with revenues ranging from $650 million to $5.6 billion. For fiscal 2007, this peer group was comprised of the following companies:


Advanced Medical Optics, Inc.	Cytec Industries Inc.	MEMC Electronic Materials, Inc.
AK Steel Holding Corporation	Dura Automotive Systems, Inc.	Phillips-Van Heusen Corporation
American Greetings Corporation	Ecolab Inc.	Ralcorp Holdings, Inc.
Ann Taylor Stores Corporation	Gateway, Inc.	Sensient Technologies Corporation
Blyth, Inc.	The Genlyte Group Incorporated	Steelcase Inc.
The Brink’s Company	Georgia Gulf Corporation	Sybron Dental Specialities Inc.
Chemtura Corporation	Graco Inc.	Thomas & Betts Corporation
Columbia Sportswear Company	Hubbell Incorporated	The Toro Company
Cooper Industries, Ltd.	Jack in the Box Inc.	Tupperware Brands Corporation
Covance Inc.	JLG Industries, Inc.	Western Digital Corporation

Going Forward. We anticipate that we, either directly or through the compensation committee’s compensation consultant, will use several methods to compare our executive compensation practices to those of other companies. These include: using publicly available market surveys to match the roles of our named executive officers to roles in the surveys; conducting total compensation studies; and conducting an analysis of our named executive officers’ compensation for use in establishing a budget for overall long-term incentive awards and setting compensation for the named executive officers. Zep has not yet selected a compensation consultant.

For further perspective, we expect to evaluate the base salary, annual incentive awards, and long-term incentives provided to the named executive officers of peer companies in terms of revenue and industry. We expect to extract this data from publicly available sources with assistance from a compensation consultant.

Weighting and Selection of Elements of Compensation

Historically. The Acuity Brands compensation committee determines the mix and weightings of each of the compensation elements by considering comparative compensation data as described above. Generally, in fiscal 2007 and the past several years, the most significant percentage of targeted compensation was allocated to long- term incentive awards. Base salary is the only portion of compensation that is assured. While the compensation committee has established a framework to assure that a significant portion of overall target total direct compensation is at risk for senior executives, actual amounts earned depend on annual performance of the business and the individual.

The compensation committee uses its judgment and discretion in deciding the mix and value of total long-term incentive compensation. The compensation committee uses restricted stock as well as options to motivate

executives to think like stockholders and to focus on the long-term performance of the business. All long-term incentives are performance-based and payout is entirely determined by company performance and, for business unit executives, business unit performance, subject to adjustment based on individual performance. Once the applicable performance criteria have been satisfied, an award of stock options or time-vesting restricted stock is made to the participants. Restricted stock is designed to mirror stockholder interests and make executives sensitive to upside potential and shareholder gains, as well as to downside risk, because a change in the stock price affects overall compensation.

Going Forward. It is expected that the Zep compensation committee will take a similar approach in determining the weighting and mix of each element of compensation.

Role of Compensation Consultants

Historically. Under its charter, the Acuity Brands compensation committee is authorized to engage outside advisors at Acuity Brands’ expense. The Acuity Brands compensation committee engaged the compensation consulting firm of Towers Perrin to advise the committee regarding compensation of Acuity Brands’ executive officers and non-employee directors, and other compensation-related matters such as benefit plans. The Acuity Brands compensation committee annually approves an engagement letter with Towers Perrin that describes the duties to be performed by Towers Perrin during the fiscal year and the related costs. The chairman of Acuity Brands’ compensation committee may make additional requests of Towers Perrin during the year on behalf of the committee. Management may periodically engage Towers Perrin to perform research to support matters to be presented to the compensation committee by management. Under the engagement letter for fiscal 2007, Towers Perrin performed or is expected to perform the following services, in addition to preparation for and attendance at meetings of Acuity Brands’ compensation committee:

•

Due diligence regarding officer compensation: market pricing analysis for the chief executive officer; president and chief executive officer of Acuity Brands Lighting; president and chief executive officer of Acuity Specialty Products; chief financial officer; and chief administrative officer and general counsel.

•

Proxy statement disclosure: review the Acuity Brands draft proxy statement and provide input and suggestions regarding potential modifications; assist management with the development of materials required by new Securities and Exchange Commission regulations (including the Compensation Discussion and Analysis report).

•

Miscellaneous: throughout the year, provide the Acuity Brands compensation committee and management with assistance and support on various issues, including (for example) new hire packages, pay or practices benchmarking assistance for the Acuity Brands’ business units, providing data or consulting advice regarding severance and/or change in control practices, updates related to evolving governance trends, board compensation analyses, and other issues.

Going Forward. Zep has not yet selected a compensation consultant, but expects to retain one that will provide similar services to those currently being provided to Acuity Brands by Towers Perrin.

Elements of Executive Compensation

Historically. Acuity Brands uses several compensation elements in its executive compensation program, including:

•

Base salary,

•

Annual cash incentives (such as the annual cash award opportunities available under the various incentive plans, performance bonuses and retention bonuses),

•

Long-term incentives, and

•

Post-termination compensation (such as severance and change in control arrangements).

The compensation program has also included minimal perquisites and other personal benefits (only a charitable contribution match in fiscal 2007).

Going Forward. We expect to use a mix of compensation elements as described below. Each element of compensation is designed to encourage and foster the following behavior and results:


Element of Compensation		Objective
Base Salary		• Provide a competitive level of secure cash compensation; and • Reward individual performance, level of experience and responsibility.

Performance-Based Annual/Short-Term Incentive		• Provide variable pay opportunity for short-term performance; and • Reward individual performance and company or business performance.

Performance-Based Long-Term Incentive		• Provide variable pay opportunity for long-term performance; • Reward individual performance and overall company performance; and • Align executives with interests of stockholders.

Zep anticipates that it will also provide post-termination compensation to its executive officers.

Base Salary

Historically. Acuity Brands has set base salary to be competitive with the general market. The base salary is designed to attract talented executives and provide a secure base of cash compensation. Salary adjustments are made annually as merited or on promotion to a position of increased responsibility. The base salaries of executives are set near or below the 50^th percentile with variable compensation dependent on Acuity Brands’ performance. In fiscal 2007, the compensation committee did not award a salary increase to Messrs. Morgan or Holl.

Going Forward. We anticipate that, as was the case at Acuity Brands, the base salary of each of our named executive officers will be reviewed following the end of the fiscal year and may be adjusted each October. The base salaries paid to the named executive officers during fiscal 2007 are reported in the Fiscal 2007 Summary Compensation Table.

Short-Term Incentives

Historically. Performance-based annual incentive compensation is a key component of Acuity Brands’ executive compensation strategy designed as a significant at-risk component of overall compensation.

The annual incentive award is payable in cash under the Acuity Brands, Inc. Management Compensation and Incentive Plan (the Annual Incentive Plan), which was approved by Acuity Brands’ stockholders. This plan was designed to motivate executive officers to attain specific short-term performance objectives that, in turn, further Acuity Brands’ long-term objectives.

At the start of a fiscal year, an annual incentive target, stated as a percentage of base salary, is determined for each participant. Measures of company and business unit financial performance for the fiscal year are also determined. The actual award earned is based on the results of financial performance for the fiscal year. The actual award earned also takes into account individual performance for the fiscal year. Finally, the actual award is subject to the application of negative discretion by the Acuity Brands compensation committee.

Financial Performance

Generally, at the beginning of the year, the Acuity Brands compensation committee selects the annual financial performance measures and sets the annual financial performance goals at the threshold, target and maximum levels, which determine payouts. Achieving target financial performance would yield an award of 100% (200% for named executive officers, subject to negative discretion) of the target amount set at the beginning of the year. Actual company financial performance for the fiscal year determines the total amount of dollars available for the incentive pool for annual incentive awards to all eligible employees, including the named executive officers. Financial performance percentages are interpolated for performance falling between stated performance measures.

When deciding what financial measures to use at the start of a fiscal year, and the threshold, target and maximum levels of achievement of those measures, the Acuity Brands compensation committee carefully considers the state of Acuity Brands’ business and what financial measures are most likely to focus the participants, including the named executive officers, on making decisions that deliver short-term results aligned with long-term goals. The committee considers management’s recommendations regarding the appropriate financial measures. The financial measures are chosen from an array of possible financial measures included in the Annual Incentive Plan.

Financial performance is measured separately for Acuity Brands as a whole and for each business unit. Depending on the named executive officer’s responsibilities, the calculation of his annual incentive award is measured and determined based on company-wide performance or business unit performance, as appropriate for that named executive officer.

Individual Performance

Performance of individual participants in the Annual Incentive Plan, including the named executive officers, is evaluated after the end of the fiscal year by (1) comparing actual performance to daily job responsibilities and pre-established individual objectives and (2) considering, on a qualitative basis, whether the individual’s performance reflects Acuity Brands’ corporate values and business philosophies, such as continuous improvement. In the case of Messrs. Morgan and Holl, the individual objectives were set after individual discussion with the chief executive officer. Individual objectives for Messrs. Bachmann, Brown, and Whitaker were determined in discussions with their immediate supervisors. Each participant, including a named executive officer, is given an individual performance management process rating (a PMP Rating), which is translated to a PMP Payout Percentage. The table below sets forth the range of possible PMP Payout Percentages for all participants.


	Range of PMP Payout Percentage
PMP Rating	Minimum		Maximum
4.75–5.00 (Exceptional)	110	%	133	%
3.75–4.74 (Superior)	90	%	120	%
2.75–3.74 (Commendable)	70	%	110	%
1.75–2.74 (Fair)	0	%	70	%
Below 1.75 (Unacceptable)	0	%	0	%

The maximum PMP Payout Percentage that can be earned by a named executive officer is 120%. The compensation committee selects the precise payout percentage within the range based on factors such as level of responsibility and impact on the Company’s performance with calibrations made across comparable positions to achieve consistency of the percentages selected.

Determination of Award

The level of financial performance is determined after the end of the fiscal year based on actual business results compared to the financial measures set at the beginning of the fiscal year. In addition, the chief executive officer or the immediate supervisor annually prepares a written report for the compensation committee, summarizing the individual performance goals and achievements of the named executive officers. The compensation committee reviews the written report and takes it into consideration in determining the awards. The amount of each actual annual incentive award, including the awards to the named executive officers, is determined as follows:

Base Salary x (Annual Incentive Target % x Financial Performance %) x PMP Payout %

The Financial Performance Payout Percentage at target yields an award of 200% for executive officers of Acuity Brands, including Messrs. Morgan and Holl, as compared to 100% for other participants in the Annual Incentive Plan. The greater percentage is designed to permit the compensation committee to apply negative discretion as it considers appropriate in accordance with the requirements of Section 162(m) of the Internal Revenue Code.

For example, for Mr. Morgan the calculation for his bonus award, assuming that company performance was at target and that he received a PMP Rating of “commendable” with a PMP Payout Percentage of 100%, would be as follows:

$500,000 x (65% x 200%) x 100% = $650,000

The compensation committee then determines the final award by applying negative discretion as it considers appropriate in accordance with the requirements of Section 162(m) of the Internal Revenue Code.

Fiscal 2007 Awards

The performance measures and performance level required for fiscal 2007 awards were established by the Acuity Brands compensation committee and ratified by the board of directors early in the fiscal year and were intended to drive business and individual performance supporting Acuity Brands’ long-term financial goals and resulting in market appreciation for stockholders. For fiscal 2007, the performance measures and weighting selected were as follows:

•

operating profit (34%);

•

operating profit margin (33%); and

•

cash flow (33%).

The appropriate performance levels at threshold, target and maximum were derived from Acuity Brands’ long-term financial performance targets, which are in the upper quartile of financial performance for industrial companies, and therefore differed from the operating plan targets for fiscal 2007. In setting the performance level for fiscal 2007, the compensation committee began with the financial performance for fiscal 2006 and generally required an increase in performance to achieve the target and maximum awards, although decreases were specified if justified by economic conditions or by corporate actions designed to achieve long-term financial performance improvement. The maximum award is designed to reward only exceptional performance.

Performance Measures

The following tables outline the fiscal 2007 performance measures, the weighting for each performance measure and the threshold, target and maximum performance levels, reflected as a percentage change from fiscal 2006 financial performance, as determined by the Acuity Brands compensation committee.


						Performance Objectives % Change from Fiscal 2006						Actual Performance % Change from Fiscal 2006
	Weighting		Fiscal 2006			Threshold		Target		Maximum		Actual Performance % Change from Fiscal 2006
Acuity Brands Lighting (1)
Operating Profit	34	%	$	181		(3.3	)%	7.0	%	17.1	%	39.2	%
Operating Profit Margin	33	%		9.9	%	(5.1	)%	1.0	%	9.1	%	29.3	%
Cash Flow	33	%	$	184		(6.5	)%	1.6	%	13.6	%	48.9	%
Acuity Specialty Products (2)
Operating Profit	34	%	$	49		(3.1	)%	7.1	%	22.4	%	(6.1	)%
Operating Profit Margin	33	%		8.8	%	(4.5	)%	2.3	%	11.4	%	(6.8	)%
Cash Flow	33	%	$	48		(14.6	)%	(2.1	)%	14.6	%	4.2	%

Financial Performance Payout Percentage						0	%	200	%	400	%	*

(1)	Under which the fiscal 2007 annual incentive award was determined for Mr. Morgan (dollars in millions).

(2)	Under which the fiscal 2007 annual incentive award was determined for Messrs. Bachmann, Holl, Brown and Whitaker (dollars in millions).

For each set of performance measures presented above, the award formula Financial Performance Payout Percentage for named executive officers is 0% for threshold performance, 200% for target performance, and 400% for maximum performance. The Financial Performance Payout Percentage used in the award formula cannot exceed 400%, even if actual performance exceeds the level of performance corresponding to the maximum payout percentage. Actual business unit Financial Performance Payout Percentages were as follows:


Acuity Brands Lighting	600.0	%	(reduced to 400%)
Acuity Specialty Products	90.0	%

As expected, the Compensation Committee exercised negative discretion in determining the final fiscal 2007 awards. The following table outlines the threshold, target and maximum awards under the Annual Incentive Plan for each of the named executive officers for fiscal 2007 as a dollar amount (in thousands). In setting the threshold, target, and maximum levels, Acuity Brands expected that the Compensation Committee would exercise negative discretion in determining the final awards. For example, in the last four fiscal years, the Compensation Committee exercised negative discretion to reduce Mr. Morgan’s award between 23% and 54%. See “Tax Deductibility Policy.”


Named Executive Officer	Individual Target %	Threshold($)	Target($)	Maximum($)	Actual Annual Incentive Bonus($)	Discretionary Bonus ($)
John K. Morgan	65	0	650	1,300	1,000	0
Mark R. Bachmann	45	0	131	392	65	66
William A. (Bill) Holl (1)	60	0	456	912	228	0
Cedric M. Brown	40	0	80	240	25	55
C. Francis Whitaker, III	40	0	68	204	21	14

(1)	Pursuant to Mr. Holl’s employment agreement, his annual incentive was amended to provide for a payment equal to the target amount (at 100% rather that 200% as reflected in the formulas) notwithstanding the level of performance.

The threshold, target and maximum awards that could have been earned under the Annual Incentive Plan for fiscal year 2007 for each of the named executive officers, expressed as a dollar amount, are also contained in the Fiscal 2007 Grant of Plan-Based Awards table.

At its meeting held on September 28, 2007, based on the compensation committee’s certification of performance with respect to fiscal 2007 annual incentive targets using information prepared by the Acuity Brands finance department, the Acuity Brands board approved the compensation committee’s recommendations with respect to fiscal 2007 annual incentives for the named executive officers. Based on the achievement of the Acuity Brands Lighting performance measures and his PMP Rating, Mr. Morgan was eligible to receive the maximum annual incentive award of $1.3 million. In accordance with past practice, the compensation committee exercised negative discretion to reduce the amount of the award to $1.0 million as shown in the table above. As previously described, Mr. Holl’s annual incentive award was determined pursuant to his employment agreement. Awards for Messrs. Bachmann, Brown, and Whitaker were based on above-target achievement of Acuity Specialty Products’ cash flow performance measure and on their individual PMP Ratings.

In addition, the compensation committee recommended, and the board approved, the grant of discretionary bonuses to Messrs. Bachmann, Brown, and Whitaker in recognition of their individual performance and their assumption of additional responsibilities during fiscal 2007. These discretionary bonuses are shown in the table above.

Going Forward. We have adopted an annual incentive plan. Each of our named executive officers will participate in the plan at a level commensurate with his post-spin position of responsibility. We expect the performance measures and considerations in exercising negative discretion generally mirror those of Acuity Brands.

The Zep compensation committee has approved participants, targets, and measures for annual incentives to be paid in fiscal 2009 for fiscal 2008 performance. The approved measures are net sales, net income, and cash flow from operating activities.

Long-Term Incentives

Historically. A substantial portion of the total direct compensation of Acuity Brands’ named executive officers was delivered in the form of long-term equity, including stock options and restricted stock. Equity incentive awards are generally granted on an annual basis and are allocated based on the achievement of company-wide financial targets, business unit operating targets, if applicable, and individual performance ratings. The awards were made under the Acuity Brands, Inc. Long-Term Incentive Plan (the LTIP), which was approved by stockholders.

The purpose of the LTIP is to enable executive officers to accumulate capital through future managerial performance, which the Acuity Brands compensation committee believes contributes to the future success of its businesses. The LTIP creates a pool of equity available for annual grants to all eligible employees, including the named executive officers. The committee believes that awards under the LTIP promote a long-term focus on our profitability due to the multi-year vesting period under the plan.

The LTIP has a one-year performance period. At the beginning of each year, the Acuity Brands compensation committee selects performance criteria, upon which awards under the LTIP are based, from the array of performance measures contained in the LTIP. For those participants employed in a business unit, financial performance is first measured at the company level and then by the contribution of the business unit towards achievement of the financial performance.

Target awards are determined as a percentage of each executive officer’s salary and are denominated in dollars. Target financial performance yields an award of 200% for executive officers of Acuity Brands, as compared to 100% for other participants in the LTIP. The greater percentage is designed to facilitate the Compensation Committee’s application of negative discretion as it considers appropriate in accordance with the

provisions of Section 162(m) of the Code. The total long-term award payments to all eligible employees cannot exceed 8% of consolidated operating profit before expenses associated with the LTIP.

Final awards for each individual are determined by adjusting the target award based on Acuity Brands’ actual performance against the established performance target for the year (after adjustments), both at the company level and, if applicable, the business unit. Final awards take into account each individual’s PMP Rating. Individual performance is evaluated in the same manner as under the Annual Incentive Plan, except that the payout factor is as follows.


PMP Rating		PMP Payout Factor
Outstanding		Up to 150%
Above Standard		Up to 125%
Standard		Up to 100%
Below Standard		0%

The Compensation Committee selects the precise payout percentage within the range based on factors such as level of responsibility and impact on the Company’s performance with calibrations made across comparable positions to achieve consistency of the percentages selected.

The Acuity Brands compensation committee, in its discretion, taking into account the recommendations of the chief executive officer, may adjust awards under the LTIP and may approve the payment of awards where performance would otherwise not meet the minimum criteria set for payment of awards, although it rarely does so. In fiscal 2006, the compensation committee used negative discretion to reduce Mr. Morgan’s award, but did not approve any payment of awards not warranted by financial performance.

The final dollar-denominated awards are then converted into either stock options or time-vesting restricted stock, as determined by the compensation committee. The stock options have an exercise price equal to the closing price on the date of grant and generally vest over a three-year period. The restricted stock generally vests over a four-year period. Dividends are paid on the restricted stock.

Fiscal 2007 Awards

For fiscal 2007, the performance criterion for LTIP awards was Earnings Per Share (EPS). The target EPS was $2.65, with a threshold of $2.00 and a maximum of $3.00. For named executive officers, the award formula payout percentage is 0% for threshold performance, 200% for target performance, and 300% for maximum performance. The payout percentage used in the award formula cannot exceed 300%, even if actual performance exceeds the level of performance corresponding to the maximum payout percentage. The final awards for participants employed at a business unit are also adjusted based on the applicable business achievement of its target for operating profit.

The appropriate EPS targets were derived from Acuity Brands’ long-term growth targets, which are in the upper quartile of financial performance for industrial companies, and therefore differ from the operating plan targets for fiscal 2007. In setting the performance level, the compensation committee begins with the financial performance for the prior fiscal year and generally requires an increase in performance to achieve the target and maximum awards. The target award represented a 13% increase over the prior year and the maximum award represented a 28% increase over the prior year. The maximum award is designed to reward only exceptional performance.

The following table outlines the award targets and 2007 actual award values under the LTIP for each of the named executive officers for fiscal 2007 as a dollar amount (in thousands). The target and maximum awards

listed assume that the PMP Rating was “Outstanding” (150%). In setting these levels, it is expected that the Compensation Committee would exercise negative discretion in determining the final awards for the named executive officers as the Acuity Brands compensation committee have done historically. See “Tax Deductibility Policy.”


Named Executive Officer	Individual Target %	Threshold ($)	Target ($)	Maximum ($)	Actual ($)*
John K. Morgan	360	0	1,800	2,700	1,000
Mark R. Bachmann	60	0	174	261	98
William A. (Bill) Holl	360	0	1,368	2,052	257
Cedric M. Brown	60	0	120	180	66
C. Francis Whitaker, III	60	0	102	153	57

*	The awards were made by the Compensation Committee of Zep Inc. under the Zep Inc. Long-Term Incentive Plan.

The threshold, target and maximum awards that can be earned under the LTIP for fiscal 2007 for each of the named executive officers are contained in the Fiscal 2007 Grant of Plan-Based Awards table. The actual awards earned by Messrs. Morgan and Holl were based on the Acuity Brands achievement of $3.37 in diluted earnings per share and the compensation committee’s application of negative discretion in determining the final amount of each award.

Going Forward. We adopted a long-term incentive plan. Each of our named executive officers will participate under the plan commensurate with his post-spin position of responsibility. We expect the performance measures and considerations in exercising negative discretion generally mirror those of Acuity Brands.

Equity Award Grant Practices

Historically. Annual equity awards are approved by the compensation committee and the board of directors at their regularly scheduled quarterly meeting following the end of the fiscal year. The chief executive officer may make interim equity awards from a previously approved discretionary share pool on the first business day of each fiscal quarter based on prescribed criteria established by the compensation committee. Acuity Brands does not time the granting of its equity awards to the disclosure of material information.

Going Forward. In order to standardize the grant dates for our equity awards and to ensure that there is no potential discretion in selecting the timing of the awards and specific grant dates, we intend to adopt procedures which generally mirror those of Acuity Brands.

We have approved grants of restricted stock and stock options with a value of at least $7.9 million in the aggregate to executive officers and certain other key employees of Zep during November 2007. Approximately $2.5 million and $1.4 million of such equity awards have been allocated to Mr. Morgan and Mr. Holl, respectively. The remainder of such equity awards was allocated among our executive officers and key employees. The foregoing awards consist of founder’s awards in connection with the spin-off and long-term incentive awards for fiscal 2007 performance.

From time to time, we intend to grant equity awards to Zep executive officers outside the annual award process, such as in connection with the hiring of a new executive, for retention purposes, to reward exemplary performance, and/or for promotional recognition.

Executive Perquisites

Historically. Perquisites and other personal benefits comprised a minimal portion of Acuity Brands’ executive compensation program. The only perquisite or other personal benefit provided by Acuity Brands to executive officers in fiscal 2007 was a charitable contributions match up to a specified amount.

Going Forward. We expect to take the same approach as Acuity Brands with respect to granting minimal perquisites or other personal benefits to executives. We do not expect to match charitable contributions.

Retirement Benefits

Historically. Acuity Brands provides retirement benefits under a number of defined benefit retirement plans. Acuity Brands froze the pension benefits under certain plans as of December 31, 2002 for all participants. This means that, while participants retain the pension benefits already accrued, no additional pension benefits will accrue after the effective date of the freeze. However, executives formerly covered by the frozen pension plan are receiving a supplemental annual contribution under a deferred compensation plan which is designed to replace the accrual under the frozen pension plan.

Effective January 1, 2003, Acuity Brands implemented the Acuity Brands, Inc. 2002 Supplemental Executive Retirement Plan (the 2002 SERP) that provides a monthly benefit equal to 1.6% of average base salary and bonus (using the highest three consecutive years of remuneration out of the ten years preceding an executive’s retirement) multiplied by years of service as an executive officer of Acuity Brands (up to a maximum of 10 years) divided by 12. Benefits are generally payable for a 15-year period following retirement (as defined in the 2002 SERP), subject to such alternative forms of payment as may be determined by Acuity Brands. Messrs. Morgan and Holl participated in the 2002 SERP. Mr. Holl’s benefit was forfeited in July 2007 upon his transfer to a non-eligible position prior to becoming vested in his benefit. Mr. Holl will be credited with an amount in the deferred compensation plan equal to the present value of his accrued benefit under the 2002 SERP. See Deferred Compensation Plans below.

Acuity Brands also maintains several deferred compensation plans which are described under “Executive Compensation—Fiscal 2007 Nonqualified Deferred Compensation.” The plans are designed to provide eligible participants an opportunity to defer compensation on a tax effective basis. Under certain plan provisions, Acuity Brands makes contributions to participants’ accounts.

Going Forward. We will assume the separate defined contribution 401(k) plan that currently covers Zep employees and establish a separate nonqualified deferred compensation plan.

We do not anticipate that we will offer a pension plan or a supplemental executive retirement plan.

401(k) Plan

Zep has adopted and assumed the separate defined contribution 401(k) plan that covers employees and former employees of the specialty products business. The 401(k) plan provides for employee pre-tax contributions and employer matching contributions. The account balances of our employees in the 401(k) plan as of the date of the distribution will continue to be held under the 401(k) plan. During a transition period, an Acuity Brands stock account and Zep stock account will be maintained under the plan. Our employees will be able to transfer amounts out of their Acuity Brands stock account, but they will not be able to add to their Acuity Brands stock account.

Deferred Compensation Plans

Zep has established a nonqualified deferred compensation plan covering our executives that is substantially similar to certain deferred compensation plans currently maintained by Acuity Brands covering such executives,

including company contributions to participants’ accounts. The accounts and benefits of our employees (including former employees who were employed by the specialty products business and the corporate office) will be transferred to the new plan. It is also anticipated that the deferred compensation plan will have enhanced terms for executive officers. The enhanced benefit is designed to offset the benefit lost from the lack of a supplemental executive retirement plan.

Mr. Morgan will be credited annually with an amount in the deferred compensation plan expected to be established by Zep equal to a benefit of actuarial equivalent present value to the additional annual benefit he would have earned under the 2002 SERP had he remained employed as an executive officer by Acuity Brands and continued to be covered under the 2002 SERP. Mr. Holl received a credit of $55,645 in the deferred compensation plan, which represents the present value of his accrued benefit under the 2002 SERP at the time of his transfer to a non-eligible position prior to becoming vested in his benefit.

Change in Control Agreements

Historically. Acuity Brands has change in control agreements with its named executive officers which provide for separation payments and benefits, consistent with common market practices among Acuity Brands’ peers, upon qualifying terminations of employment in connection with a change in control of Acuity Brands.

Going Forward. We will have change in control agreements with named executive officers similar to those offered by Acuity Brands. The board of directors intends for the change in control agreements to provide the named executive officers some measure of security against the possibility of employment loss that may result following a change in control of Zep in order that they may devote their energies to meeting the business objectives and needs of Zep and its stockholders. For additional information on the change in control arrangements see “Executive Compensation—Potential Payments upon Termination—Change in Control Agreements.”

Severance Agreements

Historically. To ensure that Acuity Brands is offering a competitive executive compensation program, Acuity Brands believes it is important to provide reasonable severance benefits to its named executive officers.

Going Forward. We will enter into a separate severance arrangement with each of our executives, including the named executive officers.

The severance agreements contain restrictive covenants with respect to confidentiality, non-solicitation, and non-competition, and are subject to the execution of a release. We will pay reasonable legal fees and related expenses incurred by an executive who is successful to a significant extent in enforcing his rights under the severance agreements. The severance agreements are effective for a rolling two-year term, which will automatically extend each day for an additional day unless terminated by either party, in which case they will continue for two years after the notice of termination or for three years following a change in control. For additional information on the severance arrangements see “Executive Compensation—Potential Payments upon Termination—Severance Arrangements.”

Equity Ownership Requirements

Zep will adopt stock ownership requirements for our executive officers, including our named executive officers. These requirements will encourage our executives to increase their ownership of Zep common stock to a minimum market value equal to two times base salary (three times base salary in the case of our chief executive officer) over a period of five years. For these purposes, ownership includes stock held directly, interests in restricted stock, restricted stock units, stock acquired through our employee stock purchase plan, and investments

in our stock through the Zep 401(k) plan. Stock options are not taken into consideration in meeting the ownership requirements.

The requirements are intended to ensure that our executive officers maintain an equity interest in our company at a level sufficient to assure our stockholders of their commitment to value creation, while addressing their individual needs for portfolio diversification.

Tax Deductibility Policy

Section 162(m) of the Internal Revenue Code generally limits the tax deductibility of compensation of the chief executive officer and our four other executive officers who are the highest paid and employed at year-end to $1 million per year unless the compensation qualifies as “performance-based” compensation. While Acuity Brands and Zep do not design compensation programs solely for tax purposes, both design other plans to be tax efficient where possible. However, the Acuity Brands and Zep compensation committees may exercise discretion in those instances when the mechanistic approaches under tax laws would compromise the interest of stockholders. As a result, to maximize the tax efficiency of Acuity Brands’ compensation programs, incentive targets for executive officers of Acuity Brands are twice that of other participants in fiscal 2007, and Zep anticipates setting similar targets. While the Acuity Brands compensation committee does not intend that an executive officer will earn such amount, the program is designed to permit the compensation committee to reward outstanding performance while retaining the tax deductibility of the award. The compensation committee continues to have the ability to use negative discretion in calculating an appropriate award.

Zep expects to seek and obtain stockholder approval of its annual and long-term incentive plans as required by Section 162(m) in order to preserve the tax deductibility of qualifying compensation paid under those plans.

Role of Executive Officers

Historically. As discussed above, the chief executive officer reports to the Acuity Brands compensation committee on his evaluations of the senior executives, including the other named executive officers. He makes compensation recommendations for the other named executive officers with respect to base salary, merit increases and annual and long-term incentives, which are the basis of discussion with the compensation committee. The chief financial officer evaluates the financial implications of any proposed compensation committee action. Executive officer level human resource personnel have also provided information to the compensation committee.

Meetings of the compensation committee are regularly attended by: the chief executive officer; the chief administrative officer and general counsel; the executive level human resource officer; and the secretary. On occasion, the chief financial officer also attends the meeting.

Going Forward. It is expected that Zep executive officers will play a similar role in determining executive compensation.

Compensation of Directors

Non-Employee Directors

Historically. Acuity Brands provided each non-employee director with an annual director fee, which included meeting fees for a specified number of board and committee meetings. The program was designed to achieve the following goals: compensation should fairly pay directors for work required for a company of Acuity Brands’ size and scope; compensation should align directors’ interests with the long-term interests of stockholders; and the structure of the compensation should be simple, transparent, and easy for stockholders to understand.

Going Forward. Zep will provide each non-employee director with an annual director fee, which includes meeting fees for a specified number of board and committee meetings. Similar to Acuity Brands, the program is designed to achieve the following goals: compensation should fairly pay directors for work required for a company of our size and scope; compensation should align directors’ interests with the long-term interests of stockholders; and the structure of the compensation should be simple, transparent, and easy for stockholders to understand.

While Zep’s director compensation program will initially be substantially similar to that of Acuity Brands, we may modify our program following the distribution date following the review by an external consultant.

Annual Director Fees

Historically. Beginning in January 2007, each non-employee director of Acuity Brands received an annual director fee in the amount of $130,000, which included the meeting fees for the first five board meetings and the first five meetings attended for each committee, and an additional fee of $5,000 for serving as chairman of a committee. Non-employee directors received $2,000 for each board meeting attended in excess of a total of five board meetings per year and $1,500 for each committee meeting attended in excess of a total of five committee meetings of each committee per year. Fifty percent of the annual fee, or $65,000, was required to be deferred under the terms of the deferred compensation plan described below, and the remaining fees could be deferred at the election of the director.

Prior to January 2007, each non-employee director received an annual retainer of $70,000, meeting fees of $2,000 for each board meeting attended and $1,500 for each committee meeting attended, and an additional fee of $5,000 for serving as the chairman of a committee. Fifty percent of the retainer, or $35,000, was required to be deferred under the terms of the deferred compensation plan, and the remaining fees could be deferred at the election of the director. In addition, each non-employee director received an annual stock option grant as described below.

Going Forward. Each non-employee director will receive an annual director fee in the amount of $65,000, which includes the meeting fees for the first five board meetings and the first five meetings attended of each committee, and an additional fee of $5,000 for serving as the chairman of a committee. Each non-employee director will receive $1,000 for each board meeting attended in excess of a total of five board meetings per year and $750 for each committee meeting attended in excess of a total of five meetings of each committee per year. Fifty percent of the annual fee, or $32,500, is required to be deferred into share units under the terms of the deferred compensation plan described below, and the remaining fees may be deferred at the election of the director.

Directors who are employees will receive no additional compensation for services as a director or as a member of a committee of our board.

Stock Option Grants

Historically. Acuity Brands granted each non-employee director stock options for the purchase of 1,500 shares of Acuity Brands common stock annually on the day of the annual meeting of stockholders with an exercise price equal to the fair market value on the grant date. The options became exercisable after one year, remained exercisable for a period of ten years from the grant date, and expired at the earlier of the expiration date or three years following retirement from the board. Beginning January 2007, the non-employee directors’ plan was amended to provide that no further annual grants of stock options would be made to non-employee directors.

Mr. Deavenport’s outstanding stock options will remain stock options to acquire Acuity Brands common stock and will be adjusted in accordance with the conversion ratio for Acuity Brands options.

Going Forward. Equity awards may be granted to directors under the long-term incentive plan that was adopted by Zep. Currently, we do not anticipate automatic annual grants under the new compensation arrangement for non-employee directors.

One-Time Grants

Historically. Upon the initial election of a non-employee director to the board, the director received a onetime credit of 1,000 deferred stock units to his deferred compensation account.

Going Forward. We approved equity awards valued at $150,000 to each non-employee director during November 2007. Accordingly, each non-employee director received a restricted stock award of 11,980 shares on November 14, 2007.

Deferred Compensation Plan

Historically. Non-employee directors of Acuity Brands were required to defer one-half of their annual director fee and could elect to defer the remaining portion of the annual fee and any chairman or meeting fees pursuant to a deferred compensation plan for non-employee directors. The deferred amounts could be invested in deferred stock units to be paid in shares at retirement or credited to an interest-bearing account to be paid in cash at retirement. Dividend equivalents on deferred stock units were credited to the interest-bearing account.

Going Forward. We has adopted a deferred compensation plan for the benefit of our non-employee directors. Under this plan, each director will have one-half of his annual fee automatically deferred to the plan and may elect to defer the remaining portion of his annual fee and any chairman or meeting fees to the plan. The director’s mandatory deferral will automatically be invested in deferred stock units that will be equivalent to the value and return on shares of Zep common stock. The director’s optional deferral may be invested in an interest-bearing account or in deferred stock units at the election of the director. The director’s account will generally be payable on or after retirement from the board. Amounts invested in deferred stock units will be paid in shares of Zep common stock and amounts deferred to the interest-bearing account will be paid in cash.

The accounts currently held under the Acuity Brands’ non-employee directors deferred compensation plan by non-employee directors of Acuity Brands who will become our directors will be transferred to, and assumed by, us. As of the distribution date, the value of the Acuity Brands deferred stock units credited to such directors at the date of the spin-off will remain in Acuity Brands deferred stock units to be paid at retirement in Acuity Brands common stock, and future deferred stock units credited to the plan will be Zep deferred stock units to be paid at retirement in Zep common stock.

Stock Ownership Requirement

Historically. Each non-employee director has been subject to a stock ownership requirement that requires the director attain ownership in Acuity Brands common stock valued at two times the expected annual director fee. For purposes of the ownership requirement, deferred stock units are considered.

Going Forward. Zep expects to establish stock ownership requirements for non-employee directors similar to those of Acuity Brands.

EXECUTIVE COMPENSATION

Set forth below is information concerning the fiscal 2007 compensation for Zep named executive officers. All compensation amounts set forth in the following tables represent compensation paid to the applicable named executive officer in connection with his service to Acuity Brands. As described in the Compensation Discussion and Analysis, the compensation and benefits provided to the named executive officers by Zep may differ from the compensation and benefits historically provided to the named executive officers by Acuity Brands because

historical compensation was determined by Acuity Brands and future compensation will be determined based on compensation policies, programs and procedures to be established by our compensation committee.

Fiscal 2007 Summary Compensation Table

The following table presents information concerning compensation paid to the named executive officers in fiscal 2007.


Name and Principal Position	Year	Salary ($)		Bonus ($)			Stock Awards ($)(1)		Option Awards ($)(1)		Non- Equity Incentive Plan Compen- sation ($)(2)		Change in Pension Value and Nonquali- fied Deferred Compen- sation Earnings ($)(3)		All Other Compen- sation ($) (4)		Total ($)
John K. Morgan (5) Chairman, President and Chief Executive Officer	2007	$	500,000	$	-0-		$	641,989	$	524,000	$	1,000,000	$	273,421	$	8,500	$	2,947,910

Mark R. Bachmann Executive Vice President and Chief Financial Officer	2007		290,053		66,000	(6)		210,665		13,698		65,000		14,338		48,024		707,778

William A. (Bill) Holl (7) Executive Vice President and Chief Commercial Officer	2007		380,000		-0-			273,308		-0-		228,000		3,406		2,850		887,564

Cedric M. Brown Senior Vice President, Supply Chain	2007		197,504		55,000	(6)		54,241		-0-		25,000		5,519		27,943		365,207

C. Francis Whitaker, III Vice President, General Counsel, and Secretary	2007		169,500		14,000	(6)		27,739		-0-		21,000		-0-		2,550		234,789

(1)

The values for equity-based awards in this column represent the cost recognized by Acuity Brands for financial statement reporting purposes for fiscal 2007 in accordance with SFAS No. 123(R) for awards granted in fiscal 2007 and prior years. Pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to value awards granted prior to fiscal 2007 can be found in Note 6 of the Notes to Combined Financial Statements. Restricted stock awards granted in fiscal 2007 are valued at the closing price on the New York Stock Exchange on the grant date.

(2)

Represents incentive payments under the Incentive Plan. Mr. Morgan was eligible to receive the maximum annual incentive award of $1,300,000 based on the performance of Acuity Brands Lighting. In accordance with past practice, the compensation committee of Acuity Brands exercised negative discretion to reduce the amount of the award. Mr. Holl’s annual incentive was determined pursuant to his employment agreement. The remaining named executive officers received no annual incentive with respect to the performance of Acuity Specialty Products regarding operating profit and operating profit margin and a partial annual incentive for above-target performance with respect to cash flow.

(3)

The amounts shown reflect the above-market portion of interest earned in the Acuity Brands deferred compensation plans calculated by comparing each plan’s effective interest rate for fiscal 2007 to 120% of the applicable federal long-term rate, with compounding, at the time the interest formula of each plan was established. Above-market earnings for the Acuity Brands deferred compensation plans were $5,772 for Mr. Morgan, $10,133 for Mr. Bachmann, $3,406 for Mr. Holl, and $5,519 for Mr. Brown. The amount for Mr. Morgan also includes $267,649, representing the fiscal 2007 increase in the actuarial present value of his benefit at age 60 under the 2002 SERP. The amount for Mr. Bachmann also includes $4,205, representing the fiscal 2007 increase in the actuarial present value of his benefit at age 65 under the Acuity Brands, Inc. Pension Plan C. For more information about these plans, see “—Pension Benefits in Fiscal 2007” and “—Fiscal 2007 Nonqualified Deferred Compensation.”

(4)

The amounts shown include primarily company contributions to 401(k) plans, each less than $10,000 other than for Mr. Brown who received a match of $10,446. Amounts shown also include contributions to the deferred compensation plan of $38,535 for Mr. Bachmann and $17,497 for Mr. Brown. See “—Fiscal 2007 Nonqualified Deferred Compensation” for additional information about the plan. Perquisites for the remaining named executive officers did not exceed $10,000 in the aggregate.

(5)	Mr. Morgan was elected President and Chief Executive Officer of Acuity Specialty Products effective July 23, 2007 and was subsequently elected Chairman effective October 31, 2007. For additional information, see “Management—Executive Officers and Directors.”

(6)	Messrs. Bachmann, Brown, and Whitaker received discretionary bonuses in recognition of individual performance and the assumption of additional responsibilities during fiscal 2007.

(7)	Mr. Holl was elected President and Chief Executive Officer of Acuity Specialty Products effective June 6, 2006 and was elected Executive Vice President and Chief Commercial Officer effective July 23, 2007. For additional information, see “Management—Executive Officers and Directors.”

Fiscal 2007 Grants of Plan-Based Awards

The following table provides information about equity and non-equity awards granted to the named executive officers during fiscal 2007.


Name	Grant Date	Committee Action Date if Different from Grant Date		Estimated Possible Payouts under Non-Equity Incentive Plan Awards (1)						Estimated Possible Payouts under Equity Incentive Plan Awards (2)						All Other Stock Awards: Number of Shares of Stock or Units (#)(3)	Grant Date Fair Value of Stock and Option Awards ($) (4)
Name	Grant Date	Committee Action Date if Different from Grant Date		Threshold ($)		Target ($)		Maximum ($)		Threshold ($)		Target ($)		Maximum ($)			Grant Date Fair Value of Stock and Option Awards ($) (4)
John K. Morgan	— — 9/29/06 7/23/07	— — 9/27/06	(5)	$	-0-	$	650,000	$	1,300,000	$	0-	$	1,800,000	$	2,700,000	24,000 15,810	$	1,089,600 1,000,141
Mark R. Bachmann	— — 9/29/06	— — 9/27/06	(5)		-0-		130,524		391,572		-0-		174,032		261,048	3,800		172,520
William A. (Bill) Holl (6)	— — 9/29/06	— — 9/27/06	(5)		-0-		456,000		912,000		-0-		1,368,000		2,052,000	2,500		113,500
Cedric M. Brown	— — 9/29/06 3/1/07 6/1/07	— — 9/27/06	(5)		-0-		80,000		240,000		-0-		120,000		180,000	1,500 1,000 500		68,100 55,060 30,840

C. Francis Whitaker, III	— — 9/29/06	— — 9/27/06	(5)		-0-		68,000		204,000		-0-		102,000		153,000	1,500		68,100

(1)

These columns show the potential value of the payout for each named executive officer under the Annual Incentive Plan if the threshold, target, or maximum goals are achieved. For Messrs. Morgan and Holl, Acuity Brands expected that the compensation committee would exercise negative discretion in determining the final award. See “Compensation Discussion and Analysis” for a description of the plan. See also “Fiscal 2007 Summary Compensation Table.”

(2)

These columns show the potential value, in dollars, of the equity payout for each named executive officer under the LTIP if the threshold, target, or maximum goals are achieved. For Messrs. Morgan and Holl, Acuity Brands expected that the compensation committee would exercise negative discretion in determining the final award. See “Compensation Discussion and Analysis” for a description of the plan and the actual amounts earned.

(3)

This column shows the number of restricted shares granted in fiscal 2007 to the named executive officers. The shares of restricted stock granted on September 29, 2006 were generally in connection with achievement of performance goals in fiscal 2006 under the LTIP. Mr. Holl joined the company during the fourth quarter of fiscal 2006 and was not eligible for the full grant under the LTIP. Grants to Mr. Brown in March and June 2007 were in recognition of his assumption of additional responsibilities. The July 2007 award for Mr. Morgan, granted in connection with his being named President and Chief Executive Officer of Acuity Specialty Products, vests ratably in three equal annual installments beginning one year from the grant date. All of the other grants vest ratably in four equal annual installments beginning one year from the grant date. Dividends are paid on the restricted shares at the same rate as for other outstanding shares.

(4)

This column shows the full grant date fair value of the restricted stock awards under SFAS No. 123(R) granted to the named executive officers in fiscal 2007. The grant date fair value of restricted stock awards is calculated using the closing price of Acuity Brands stock on the New York Stock Exchange on the grant date.

(5)	The Acuity Brands compensation committee approved the awards on September 27, 2006. The Acuity Brands board of directors ratified the awards on September 29, 2006, which is the grant date for the awards.

(6)	According to the terms of the employment agreement with Mr. Holl, effective as of July 23, 2007, his annual incentive was amended to provide for a payment equal to target (at 100% rather than 200% as reflected in the formula) notwithstanding the level of performance. See “—Employment Contracts.”

Outstanding Equity Awards at Fiscal 2007 Year-End

The following table provides information on the current holdings of stock options and restricted stock awards by the named executive officers at fiscal year end. This table includes unexercised and unvested option awards, unvested restricted stock awards, and the target value of equity awards for fiscal 2007 performance, which were not determinable as of fiscal 2007 year end. Each equity grant is shown separately for each named executive officer. All options were equitably adjusted after the spin-off of the company from Acuity Brands in October 2007 to increase the number of shares subject to the option and to decrease the exercise price to maintain the same intrinsic value of the options. The number shown in the table represents the information as of fiscal year end prior to the spin-off adjustments. The vesting schedule for each grant is shown following the table, based on the option or stock award grant date. The option exercise prices shown below are the closing market price of Acuity Brands stock on the New York Stock Exchange on the grant date.


	Option Awards						Stock Awards
Name	Option Grant Date	Number of Securities Under- lying Unexer- cised Options Exercis- able (#)	Number of Securities Underlying Unexercised Options Unexercis- able (#)	Option Exercise Price ($)		Option Expiration Date	Stock Award Grant Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)(1)		Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that Have Not Vested (#)(2)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights that Have Not Vested ($)(3)
John K. Morgan	12/18/03 7/29/05 12/1/05	60,474 76,573 2,667	-0- 80,000 5,333	$	23.69 29.18 31.99	12/17/13 7/28/15 11/30/15	10/24/00 12/18/03 1/20/04 1/6/05 9/29/06 7/23/07 —	3,228 10,532 20,000 6,250 24,000 15,810	$	169,599 553,351 1,050,800 328,375 1,260,960 830,657	-0-	$	1,800,000

Mark R. Bachmann	9/22/98 10/7/99 1/5/00 12/18/03	3,091 4,682 3,219 15,948	-0- -0- -0- -0-	$	29.95 28.03 23.65 23.69	9/21/08 10/6/09 1/4/10 12/17/13	10/24/00 12/18/03 1/6/05 12/1/05 6/29/06 9/29/06 —	1,508 5,271 1,750 2,850 3,750 3,800	$	79,230 276,938 91,945 149,739 197,025 199,652	-0-	$	174,032

William A. (Bill) Holl							6/6/06 9/29/06 —	18,750 2,500	$	985,125 131,350	-0-	$	1,368,000

Cedric M. Brown							12/18/03 1/6/05 12/1/05 9/29/06 3/1/07 6/1/07 —	901 624 270 1,500 1,000 500	$	47,338 32,785 14,186 78,810 52,540 26,270	-0-	$	120,000

C. Francis Whitaker, III							12/18/03 1/6/05 12/1/05 3/30/06 9/29/06 —	165 124 150 525 1,500	$	8,669 6,515 7,881 27,583 78,810	-0-	$	102,000

(1)	The market value is calculated as the product of (a) $52.54 per share, the closing market price of Acuity Brands stock as of August 31, 2007, the last day of the fiscal year, multiplied by (b) the number of shares that have not vested.

(2)

The number of shares to be awarded for fiscal 2007 performance under the LTIP was not determinable as of fiscal 2007 year end. The actual number of shares that will be earned by the named executive officers depends on the achievement of the LTIP performance goals and any negative discretion applied, as discussed under “Compensation Discussion and Analysis.”

(3)

The amounts in this column represent the target payout value for the equity to be awarded for fiscal 2007 performance under the LTIP. Target payout values are also included in the Fiscal 2007 Grants of Plan-Based Awards table. The actual payout value that will be earned by the named executive officers depends on the achievement of the LTIP performance goals and any negative discretion applied, as discussed under “Compensation Discussion and Analysis.” The amounts actually earned by the named executive officers are also discussed under “Compensation Discussion and Analysis.”


Option Awards Vesting Schedule		Stock Awards Vesting Schedule
Grant Date	Vesting Schedule	Grant Date	Vesting Schedule
9/22/98	¹/4 per year beginning one year from grant date	10/24/00	¹/4 per year beginning 11/29/04
10/7/99	¹/4 per year beginning one year from grant date		¹/4 per year beginning 1/20/05
1/5/00	¹/4 per year beginning one year from grant date		¹/4 per year beginning 11/25/05
12/18/03	¹/3 per year beginning one year from grant date		¹/4 per year beginning 12/10/05
7/29/05 12/1/05	¹/4 per year beginning one year from grant date ¹/3 per year beginning one year from grant date	12/18/03	¹/2 each two years and four years from grant date 100% four years from grant date (Morgan, Bachmann)
		1/20/04	¹/4 per year beginning one year from grant date
		1/6/05	¹/4 per year beginning one year from grant date
		12/1/05	¹/4 per year beginning one year from grant date
		3/30/06	¹/4 per year beginning one year from grant date
		6/6/06	¹/4 per year beginning one year from grant date
		6/29/06	¹/4 per year beginning one year from grant date
		9/29/06	¹/4 per year beginning one year from grant date
		3/1/07	¹/4 per year beginning one year from grant date
		6/1/07	¹/4 per year beginning one year from grant date
		7/23/07	¹/3 per year beginning one year from grant date

Option Exercises and Stock Vested in Fiscal 2007

The following table provides information for the named executive officers on (1) stock option exercises during fiscal 2007, including the number of shares acquired upon exercise and the value realized, and (2) the number of shares acquired upon the vesting of restricted stock awards and the value realized, each before payment of any applicable withholding tax and broker commissions.


	Option Awards			Stock Awards
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)(1)		Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)(2)
John K. Morgan	97,238	$	3,292,197	10,031	$	526,742
Mark R. Bachmann	17,686		287,125	6,083		329,859
William A. (Bill) Holl	-0-		-0-	6,250		385,500
Cedric M. Brown	1,292		57,739	553		28,610
C. Francis Whitaker, III	-0-		-0-	288		15,367

(1)	The value realized is the difference between the closing market price on the date of exercise and the exercise price, multiplied by the number of options exercised.

(2)	The value realized is the closing market price on the day the stock awards vest, multiplied by the total number of shares vesting.

Pension Benefits in Fiscal 2007

The table below sets forth information on the supplemental retirement plan and pension benefits for named executive officers under the following plans:

2002 Acuity Brands, Inc. Supplemental Executive Retirement Plan. The 2002 Acuity Brands, Inc. Supplemental Executive Retirement Plan (the 2002 SERP) is an unfunded, nonqualified retirement benefit plan that is offered to executive officers of Acuity Brands to provide retirement benefits above amounts available under Acuity Brands’ tax-qualified defined contribution plans. Benefits payable under the SERP are paid for 180 months commencing on the executive’s normal retirement date, which is defined as retirement at age 60, in a monthly amount equal to 1.6% of the executive’s average annual compensation multiplied by the executive’s years of credited service and divided by 12. Average annual compensation is defined as the average of the executive’s salary and bonus for the three highest consecutive calendar years during the ten years preceding the executive’s retirement, death, or other termination of service. An executive is credited with one year of credited service for each plan year in which the executive serves as an executive officer of Acuity Brands on a fulltime basis. Total years of credited service cannot exceed ten years, although compensation earned after completing ten years of credited service may be counted for purposes of determining the executive’s average annual compensation and accrued benefit under the 2002 SERP. A reduced retirement benefit can commence between ages 55 and 60. Acuity Brands does not have a policy for granting extra years of credited service under the 2002 SERP, except in connection with a change in control as provided in an executive’s change in control agreement.

Mr. Holl participated in the 2002 SERP for the period during which he served as an executive officer of Acuity Brands. Mr. Holl forfeited his accumulated benefit, which was unvested, in connection with his transfer to a non-executive officer position in July 2007. Messrs. Bachmann, Brown, and Whitaker have not served Acuity Brands in executive officer positions and, therefore, have not participated in the 2002 SERP.

Mr. Morgan no longer participates in the 2002 SERP. Zep does not expect to establish a nonqualified supplemental executive retirement plan for its executive officers, but will sponsor a nonqualified deferred savings plan, which is discussed below.

Former Acuity Brands, Inc Pension Plan C. The Acuity Brands, Inc. Pension Plan C (the Pension Plan) was a qualified defined benefit retirement plan under which additional accruals were frozen effective December 31, 2002, and the assets and liabilities of the Pension Plan were merged into the Pension Plan for Hourly Employees of Emergency Lighting Division of Acuity Lighting Group, Inc. Mr. Bachmann is the only Zep executive officer who was a participant in the Pension Plan. The accrued benefit under the Pension Plan is based on the executive’s final average compensation and credited service as of December 31, 2002. Final average compensation is defined as 1/12^th of the average of the participant’s highest three consecutive years of compensation out of his last ten years of compensation. Compensation is determined by the participant’s calendar year earnings as shown in Box 1 of Form W-2, increased for earnings deferred into certain tax-qualified and nonqualified plans of Acuity Brands and decreased for certain other employer contributions or payments that might be included in Box 1 but are not considered as compensation under the Pension Plan. For participants becoming covered by the Pension Plan on or after January 1, 1994, as was Mr. Bachmann, the normal retirement benefit under the Pension Plan is calculated as years of credited service times the sum of 1/2% of final average compensation and 1/2% of final average compensation in excess of covered compensation. The normal form of benefit payment is a single life annuity with 120 payments guaranteed. The normal retirement age as defined in the Pension Plan is age 65. Participants vest in their Pension Plan benefit after five years of credited service.

The amounts reported in the table below equal the present value of the accumulated benefit at May 31, 2007, the date used by our actuaries in determining fiscal year expense. The assumptions used to calculate the present value of the accumulated benefit are described in the footnotes to the table.


Name	Plan Name	Number of Years Credited Service (#)	Present Value of Accumulated Benefit ($)		Payments During Last Fiscal Year ($)
John K. Morgan (1)	2002 SERP	5.75	$	552,379	$	–0–
Mark R. Bachmann (2)	Pension Plan	6.00		37,690		–0–
William A. (Bill) Holl	NA	NA		NA		NA
Cedric M. Brown	NA	NA		NA		NA
C. Francis Whitaker, III	NA	NA		NA		NA

(1)

Mr. Morgan’s accumulated benefit in the 2002 SERP is based on service and earnings (base salary and bonus, as described above) considered by the 2002 SERP for the period through May 31, 2007. The present value has been calculated assuming Mr. Morgan’s benefit is payable commencing at age 60 and that the benefit is payable in 180 monthly payments as described above. The interest rate assumed in the calculation is 6.00%. The post-retirement mortality assumption is based on the RP2000 mortality table with mortality improvements projected for 5 years. At August 31, 2007, Mr. Morgan is not eligible for an early retirement benefit under the 2002 SERP.

(2)

Mr. Bachmann’s accumulated benefit in the Pension Plan is based on service and earnings (as described above) considered by the Pension Plan for the period through December 31, 2002. The present value has been calculated assuming Mr. Bachmann’s benefit commences at age 65 and that the benefit is payable under the form of annuity described above. The interest rate assumed in the calculation is 6.00%. The post-retirement mortality assumption is based on the RP2000 mortality table with mortality improvements projected for 5 years and collar adjustments. At August 31, 2007, Mr. Bachmann is not eligible for an early retirement benefit under the Pension Plan.

Fiscal 2007 Nonqualified Deferred Compensation

The table below provides information on the nonqualified deferred compensation of the named executive officers in fiscal 2007 under the plans described below.

2005 Acuity Brands, Inc. Supplemental Deferred Savings Plan. The 2005 Acuity Brands, Inc. Supplemental Deferred Savings Plan (the 2005 SDSP) is an unfunded nonqualified plan under which key employees, including the named executive officers, are able to annually defer up to 50% of salary and bonus as cash units. The 2005 SDSP replaced the 2001 SDSP (described below) and is designed to comply with certain new tax law requirements, including Section 409A of the Internal Revenue Code (Section 409A).

Deferred cash units earn interest income on the daily outstanding balance in the account based on the prime rate, an “above-market interest rate” as defined by the SEC. Interest is credited daily and is compounded annually. Contributions made in or after 2005 may be paid in a lump sum or in 10 annual installments at the executive’s election. The executive may direct that his deferrals and related earnings be credited to up to three accounts to be distributed during his employment (in-service accounts). In-service accounts may be distributed in a lump sum or up to ten annual installments no earlier than two years following the last deferral to the account. The executive may change the form of distribution twice during the period up to one year prior to termination or retirement, with the new distribution being delayed at least an additional five years in accordance with Section 409A. Except for the period during which an executive serves as an executive officer of Acuity Brands and is eligible for the 2002 SERP, as discussed above, an executive is eligible for a company match of 25% of his deferrals up to a maximum of 5% of compensation (salary and bonus) and is eligible for a supplemental company contribution of 3% of compensation. Executives vest in company contributions 50% upon attaining age 55 and completing at least five years of service, with vesting thereafter of an additional 10% each year up to 100% with

10 years of service. Vested company contributions are only eligible to be distributed at or following termination. Mr. Bachmann receives an annual contribution to the 2005 SDSP, which are immediately vested, in replacement of benefits lost when Pension Plan C was frozen.

At the time of the spin-off of the company from Acuity Brands in October 2007, the accounts, assets, and liabilities related to our employees, including Messrs. Morgan, Bachmann, Holl, Brown, and Whitaker, were transferred to the Zep nonqualified deferred compensation plan, established just prior to the spin-off.

2001 Acuity Brands, Inc. Supplemental Deferred Savings Plan. The 2001 Acuity Brands, Inc. Supplemental Deferred Savings Plan (the 2001 SDSP) covers the same general group of eligible employees and operates in a similar manner to the 2005 SDSP, except that it encompasses executive and company contributions that were vested as of December 31, 2004 and, therefore, are not subject to the provisions of Section 409A. Executive deferrals may be distributed in a lump sum or up to 10 annual installments beginning no sooner than five years following the calendar year of deferral. Company contributions are distributed at or following termination in a lump sum or installments. Executives may not change their existing distribution elections under the 2001 SDSP.

Acuity Brands, Inc. Executives’ Deferred Compensation Plan. The Acuity Brands, Inc. Executives’ Deferred Compensation Plan (the EDCP) is an unfunded nonqualified deferred compensation plan under which additional deferrals and company contributions were frozen effective December 31, 2002. Executives could defer all or a portion of their bonus to the plan and receive a dollar-for-dollar company match of up to $5,000, depending on the position of the executive. Executive deferrals and company contributions earn an above-market rate of interest based on the prime rate less a specified percent depending on the prime rate, with semi-annual compounding. Executives’ balances are payable in a lump sum or up to ten annual installments. Executives may not change their existing distribution elections under the EDCP. Messrs. Morgan and Bachmann are the only named executive officers who are participants in the EDCP.

Acuity Brands, Inc. Senior Management Benefit Plan. The Acuity Brands, Inc. Senior Management Benefit Plan (the SMBP) is an unfunded nonqualified deferred compensation plan implemented in September 1985 and under which executive deferrals were completed in 1996. Executives could defer up to 25% of base salary and 25% of bonus, but not less than $2,500 per plan year, in equal annual installments over a period of either four and/or eight consecutive years. Executives’ deferrals earn interest at the Moody’s average corporate bond rate plus 300 basis points (Moody’s plus 3) compounded annually. Executives who retire on or after attaining age 65 are guaranteed a retirement account balance equal to their deferrals plus interest at 11% compounded annually to the benefit commencement date. Retirement balances are paid, at the executive’s election, in a lump sum or in monthly, quarterly, or annual installments over 15 years beginning on or after termination. The amount of the installment payment is determined by amortizing the executive’s account balance at his benefit commencement date over the 15-year period based on an annual interest rate of Moody’s plus 3, with the rate and payments adjusted annually over the remaining payment term. Mr. Morgan is the only named executive officer who is a participant in the SMBP.

Mr. Whitaker was not eligible to participate in any of the deferred compensation plans in fiscal 2007.

Name

Plan

Executive
Contributions
in Last

Fiscal Year

($)(1)(2)

Registrant
Contributions
in Last Fiscal
Year ($)(2)(3)

Aggregate
Earnings
in Last
Fiscal
Year
($)(2)(4)

Aggregate
Withdrawals/
Distributions
($)

Aggregate
Balance at
Last Fiscal
Year End
($)(5)

John K. Morgan

2005 SDSP
2001 SDSP
SMBP
EDCP

–0–

15,612

4,363

42,637

378

–0–
21,665

–0–

204,677
49,884
430,248
6,283

Mark R. Bachmann

2005 SDSP
2001 SDSP
EDCP

63,551

–0–

38,535
–0–

–0–

26,267
9,218
1,373

–0–
9,075

12,267

377,369
117,783
21,664

William A. (Bill) Holl

2005 SDSP

190,000

–0–

11,108

–0–

233,093

Cedric M. Brown

2005 SDSP

41,177

17,496

38,897

–0–

277,672

C. Francis Whitaker, III

(1)	Amounts shown in this column are also reported as “Salary” in the Fiscal 2007 Summary Compensation Table.

(2)	Executives’ contributions and related earnings are 100% vested. Company contributions and related earnings become vested in accordance with the terms of the plan or upon a change in control of Acuity Brands.

(3)	Amounts shown in this column are also reported as “All Other Compensation” in the Fiscal 2007 Summary Compensation Table.

(4)

The above-market portion of the amounts shown in this column is also reported as “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the Fiscal 2007 Summary Compensation Table. Above-market earnings, as defined by the SEC, were $5,772 for Mr. Morgan, $10,133 for Mr. Bachmann, $3,406 for Mr. Holl, and $5,519 for Mr. Brown.

(5)	For Mr. Morgan, $29,609 of the amount shown in this column was previously reported as salary in prior years’ summary compensation tables.

Employment Contracts

Pursuant to Acuity Brands’ employment agreement with Mr. Morgan (which was assumed by Zep), effective as of July 23, 2007, he became entitled to receive an annual salary of $500,000 upon becoming President and Chief Executive Officer of Acuity Specialty Products, a target annual incentive opportunity as a percentage of base salary under the Annual Incentive Plan for fiscal 2007 and future years, a restricted stock award of 15,810 shares on the effective date of the agreement, an additional equity award valued at not less than $1,500,000 within 30 days of the distribution date, and a target long-term incentive opportunity as a percentage of base salary under the LTIP for fiscal 2007 and future years. The employment agreement also provides that Mr. Morgan will be reimbursed for any additional taxes, penalties, or interest resulting from the non-compliance by Acuity Brands, or Zep following the spin-off, with respect to payments under Code Section 409A.

In addition to participation in employee benefit plans and perquisites afforded to executives at his level, coverage in the 2002 SERP, participation in the 2005 SDSP, and coverage under Acuity Brands’ director and officer liability insurance, Mr. Morgan is a party to a severance agreement and a change in control agreement as described below. In connection with the assumption of the agreement by Zep, certain plans referenced in Mr. Morgan’s agreement have been replaced by Zep plans.

Pursuant to Acuity Specialty Products’ employment agreement with Mr. Holl (which have been assumed by Zep), effective as of July 23, 2007, he became entitled to receive an annual salary of $380,000 upon becoming Executive Vice President and Chief Commercial Officer of Acuity Specialty Products, an annual bonus at target

level under the Annual Incentive Plan for fiscal 2007 notwithstanding the level of performance, a target annual incentive opportunity as a percentage of base salary under the Annual Incentive Plan for future fiscal years, an equity award valued at approximately $1,140,000 within 30 days of the distribution date, and a target long-term incentive opportunity as a percentage of base salary under the LTIP. The employment agreement also provides that during the first twelve months following the date of the spin-off, upon termination by Zep (other than for death, disability, or cause) or voluntary termination by Mr. Holl, Mr. Holl is entitled to the greater of (1) a lump sum payment of $285,000 or (2) the benefits provided under any severance, change in control, or other agreement with Zep. Mr. Holl also agreed to the cancellation of certain unvested restricted stock prior to the spin-off and he has received an additional award of restricted stock after the date of the spin-off. In addition to participation in employee benefit plans and perquisites afforded to executives at his level, participation in the 2005 SDSP, and coverage under Acuity Brands’ director and officer liability insurance, Mr. Holl is a party to a severance agreement and a change in control agreement as described below.

Although there are no written employment agreements with the other named executive officers, the remaining named executive officers have compensation arrangements that provide for an annual base salary, target incentive opportunities as a percentage of base salary in the annual and long-term incentive plans, participation in employee benefit plans and perquisites afforded to executives at their level, and participation in the 2005 SDSP. In addition, they are or will be parties to severance agreements and change in control agreements as described below.

Potential Payments upon Termination

Zep will enter into severance agreements and change in control agreements with its named executive officers. While the named executive officers may be entitled to payments and benefits under several agreements or arrangements, the agreements or arrangements contain provisions that prohibit the duplication of payments and benefits.

Severance Agreements

The severance agreements for the named executive officers will provide the following benefits in the event the executive’s employment (1) is involuntarily terminated by Zep without cause or (2) is terminated by the officer for good reason after a change in control of Zep (as each such term is defined in the severance agreement), for the terms set forth in the table below:

•

monthly severance payments for the severance period in an amount equal to the executive’s then current base salary rate;

•

continuation of healthcare and life insurance coverage for the severance period;

•

outplacement services not to exceed 10% of base salary;

•

a pro rata bonus in the year of termination;

•

accelerated vesting of any performance-based restricted stock for which performance targets have been achieved;

•

vesting of time-vesting restricted stock as provided in the related award agreements; and

•

additional benefits, at the discretion of the compensation committee, including without limitation, additional retirement benefits and acceleration of long-term incentive awards, if the executive is terminated prior to age 65 and suffers a diminution of projected benefits.

Under the severance agreements, the involuntary termination of an executive by the company for the following reasons constitutes a termination for cause:

•

termination is the result of an act or acts by the executive which have been found in an applicable court of law to constitute a felony (other than traffic-related offenses);

•

termination is the result of an act or acts by the executive which are in the good faith judgment of Zep to be in violation of law or of written policies of Zep and which result in material injury to Zep;

•

termination is the result of an act or acts of dishonesty by the executive resulting or intended to result directly or indirectly in gain or personal enrichment to the executive at the expense of Zep; or

•

the continued failure by the executive substantially to perform the duties reasonably assigned to him, after a demand in writing for substantial performance of such duties is delivered by Zep.

Under the severance agreements, a good reason for termination by an executive of his employment with the company means the occurrence during the two-year term after a change in control (without the executive’s express consent) of any of the following acts by Zep which has not been corrected within 30 days after written notice is given to Zep by the executive:

•

an adverse change in the executive’s title or position in the company from the executive’s title or position immediately prior to the change in control which represents a demotion;

•

the company’s requiring the executive to be based more than 50 miles from the primary workplace where the executive is based immediately prior to the change in control, except for reasonably required travel on Zep’s business which is not significantly greater than such travel requirements prior to the change in control;

•

a reduction in base salary and target bonus opportunity (not the bonus actually earned) below the level in effect immediately prior to the change in control, unless such reduction is consistent with reductions being made at the same time for other officers of Zep in comparable positions;

•

a material reduction in the aggregate benefits provided to the executive by Zep under its employee benefits plans immediately prior to the change in control, except in connection with a reduction in benefits which is consistent with reductions being made at the same time for other officers of Zep in comparable positions;

•

an insolvency or bankruptcy filing by Zep; or

•

a material breach by the company of the severance agreement.

Mr. Morgan’s severance agreement also provides for:

•

continued vesting during the severance period of unvested stock options;

•

exercisability of vested stock options and stock options that vest during the severance period for the shorter of the remaining exercise term or the length of the severance period;

•

accelerated vesting during the severance period of restricted stock that is not performance-based, on a monthly pro rata basis determined from the date of grant to the end of the severance period;

•

continued vesting during the severance period of performance-based restricted stock for which performance targets are achieved and vesting begins during the severance period;

•

continued accrual during the severance period of credited service under the 2002 SERP; and

•

immediate vesting of the matching and supplemental subaccounts under the 2001 SDSP and 2005 SDSP (the SDSPs) (which would otherwise be forfeited upon Mr. Morgan’s termination prior to attaining age 55), with distribution from the SDSPs at the end of the severance period.

The severance agreements also contain restrictive covenants with respect to confidentiality, non-solicitation, and non-competition, and are subject to the execution of a release. Zep will pay reasonable legal fees and related expenses incurred by an executive who is successful to a significant extent in enforcing his rights under the

severance agreements. The severance agreements are effective for a rolling two-year term, which will automatically extend each day for an additional day unless terminated by either party, in which case they will continue for two years after the notice of termination or for three years following a change in control.

Named executive officers of Zep would have received the payments and benefits quantified in the table below in the event of their termination by Zep without cause or by the executive for good reason following a change in control, assuming the termination occurred on August 31, 2007. The closing price per share of Acuity Brands common stock on August 31, 2007 was $52.54.


Name	Term in Months	Base Salary ($)(1)		Annual Bonus at Target ($)(2)		Welfare Plan Continua- tion ($)(1)(3)		Outplace- ment (maximum 10% of salary) ($)		Additional Credit in SERP ($)(4)		Registrant Contribu- tions to SDSP’s ($)		Value Realized on Accelerated Unvested Equity Awards ($)(5)		Total ($)
John K. Morgan	24	$	1,000,000	$	650,000	$	19,134	$	50,000	$	493,348	$	204,677	$	6,172,140	$	8,589,299
Mark R. Bachmann	18		435,000		130,524		18,126		29,005		–0–		–0–		79,232		691,887
William A. (Bill) Holl	18		570,000		456,000		13,483		38,000		–0–		–0–		–0–		1,077,483
Cedric M. Brown	12		200,000		80,000		11,731		20,000		–0–		–0–		–0–		311,731
C. Francis Whitaker, III	12		170,000		68,000		10,024		17,000		–0–		–0–		–0–		265,024

(1)	The salary and welfare continuation payments are made on a monthly basis during the severance period. A six-month distribution delay may be required for key employees in accordance with Section 409A.

(2)	The pro rata bonus is for the fiscal year in which the severance occurs. For a severance that occurred on August 31, 2007, the pro rata bonus would be the target bonus for fiscal 2007 under the Annual Incentive Plan.

(3)	Zep is required to continue covered welfare plan premium payments for the severance period.

(4)	Mr. Morgan’s agreement with Acuity Brands provides for additional credited service in the 2002 SERP equal to the severance period.

(5)	The value realized on unvested equity awards represents the difference (or spread) between the fair market value of unvested awards at August 31, 2007, using Acuity Brands’ closing price of $52.54 (less the exercise price of unvested options).

The table above does not include amounts that the executives would be entitled to receive that are already described in the compensation tables, including:

•

the value of equity awards that are already vested;

•

the amounts payable under defined benefit pension plans; and

•

amounts previously deferred into the deferred compensation plans.

Change in Control Agreements

It is intended that change in control agreements will provide the named executive officers some measure of security against the possibility of employment loss that may result following a change in control of Zep in order that they may devote their energies to meeting the business objectives and needs of Zep and its stockholders.

The change in control agreements are effective for a rolling two-year term, which will automatically extend each day for an additional day unless terminated by either party. However, the term of the change in control agreements will not expire during a threatened change in control period (as defined in the change in control agreements) or prior to the expiration of 24 months following a change in control. The change in control agreements provide two types of potential benefits to executives:

Upon a change in control, all restrictions on any outstanding incentive awards will lapse and the awards will immediately become fully vested, all outstanding stock options will become fully vested and immediately exercisable, and Zep may be required to immediately purchase for cash, on demand, at the then per-share fair market value, any shares of unrestricted stock and shares purchased upon exercise of options. The cash-out option for restricted shares and stock options varies and is dependent upon the date of the award agreement.

If the employment of the named executive officer is terminated within 24 months following a change in control or in certain other instances in connection with a change in control (a) by Zep other than for cause or disability or (b) by the officer for good reason (as each term is defined in the change in control agreement), the officer will be entitled to receive:

•

a pro rata bonus for the year of termination;

•

a lump sum cash payment equal to a multiple of the sum of his base salary and bonus (in each case at least equal to his base salary and bonus prior to a change in control), subject to certain adjustments;

•

continuation of life insurance, disability, medical, dental, and hospitalization benefits for the specified term; and

•

for Mr. Morgan, a cash payment representing 36 additional months participation in the company’s qualified or nonqualified deferred compensation plans.

The change in control agreements for each of Messrs. Morgan, Bachmann, and Holl provide or will provide that Zep will make an additional “gross-up payment” to offset fully the effect of any excise tax imposed under Section 4999 of the Internal Revenue Code, on any payment made to him arising out of or in connection with his employment. In addition, Zep will pay all legal fees and related expenses incurred by the officer arising out of any disputes related to his termination of employment or claims under the change in control agreement if, in general, the circumstances for which he has retained legal counsel occurred on or after a change in control.

A change in control includes:

•

the acquisition of 20% or more of the combined voting power of Zep’s then outstanding voting securities;

•

a change in more than one-third of the members of Zep’s board of directors who were either members as of the distribution date or were nominated or elected by a vote of two-thirds of those members or members so approved;

•

a merger or consolidation involving Zep through which the stockholders of Zep no longer hold more than 60% of the combined voting power of the outstanding voting securities of Zep resulting from the merger or consolidation in substantially the same proportion as prior to the merger or consolidation; or

•

a complete liquidation or dissolution of Zep or the sale or other disposition of all or substantially all of the assets of Zep.

Under the change in control agreements, a termination for cause is a termination evidenced by a resolution adopted by two-thirds of the board that the executive:

•

intentionally and continually failed to substantially perform his duties with Zep which failure continued for a period of at least 30 days after a written notice of demand for substantial performance has been delivered to the executive specifying the manner in which the executive has failed to substantially perform; or

•

intentionally engaged in conduct which is demonstrably and materially injurious to Zep, monetarily or otherwise

The executive will not be terminated for cause until he has received a copy of a written notice setting forth the misconduct described above and until he has been given an opportunity to be heard by the board.

Under the change in control agreements, disability has the meaning ascribed to such term in Zep’s long-term disability plan or policy covering the executive, or in the absence of such plan or policy, a meaning consistent with Section 22(e)(3) of the Internal Revenue Code.

Under the change in control agreements, good reason means the occurrence of any of the following events or conditions in connection with a change in control:

•

any change in the executive’s status, title, position or responsibilities which, in the executive’s reasonable judgment, represents an adverse change from his status, title, position or responsibilities as in effect immediately prior; the assignment to the executive of any duties or responsibilities which, in the executive’s reasonable judgment, are inconsistent with his status, title, position or responsibilities; or any removal of the executive from or failure to reappoint or reelect him to any of such offices or positions, except in connection with the termination of his employment for disability, cause, as a result of his death or by the executive other than for good reason;

•

a reduction in the executive’s base salary or any failure to pay the executive any compensation or benefits to which he is entitled within five days of the date due;

•

a failure to increase the executive’s base salary at least annually at a percentage of base salary no less than the average percentage increases (other than increases resulting from the executive’s promotion) granted to the executive during the three full years ended prior to a change in control (or such lesser number of full years during which the executive was employed);

•

Zep’s requiring the executive to be based more than 50 miles from the primary workplace where the executive is based immediately prior to the change in control except for reasonably required travel on Zep’s business which is not greater than such travel requirements prior to the change in control;

•

the failure by Zep (1) to continue in effect any compensation or employee benefit plan in which the executive was participating immediately prior to the change in control or (2) to provide the executive with compensation and benefits, in the aggregate, at least equal to those provided for under each other compensation or employee benefit plan, program and practice as in effect immediately prior to the change in control; and

•

the insolvency or the filing of a petition for bankruptcy of Zep;

Named executive officers of Zep would have received the payments and benefits quantified in the table below, assuming a change in control occurred on August 31, 2007. The closing price per share of Acuity Brands common stock on August 31, 2007 was $52.54.


Name	Multiple	Salary & Bonus ($)(1)		Welfare Plans ($)		Company Contribu- tions to 2002 SERP, 401(k), SDSP and EDCP ($)(2)		Excise Tax Gross-Up ($)(3)		Value Realized on Accelerated Unvested Equity Awards ($)(4)		Total ($)
John K. Morgan	3 X	$	4,500,000	$	28,701	$	913,913	$	2,684,654	$	6,172,140	$	14,299,408
Mark R. Bachmann	1.5 X		630,865		18,126		285,491		-0-		994,532		1,929,014
William A. (Bill) Holl	2 X		1,216,000		17,977		16,200		645,762		1,116,477		3,012,416
Cedric M. Brown	1.5 X		439,454		17,597		115,119		-0-		251,934		824,104
C. Francis Whitaker, III	1.5 X		382,500		15,036		21,600		-0-		129,461		548,597

(1)	Represents salary plus highest of current year bonus, prior year bonus, or average of bonus for last three years.

(2)	Represents the present value of additional credited service or annual company contributions in the referenced plans equal to the number of months associated with the multiple and unvested company contributions in deferred compensation plans that vest upon a change in control, as follows:


Name	Additional Company Contributions		Unvested Company Contributions
John K. Morgan	$	706,094	$	207,819
Mark R. Bachmann		47,374		238,117
William A. (Bill) Holl		16,200		—
Cedric M. Brown		23,309		91,810
C. Francis Whitaker, III		21,600		—

(3)

The excise tax gross-up is calculated assuming the excise tax rate of 20% of the excess of the value of the change in control payments over the executive’s average W-2 earnings for the last five calendar years. The excise tax gross-up is based on an assumed effective aggregate tax rate of 36% for the executive. The estimated tax gross-up payment has been calculated assuming no value is assigned to the non-compete and other restrictive covenants that may apply to the executive. Upon a change in control and termination of the executive’s employment, we expect to assign a portion of the amount paid to the executive as value for the restrictive covenants, which would decrease the total parachute payments and the amount of the excise tax gross-up.

(4)	The value realized on unvested equity awards represents the difference between the fair market value of unvested awards at August 31, 2007, using Acuity Brands’ closing price of $52.54 (less the exercise price of unvested options).

The table above does not include amounts that the executives would be entitled to receive that are already described in the compensation tables above, including:

•

the value of equity awards that are already vested;

•

the amounts payable under defined benefit pension plans; and

•

amounts previously deferred into the deferred compensation plans.

Equity Award Agreements

In addition to the accelerated vesting in the event of a change in control, equity award agreements generally provide for accelerated vesting as a result of the following events.

•

Death/Disability. Stock options vest and are exercisable to the earlier of the expiration date or one year after event. Restricted shares vest immediately.

•

Retirement at Age 65. For Mr. Morgan, options granted in December 2003 continue to vest and are exercisable to the earlier of the expiration date or five years after retirement, and for options granted on or after December 2005, vested options are exercisable to the earlier of the expiration date or five years after retirement. For Mr. Bachmann, vested options are exercisable to the earlier of the expiration date or three years after retirement. Messrs. Holl, Brown, and Whitaker do not have outstanding stock options. For performance-based restricted stock awards granted in October 2000 through January 2005, vesting continues subject to restrictive covenants. For restricted stock awards granted in December 2005 and later, unvested shares are forfeited.

•

Early Retirement (Between Ages 55 and 65). For Mr. Morgan, options granted in December 2003 continue to vest and are exercisable to the earlier of the expiration date or five years after retirement and for options granted on or after December 2005, vested options are exercisable to the earlier of the expiration date or five years after retirement. For Mr. Bachmann, vested options are exercisable to the earlier of the expiration date or three years after retirement. Messrs. Holl, Brown, and Whitaker do not have outstanding stock options. For performance-based restricted stock awards granted in October

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2000 through January 2005, vesting continues subject to restrictive covenants. For restricted stock awards granted in December 2005 and later, unvested shares are forfeited.

The amounts that would vest for each named executive officer as a result of these events are the same as the amounts shown in the table above in the column “Value Realized on Accelerated Unvested Equity Awards.”

Deferred Compensation Plans

In addition to the vesting of company contributions to deferred compensation plans in the event of a change in control, company contributions vest and are payable upon death or total and permanent disability. The amounts that would vest for each named executive officer as a result of these events are the same as the amounts shown in the table above in the column “Company Contributions to 2002 SERP, 401(k), SDSP and ECDP” and in footnote 2 to that column.

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

Security Ownership of Directors and Executive Officers

The following table sets forth information concerning beneficial ownership of the company’s common stock as of November 23, 2007, unless otherwise indicated, by each of the directors, by each of the named executive officers, by all directors and officers of the company as a group, and by beneficial owners of more than five percent of the company’s common stock.


Name	Shares of Common Stock Beneficially Owned(1)(2)(3)	Percent of Shares Outstanding(4)
Mark R. Bachmann	134,733	*
Cedric M. Brown	15,745	*
J. Veronica Biggins	11,980	*
Earnest W. Deavenport, Jr.	12,539	*
William A. (Bill) Holl	146,523	*
John K. Morgan	169,754	*
Kenyon W. Murphy	28,484	*
Sidney J. Nurkin	11,980	*
Joseph Squicciarino	11,980	*
C. Francis Whitaker, III	11,616	*
All directors and executive officers as a group (10 persons)	555,334	2.6	%
GAMCO Investors, Inc. (5)	2,460,760	11.5	%
Wellington Management Company LLP (6)	1,680,129	7.9	%
Barclays Global Investors, N.A. (7)	1,339,494	6.3	%

*	Represents less than one percent of the respective corporation’s common stock.

(1)	Subject to applicable community property laws and, except as otherwise indicated, each beneficial owner has sole voting and investment power with respect to all shares shown.

(2)	Includes Zep shares that may be acquired within 60 days of November 23, 2007 upon exercise of employee stock options. Options are included for the following individuals: Mr. Morgan, 7,966 shares; Mr. Bachmann, 80,481 shares; and all directors and executive officers as a group, 88,447 shares.

(3)

Includes restricted shares received in the distribution on a one-for-two basis for performance-based and time-vesting restricted shares granted under Acuity Brands’ Long-Term Incentive Plan and time-vesting restricted shares granted under the Zep Long-Term Incentive Plan, portions of which vest in November 2008 through 2011, September 2007 through 2010, November 2007 and 2008, December 2007 through 2009, January 2008 and 2009, March 2008 and 2009, June 2008 through 2010, and July 2008 through 2010. The executives have sole voting power over these restricted shares. Restricted shares are included for the following individuals: Mr. Bachmann, 36,857 shares; Ms. Biggins, 11,980 shares; Mr. Brown, 12,899 shares; Mr. Deavenport, 11,980 shares; Mr. Holl, 128,201 shares; Mr. Morgan, 136,750 shares; Mr. Murphy, 21,532 shares; Mr. Nurkin, 11,980 shares; Mr. Squicciarino, 11,980 shares; Mr. Whitaker, 11,323 shares; and all directors and executive officers as a group, 395,483 shares.

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(4)	Based on an aggregate of 21,387,704 shares of Zep common stock issued and outstanding as of November 23, 2007.

(5)	This information is based on a Form 13D filed with the SEC by GAMCO Investors, Inc., One Corporate Center, Rye, New York 10580-1435, on November 13, 2007 containing information as of November 2, 2007.

(6)

This information is based on a Form 13F filed with the SEC by Wellington Management Company, LLP, 75 State Street, Boston, Massachusetts 02109, on November 14, 2007 containing information as of September 30, 2007 for share ownership in Acuity Brands, Inc. The number shown reflects the calculation of their estimated Zep Inc. holdings after the spin-off.

(7)

This information is based on a Form 13F filed with the SEC by Barclays Global Investors, N.A., 45 Fremont Street, San Francisco, California 94105, on November 13, 2007 containing information as of September 30, 2007 for share ownership in Acuity Brands, Inc. The number shown reflects the calculation of their estimated Zep Inc. holdings after the spin-off.

Item 13. Certain Relationships and Related Transactions, and Director Independence

There is no family relationship between any of our executive officers or directors, and there are no arrangements or understandings between any of our executive officers or directors and any other person pursuant to which any of them was elected an officer or director, other than arrangements or understandings with our directors or officers acting solely in their capacities as such. Generally, our executive officers will be elected annually and will serve at the pleasure of our board of directors.

The Board has determined that all of its members, except John K. Morgan, the Chairman, President, and Chief Executive Officer and Kenyon W. Murphy, have no material relationship with us, and are therefore independent, based on the listing standards of the New York Stock Exchange, the categorical standards set forth in the Corporation’s Governance Guidelines (available on our website at www.zepinc.com under “Corporate Governance”), and a finding of no other material relationships.

Kenyon W. Murphy serves as a member of the audit committee and compensation committee and does not qualify as an independent director based on the listing standards of the New York Stock Exchange. Rule 303A of the New York Stock Exchange Listing Standards provides that our Audit Committee and our Compensation Committee are not required to become fully independent until twelve months after our listing date, as long as the majority of the members of each committee are independent within ninety days of our listing. Each of our Audit Committee and Compensation Committee plans on utilizing this phase in provision and will become fully independent by October 15, 2008.

Item 14. Principal Accountant Fees and Services

Ernst & Young LLP has been the independent registered public accounting firm of Acuity Brands, Inc. (“Acuity Brands”) auditors since 2002. We did not directly pay any fees to Ernst & Young LLP in either 2007 or 2006. The fees for audit and non-audit services provided by Ernst & Young LLP before our spin-off from Acuity Brands were paid by Acuity Brands. A portion of those fees has been allocated to us based on the principles described in Note 2 to the Notes to Combined Financial Statements. The aggregate fees paid by Acuity Brands to Ernst & Young LLP and allocated to us in 2007 and 2006 were approximately $0.8 million and $0.6 million, respectively, substantially all of which related to audit services.

Ernst & Young LLP were appointed as our independent auditors following our separation from Acuity Brands. The Audit Committee has established policies and procedures for the approval and pre-approval of audit services and permitted non-audit services. The Audit Committee has the responsibility to engage and terminate our independent registered public accounting firm, to pre-approve the performance of all audit and permitted non-audit services provided to us by its independent registered public accounting firm in accordance with Section 10A of the Exchange Act, and to review with our independent registered public accounting firm their fees and plans for all auditing services. The Audit Committee considered the provision of non-audit services by the independent registered public accounting firm and determined that provision of those services was compatible with maintaining auditor independence.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

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

(1)

Report of Independent Registered Public Accounting Firm (Ernst & Young LLP)

Combined Balance Sheets as of August 31, 2007 and 2006

Combined Statements of Income for the years ended August 31, 2007, 2006, and 2005

Combined Statements of Cash Flows for the years ended August 31, 2007, 2006, and 2005

Combined Statements of Stockholders’ Equity and Comprehensive Income for the years ended

August 31 2007, 2006, and 2005

Notes to Combined Financial Statements

(2)

Financial Statement Schedules:

Schedule II Valuation and Qualifying Accounts

Any of Schedules I through V not listed above have been omitted because they are not applicable or the required information is included in the combined financial statements or notes thereto.

(3)

Exhibits filed with this report (begins on next page):

Copies of exhibits will be furnished to stockholders upon request at a nominal fee.

Requests should be sent to Zep Inc., Investor Relations Department, 1310 Seaboard Industrial Avenue Atlanta, Georgia 30318-2825.

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INDEX TO EXHIBITS


EXHIBIT 2	Agreement and Plan of Distribution by and between Acuity Brands, Inc. and Zep Inc., dated as of October 31, 2007.	Reference is made to Exhibit 2.1 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

EXHIBIT 3	(a) Restated Certificate of Incorporation of Zep Inc.	Reference is made to Exhibit 3.1 of registrant’s Form 8-K as filed with the Commission on October 26, 2007, which is incorporated herein by reference.

	(b) Amended and Restated By-Laws of Zep Inc.	Reference is made to Exhibit 3.2 of registrant’s Form 8-K as filed with the Commission on October 26, 2007, which is incorporated herein by reference.

EXHIBIT 4	(a) Form of Certificate representing Zep Inc. Common Stock.	Reference is made to Exhibit 4.1 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(b) Stockholder Protection Rights Agreement, dated as of October 31, 2007, between Acuity Brands, Inc. and Zep Inc.	Reference is made to Exhibit 4.2 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

EXHIBIT 10(i)A	(1) Tax Disaffiliation Agreement, dated as of October 31, 2007, by and between Zep Acuity Brands, Inc. and Zep Inc.	Reference is made to Exhibit 10.1 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(2) Transition Services Agreement, dated as of October 31, 2007, by and between Acuity Brands, Inc. and Zep Inc.	Reference is made to Exhibit 10.2 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(3) Agreement and Plan of Distribution, dated as of October 31, 2007, by and between Acuity Brands, Inc. and Zep Inc.	Reference is made to Exhibit 2.1 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(4) 5-Year Revolving Credit Agreement, dated as of October 19, 2007 among Zep Inc., the Subsidiary Borrowers from time to time parties hereto, the Lenders from time to time parties hereto, JPMorgan Chase Bank, National Association; Bank of America, N.A.; KeyBank National Association; Wachovia Bank, National Association; Regions Bank; and Wells Fargo Bank, N.A.	Filed with the Commission as part of this Form 10-K.

104


	(5) Credit and Security Agreement dated as of October 19, 2007 among Acuity Enterprise Inc, as Borrower; Acuity Specialty Products, Inc., as Servicer; Variable Funding Capital Company, the Liquidity Banks from time to time party hereto; and Wachovia Bank National Association, as Agent.	Filed with the Commission as part of this Form 10-K.

	(6) Form of Change-in-Control Agreement.	Reference is made to Exhibit 10.7 of the registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(7) Form of Change-in-Control Agreement for Certain Executive Officers.	Reference is made to Exhibit 10.9 of the registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

EXHIBIT 10(iii)A	Management Contracts and Compensatory Arrangements:

	(1) Employee Benefits Agreement, dated as of October 31, 2007.	Reference is made to Exhibit 10.3 of registrant’s Form 8-k as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(2) Zep Inc. Long-Term Incentive Plan.	Reference is made to Exhibit 10.4 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(3) Zep Inc. Non-Employee Director Deferred Compensation Plan.	Reference is made to Exhibit 10.5 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(4) Zep Inc. Supplemental Deferred Savings Plan.	Reference is made to Exhibit 10.6 of registrant’s Form 8-Kas filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(5) Form of Indemnification Agreement.	Reference is made to Exhibit 10.16 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(6) Form of Change-in-Control Agreement.	Reference is made to Exhibit 10.17 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(7) Form of Severance Agreement.	Reference is made to Exhibit 10.18 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

105


	(8) Zep Inc. Management Compensation and Incentive Plan.	Reference is made to Exhibit 10.7 of registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(9) John Morgan Employment Letter.	Reference is made to Exhibit 10.12 of registrant’s Form 10 as filed with the Commission on October 10, 2007, which is incorporated herein by reference.

	(10) Bill Holl Employment Letter.	Reference is made to Exhibit 10.13 of registrant’s Form 10 as filed with the Commission on October 10, 2007, which is incorporated herein by reference.

	(11) Form of Stock Appreciation Rights Agreement for Executive Officers.	Reference is made to Exhibit 10.8 of the registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(12) Form of Nonqualified Stock Option Agreement for Executive Officers.	Reference is made to Exhibit 10.9 of the registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(13) Form of Nonqualified Stock Option Agreement for Key Employees.	Reference is made to Exhibit 10.10 of the registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(14) Form of Incentive Stock Option Agreement for Key Employees.	Reference is made to Exhibit 10.11 of the registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(15) Form of Incentive Stock Option Agreement for Executive Officers.	Reference is made to Exhibit 10.12 of the registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(16) Form of Long-Term Incentive Plan Restricted Stock Award Agreement (without Restrictive Covenants).	Reference is made to Exhibit 10.13 of the registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(17) Form of Long-Term Incentive Plan Restricted Stock Award Agreement (with Restrictive Covenants).	Reference is made to Exhibit 10.14 of the registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

	(18) Form of Long-Term Incentive Plan Restricted Stock Units Award Agreement.	Reference is made to Exhibit 10.15 of the registrant’s Form 8-K as filed with the Commission on November 5, 2007, which is incorporated herein by reference.

EXHIBIT 14	Code of Ethics and Business Conduct	Filed with the Securities and Exchange Commission as part of this Form 10-K.

106


EXHIBIT 21	List of Subsidiaries.	Filed with the Securities and Exchange Commission as part of this Form 10-K.

EXHIBIT 23	Consent of Independent Auditors.	Filed with the Securities and Exchange Commission as part of this Form 10-K.

EXHIBIT 24	Powers of Attorney.	Filed with the Securities and Exchange Commission as part of this Form 10-K.

EXHIBIT 31	(a) Rule 13a-14(a)/15d-14(a) Certification, signed by John K. Morgan	Filed with the Securities and Exchange Commission as part of this Form 10-K.

EXHIBIT 31	(b) Rule 13a-14(a)/15d-14(a) Certification, signed by Mark R. Bachmann	Filed with the Securities and Exchange Commission as part of this Form 10-K.

EXHIBIT 32	(a) Section 1350 Certification, signed by John K. Morgan	Filed with the Securities and Exchange Commission as part of this Form 10-K.

EXHIBIT 32	(b) Section 1350 Certification, signed by Mark R. Bachmann	Filed with the Securities and Exchange Commission as part of this Form 10-K.

*	Zep Inc. operated under the name Acuity SpinCo from July 27, 2007 to September 12, 2007.

107

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.


	Zep Inc.

Date: November 29, 2007	By:	/S/ JOHN K. MORGAN
		John K. Morgan Chairman, President, and Chief Executive 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/ JOHN K. MORGAN John K. Morgan	Chairman, President, and Chief Executive Officer	November 29, 2007

/S/ MARK R. BACHMANN Mark R. Bachmann	Executive Vice President and Chief Financial Officer	November 29, 2007

* Earnest W. Deavenport, Jr.	Director	November 26, 2007

* Kenyon W. Murphy	Director	November 26, 2007

* Joseph Squicciarino	Director	November 26, 2007

* Sidney J. Nurkin	Director	November 26, 2007

* J. Veronica Biggins	Director	November 26, 2007

BY: /S/ C. FRANCIS WHITAKER, III C. Francis Whitaker, III*	Attorney-in-Fact	November 29, 2007

108

SCHEDULE II

Zep Inc.

VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED AUGUST 31, 2007, 2006, AND 2005

(in thousands)


	Balance at Beginning of Year		Additions and Reductions Charged to		Deductions	Balance at End of Year
	Balance at Beginning of Year		Costs and Expenses	Other Accounts	Deductions	Balance at End of Year
Year Ended August 31, 2007:
Reserve for doubtful accounts	$	3,788	2,515	3	2,803	$	3,503

Reserve for estimated returns and allowances	$	783	13,419	—	13,532	$	670

Year Ended August 31, 2006:
Reserve for doubtful accounts	$	4,050	2,188	11	2,461	$	3,788

Reserve for estimated returns and allowances	$	548	16,038	—	15,803	$	783

Year Ended August 31, 2005:
Reserve for doubtful accounts	$	3,796	3,801	27	3,574	$	4,050

Reserve for estimated returns and allowances	$	360	14,266	—	14,078	$	548

109

EX-10.(I).A.(4) 2 dex10ia4.htm (5) CREDIT AND SECURITY AGREEMENT (5) Credit and Security Agreement

Exhibit 10(i) A(4)

EXECUTION COPY

5-YEAR REVOLVING CREDIT AGREEMENT

DATED AS OF OCTOBER 19, 2007

AMONG

ZEP INC.,

THE SUBSIDIARY BORROWERS

FROM TIME TO TIME PARTIES HERETO,

THE LENDERS FROM TIME TO TIME PARTIES HERETO,

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

as Administrative Agent,

BANK OF AMERICA, N.A.

as Syndication Agent

and

KEYBANK NATIONAL ASSOCIATION, WACHOVIA BANK, NATIONAL

ASSOCIATION, REGIONS BANK and WELLS FARGO BANK, N.A.,

as Co-Documentation Agents

J.P. MORGAN SECURITIES INC.,

as Joint Lead Arranger and Sole Bookrunner

and

BANC OF AMERICA SECURITIES LLC,

as Joint Lead Arranger

TABLE OF CONTENTS


			Page

ARTICLE I

DEFINITIONS			1
1.1.	Certain Defined Terms		1
1.2.	References		21
1.3.	Supplemental Disclosure		21

ARTICLE II

THE CREDITS			21
2.1.	Commitment		21
2.2.	Swing Line Loans		22
	2.2.1.	Amount of Swing Line Loans	22
	2.2.2.	Borrowing Notice	22
	2.2.3.	Making of Swing Line Loans	22
	2.2.4.	Repayment of Swing Line Loans	22
2.3.	Determination of Dollar Amounts; Required Payments; Termination		23
	2.3.1.	Determination of Dollar Amounts	23
	2.3.2.	Required Payments	23
	2.3.3.	Termination	23
2.4.	Revolving Loans		24
2.5.	Types of Advances		24
2.6.	Facility Fee; Reductions in Aggregate Commitment		24
	2.6.1.	Facility Fee	24
	2.6.2.	Reductions in Aggregate Commitment	24
2.7.	Minimum Amount of Each Advance		24
2.8.	Optional Principal Payments		24
2.9.	Method of Selecting Types and Interest Periods for New Advances		25
	2.9.1.	Method of Selecting Types and Interest Periods for New Advances	25
	2.9.2.	Method of Borrowing	25
2.10.	Conversion and Continuation of Outstanding Advances		25
2.11.	Changes in Interest Rate, etc.		26
2.12.	No Conversion or Continuation of Eurocurrency Advances After Default; Dates Applicable After Default		27
2.13.	Method of Payment		27
2.14.	Noteless Agreement; Evidence of Indebtedness		28
2.15.	Telephonic Notices		28
2.16.	Interest Payment Dates; Interest and Fee Basis		29
2.17.	Notification of Advances, Interest Rates, Prepayments and Commitment Reductions		29
2.18.	Lending Installations		29
2.19.	Non-Receipt of Funds by the Administrative Agent		30
2.20.	Replacement of Lender		30


2.21.	Facility LCs		31
	2.21.1.	Issuance; Transitional Facility LCs	31
	2.21.2.	Participations	31
	2.21.3.	Notice	31
	2.21.4.	LC Fees	32
	2.21.5.	Administration; Reimbursement by Lenders	32
	2.21.6.	Reimbursement by the Borrowers	32
	2.21.7.	Obligations Absolute	33
	2.21.8.	Actions of LC Issuers	33
	2.21.9.	Indemnification	33
	2.21.10.	Lenders’ Indemnification	34
	2.21.11.	Facility LC Collateral Account	34
	2.21.12.	Rights as a Lender	35
2.22.	Subsidiary Borrowers		35
2.23.	Increase of Commitments		36
2.24.	Interest		38
2.25.	Judgment Currency		38
2.26.	Market Disruption		39

ARTICLE III

YIELD PROTECTION; TAXES			40
3.1.	Yield Protection		40
3.2.	Changes in Capital Adequacy Regulations		41
3.3.	Availability of Types of Advances		41
3.4.	Funding Indemnification		41
3.5.	Taxes		42
3.6.	Lender Statements; Survival of Indemnity		44
3.7.	Mitigation of Obligations		44

ARTICLE IV

CONDITIONS PRECEDENT			45
4.1.	Initial Credit Extension		45
4.2.	Each Credit Extension		46
4.3.	Initial Advance to Each New Subsidiary Borrower		47

ARTICLE V

REPRESENTATIONS AND WARRANTIES			47
5.1.	Existence and Standing		47
5.2.	Authorization and Validity		48
5.3.	No Conflict; Government Consent		48
5.4.	Financial Statements		48
5.5.	Material Adverse Change		48
5.6.	Taxes		48
5.7.	Litigation and Contingent Obligations		49


5.8.	Subsidiaries		49
5.9.	Accuracy of Information		49
5.10.	Regulation U		49
5.11.	Material Agreements		49
5.12.	Compliance With Laws		49
5.13.	Ownership of Properties		50
5.14.	ERISA; Foreign Pension Matters		50
5.15.	Plan Assets; Prohibited Transactions		50
5.16.	Environmental Matters		50
5.17.	Investment Company Act		51
5.18.	Insurance		51
5.19.	Solvency		51
5.20.	Patriot Act		51

ARTICLE VI COVENANTS			51
6.1.	Reporting		51
6.2.	Use of Proceeds		53
6.3.	Notice of Default		53
6.4.	Conduct of Business		53
6.5.	Taxes		53
6.6.	Insurance		53
6.7.	Compliance with Laws; Maintenance of Plans		54
6.8.	Maintenance of Properties		54
6.9.	Inspection; Keeping of Books and Records		54
6.10.	Addition of Guarantors; Pledge of Capital Stock		54
	6.10.1.	Addition of Guarantors	54
	6.10.2.	Pledge of Capital Stock	55
6.11.	Indebtedness		55
6.12.	Consolidations and Mergers; Permitted Acquisitions		56
	6.12.1.	Consolidations and Mergers	56
	6.12.2.	Permitted Acquisitions	56
6.13.	Liens		57
6.14.	Transactions with Affiliates		59
6.15.	Financial Contracts		59
6.16.	ERISA		59
6.17.	Environmental Compliance		60
6.18.	Sale of Assets		60
6.19.	Restricted Payments		60
6.20.	Investments		61
6.21.	Capital Expenditures		61
6.22.	Sale and Leaseback Transactions		61
6.23.	Financial Covenants		61
	6.23.1.	Maximum Leverage Ratio	61
	6.23.2.	Minimum Interest Expense Coverage Ratio	62

ARTICLE VII DEFAULTS			62
7.1.	Breach of Representations or Warranties		62

iii


7.2.	Failure to Make Payments When Due	62
7.3.	Breach of Covenants	62
7.4.	Other Breaches	62
7.5.	Default as to Other Indebtedness	63
7.6.	Voluntary Bankruptcy; Appointment of Receiver; Etc.	63
7.7.	Involuntary Bankruptcy; Appointment of Receiver; Etc.	63
7.8.	Judgments	64
7.9.	Unfunded Liabilities	64
7.10.	Other ERISA Liabilities	64
7.11.	Environmental Matters	64
7.12.	Change in Control	64
7.13.	Receivables Purchase Document Events	64
7.14.	Guarantor Revocation; Failure of Loan Documents	64

ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES		65
8.1.	Acceleration	65
8.2.	Amendments	65
8.3.	Preservation of Rights	66

ARTICLE IX JOINT AND SEVERAL OBLIGATIONS		66
9.1.	Joint and Several Liability	66
9.2.	Primary Obligation; Waiver of Marshalling	67
9.3.	Financial Condition of Borrowers	67
9.4.	Continuing Liability	67
9.5.	Additional Waivers	67
9.6.	Settlements or Releases	68
9.7.	No Election	68
9.8.	Joint Loan Account	68
9.9.	Apportionment of Proceeds of Loans	68
9.10.	The Administrative Agent, Lenders and LC Issuers Held Harmless	68
9.11.	Borrowers’ Integrated Operations	69
9.12.	Foreign Subsidiary Borrowers	69

ARTICLE X GENERAL PROVISIONS		69
10.1.	Survival of Representations	69
10.2.	Governmental Regulation	69
10.3.	Headings	69
10.4.	Entire Agreement	69
10.5.	Several Obligations; Benefits of this Agreement	69
10.6.	Expenses; Indemnification	70
10.7.	Numbers of Documents	71
10.8.	Accounting	71
10.9.	Severability of Provisions	71
10.10.	Nonliability of Lenders	71
10.11.	Confidentiality	71
10.12.	Lenders Not Utilizing Plan Assets	72
10.13.	Nonreliance	72


10.14.	Disclosure		72
10.15.	Subordination of Intercompany Indebtedness		72
10.16.	USA PATRIOT ACT NOTIFICATION		73

ARTICLE XI THE AGENTS			74
11.1.	Appointment; Nature of Relationship		74
11.2.	Powers		74
11.3.	General Immunity		74
11.4.	No Responsibility for Loans, Recitals, etc.		74
11.5.	Action on Instructions of Lenders		75
11.6.	Employment of Agents and Counsel		75
11.7.	Reliance on Documents; Counsel		75
11.8.	Agents’ Reimbursement and Indemnification		75
11.9.	Notice of Default		76
11.10.	Rights as a Lender		76
11.11.	Lender Credit Decision		76
11.12.	Successor Agents		76
11.13.	Agent and Arranger Fees		77
11.14.	Delegation to Affiliates		77
11.15.	Release of Guarantors		77

ARTICLE XII SETOFF; RATABLE PAYMENTS			78
12.1.	Setoff		78
12.2.	Ratable Payments		78

ARTICLE XIII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS			78
13.1.	Successors and Assigns		78
13.2.	Participations		79
	13.2.1.	Permitted Participants; Effect	79
	13.2.2.	Voting Rights	79
	13.2.3.	Benefit of Certain Provisions	79
13.3.	Assignments		80
	13.3.1.	Permitted Assignments	80
	13.3.2.	Consents	80
	13.3.3.	Effect; Effective Date	80
	13.3.4.	The Register	81
13.4.	Dissemination of Information		81
13.5.	Tax Treatment		81

ARTICLE XIV NOTICES			81
14.1.	Notices		81
14.2.	Change of Address		82

ARTICLE XV COUNTERPARTS			82

ARTICLE XVI CHOICE OF LAW; CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF VENUE, FORUM AND JURY TRIAL			82


16.1.	CHOICE OF LAW	82
16.2.	CONSENT TO JURISDICTION	82
16.3.	SERVICE OF PROCESS	83
16.4.	WAIVER OF VENUE AND FORUM	83
16.5.	WAIVER OF JURY TRIAL	84


EXHIBITS

Exhibit A	-	Form of Opinion Letter

Exhibit B	-	Form of Compliance Certificate

Exhibit C	-	Form of Assignment Agreement

Exhibit D	-	Form of Loan/Credit Related Money Transfer Instruction

Exhibit E	-	Form of Promissory Note (if requested)

Exhibit F	-	List of Closing Documents

Exhibit G	-	Form of Guaranty

Exhibit H	-	Form of Assumption Letter

Exhibit I	-	Form of Commitment and Acceptance

SCHEDULES

Pricing Schedule

Commitment Schedule

Schedule 2.2	-	Mandatory Cost

Schedule 2.21	-	Transitional Letters of Credit

Schedule 5.5	-	Certain Disclosures

Schedule 5.8	-	Subsidiaries

Schedule 5.16	-	Environmental Matters

Schedule 6.11	-	Existing Indebtedness

Schedule 6.13	-	Existing Liens

Schedule 6.20	-	Existing Investments

vii

5-YEAR REVOLVING CREDIT AGREEMENT

This 5-Year Revolving Credit Agreement, dated as of October 19, 2007, is among Zep Inc., a Delaware corporation, ACUITY SPECIALTY PRODUCTS, INC., a Georgia corporation and one or more other Subsidiary Borrowers from time to time parties hereto (whether now existing or hereafter formed), the institutions from time to time parties hereto as Lenders (whether by execution of this Agreement or an assignment pursuant to Section 13.3), JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Swing Line Lender, LC Issuer and Administrative Agent, BANK OF AMERICA, N.A., as Syndication Agent and KEYBANK NATIONAL ASSOCIATION, WACHOVIA BANK, NATIONAL ASSOCIATION, REGIONS BANK and WELLS FARGO BANK, N.A., as Co-Documentation Agents. The parties hereto agree as follows:

ARTICLE I

DEFINITIONS

1.1. Certain Defined Terms. As used in this Agreement:

“Accounting Changes” is defined in Section 10.8 hereof.

“Acquisition” means any transaction, or any series of related transactions, consummated on or after the Closing Date, by which the Company or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage of voting power) of the outstanding ownership interests of a partnership, limited liability company or any Person.

“Administrative Agent” means JPMorgan in its capacity as contractual representative of the Lenders pursuant to Article XI, and not in its individual capacity as a Lender, and any successor Administrative Agent appointed pursuant to Article XI.

“Advance” means a borrowing hereunder consisting of the aggregate amount of the several Loans (i) made by some or all of the Lenders on the same Borrowing Date, or (ii) converted or continued by the Lenders on the same date of conversion or continuation, consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in the case of Eurocurrency Loans, in the same Agreed Currency and for the same Interest Period. The term “Advance” shall include Swing Line Loans unless otherwise expressly provided.

“Affected Foreign Subsidiary” means any Foreign Subsidiary to the extent such Foreign Subsidiary acting as a Guarantor would cause a Deemed Dividend Problem.

“Affected Lender” is defined in Section 2.20.

“Affiliate” of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person is the “beneficial owner” (as defined in Rule 13d-3 under the

Securities Exchange Act of 1934) of twenty percent (20%) or more of any class of voting securities (or other voting interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting securities, by contract or otherwise.

“Agent” means any of the Administrative Agent, the Syndication Agent or a Co-Documentation Agent, as appropriate, and “Agents” means, collectively, the Administrative Agent, the Syndication Agent and the Co-Documentation Agents.

“Aggregate Commitment” means the aggregate of the Commitments of all the Lenders, as may be adjusted from time to time pursuant to the terms hereof. The initial Aggregate Commitment is One Hundred Million and 00/100 Dollars ($100,000,000).

“Aggregate Outstanding Credit Exposure” means, at any time, the aggregate of the Outstanding Credit Exposure of all the Lenders.

“Agreed Currencies” means (i) Dollars, (ii) euro, (iii) Canadian Dollars, (iv) Pounds Sterling and (v) any other Foreign Currency agreed to by the Administrative Agent and each of the Lenders.

“Agreement” means this 5-Year Revolving Credit Agreement, as it may be amended, restated, supplemented or otherwise modified and as in effect from time to time.

“Agreement Accounting Principles” means generally accepted accounting principles as in effect in the United States from time to time, applied in a manner consistent with that used in preparing the financial statements of the Company referred to in Section 5.4; provided, however, that except as provided in Section 10.8, with respect to the calculation of financial ratios and other financial tests required by this Agreement, “Agreement Accounting Principles” means generally accepted accounting principles as in effect in the United States as of the Closing Date, applied in a manner consistent with that used in preparing the financial statements of the Company referred to in Section 5.4 hereof.

“Alternate Base Rate” means, for any day, a fluctuating rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of (a) the Federal Funds Effective Rate for such day and (b) one-half of one percent (0.5%) per annum.

“Applicable Facility Fee Rate” means, at any time, the percentage rate per annum at which Facility Fees are accruing on the Aggregate Commitment at such time as set forth in the Pricing Schedule.

“Applicable Margin” means, with respect to Eurocurrency Advances at any time, the percentage rate per annum which is applicable at such time with respect to Eurocurrency Advances as set forth in the Pricing Schedule.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Approximate Equivalent Amount” of any currency with respect to any amount of Dollars shall mean the Equivalent Amount of such currency with respect to such amount of Dollars on or as of such date, rounded up to the nearest whole unit of such currency as determined by the Administrative Agent from time to time.

“Arranger” means each of (i) J.P. Morgan Securities Inc. and its successors, in its capacity as Joint Lead Arranger and Sole Book Runner and (ii) Banc of America Securities LLC and its successors, in its capacity as Joint Lead Arranger.

“Article” means an article of this Agreement unless another document is specifically referenced.

“Assignment Agreement” is defined in Section 13.3.1.

“Assumption Letter” means a letter of a Subsidiary of the Company addressed to the Administrative Agent and the Lenders, and acknowledged by the Administrative Agent, in substantially the form of Exhibit H hereto, pursuant to which such Subsidiary agrees to become a “Subsidiary Borrower” and agrees to be bound by the terms and conditions hereof.

“Authorized Officer” means any of the chief executive officer, president, chief operating officer, chief financial officer, treasurer or vice president of finance of the Company, acting singly.

“Available Aggregate Commitment” means, at any time, the Aggregate Commitment then in effect minus the Aggregate Outstanding Credit Exposure at such time.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” means, as applicable, any of the Company or any of the Subsidiary Borrowers, together with their respective permitted successors and assigns, and “Borrowers” means, collectively, the Company and the Subsidiary Borrowers.

“Borrowing Date” means a date on which an Advance is made hereunder.

“Borrowing Notice” is defined in Section 2.9.1.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurocurrency Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in Agreed Currencies in the London interbank market or the principal financial center of the country in which payment or purchase of such Agreed Currency can be made (and, if the Advances or the payment under a Facility LC which are the subject of a borrowing, drawing, payment, reimbursement or rate selection are denominated in euro, the term “Business Day” shall also exclude any day on which the TARGET payment system is not open for the settlement of payments in euro).

“Buying Lender” is defined in Section 2.23(ii).

“Canadian Dollars” means the lawful currency of Canada.

“Capitalized Lease” of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.

“Capitalized Lease Obligations” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.

“Capital Expenditures” means, without duplication, any expenditures for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of the Company and its Subsidiaries prepared in accordance with GAAP

“Capital Stock” means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a limited liability company, membership interests, (iv) in the case of a partnership, partnership interests (whether general or limited) and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Cash Equivalent Investments” means, as to any Person, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) time deposits and certificates of deposit of any investment grade commercial bank having, or which is the principal banking subsidiary of an investment grade bank holding company organized under the laws of the United States, any State thereof, the District of Columbia or any foreign jurisdiction having capital, surplus and undivided profits aggregating in excess of $500,000,000, with maturities of not more than one year from the date of acquisition by such Person, (iii) repurchase obligations with a term of not more than ninety (90) days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above, provided that such repurchase obligations are secured by a first priority security interest in such underlying securities which have, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations, (iv) commercial paper issued by any Person incorporated in the United States rated at least A-1 by S&P or P-1 by Moody’s and in each case maturing not more than 270 days after the date of acquisition by such Person, (v) investments in money market funds substantially all of the assets of which are comprised of securities of the types described in clauses (i) through (iv) above, and (vi) demand deposit accounts maintained in the ordinary course of business.

“Change” is defined in Section 3.2.

“Change in Control” means (i) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly, of thirty percent (30%) or more of the outstanding shares of voting stock of the Company; (ii) the majority of the Board of Directors of the Company fails to consist of Continuing Directors; or (iii) any Subsidiary Borrower shall cease to be a Wholly-Owned Subsidiary of the Company; provided that notwithstanding the foregoing, the occurrence of the Spin-Off Transaction shall not constitute a Change in Control hereunder.

“Closing Date” means October 19, 2007.

“Co-Documentation Agent” means each of KeyBank National Association, Wachovia Bank, National Association, Regions Bank and Wells Fargo Bank, N.A. in its capacity as a co-documentation agent for the Lenders pursuant to Article XI, and not in its individual capacity as a Lender, and any successor Co-Documentation Agent appointed pursuant to Article XI.

“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time, and any rule or regulation issued thereunder.

“Collateral Shortfall Amount” means, as of any date of determination, an amount equal to the difference of (x) the amount of LC Obligations at such time, less (y) the amount on deposit in the Facility LC Collateral Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations in accordance with the terms and conditions of this Agreement.

“Commitment” means, for each Lender, the obligation of such Lender to make Revolving Loans to, and participate in Facility LCs issued upon the application of, a Borrower in an aggregate amount not exceeding the amount set forth on the Commitment Schedule or in an Assignment Agreement executed pursuant to Section 13.3, as it may be modified as a result of any assignment that has become effective pursuant to Section 13.3.2 or as otherwise modified from time to time pursuant to the terms hereof.

“Commitment Increase Notice” is defined in Section 2.23(i).

“Commitment Schedule” means the Schedule identifying each Lender’s Commitment as of the Closing Date attached hereto and identified as such.

“Company” means Zep Inc., a Delaware corporation, and its permitted successors and assigns (including, without limitation, a debtor-in-possession on its behalf).

“Computation Date” is defined in Section 2.3.1.

“Consolidated Net Income” means, with reference to any period, the net after-tax income (or loss) of the Company and its Subsidiaries calculated on a consolidated basis for such period determined in accordance with Agreement Accounting Principles, excluding minority interests and including only dividends actually received by the Company from any entity which is not a Subsidiary.

“Consolidated Net Worth” means at any time the consolidated stockholders’ equity of the Company and its Subsidiaries calculated on a consolidated basis as of such time in accordance with Agreement Accounting Principles.

“Consolidated Total Assets” means the total amount of all assets of the Company and its consolidated Subsidiaries, and including amounts attributable to minority interests in Affiliates of the Company to the extent deducted in calculating the Consolidated Total Assets of the Company and its Subsidiaries but only to the extent such Affiliate shall be a Guarantor hereunder, calculated on a consolidated basis as of such time in accordance with Agreement Accounting Principles.

“Continuing Director” means, with respect to any Person as of any date of determination, any member of the board of directors of such Person who (i) was a member of such board of directors on the Closing Date, or (ii) was nominated for election or elected to such board of directors with the approval of the required majority of the Continuing Directors who were members of such board at the time of such nomination or election; provided that any individual who is so elected or nominated in connection with a merger, consolidation, acquisition or similar transaction shall not be a Continuing Director unless such individual was a Continuing Director prior thereto.

“Contractual Obligation” means, for any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking under which such Person is obligated or by which it or any of the property owned by it is bound.

“Controlled Group” means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code.

“Conversion/Continuation Notice” is defined in Section 2.10.

“Credit Extension” means the making of an Advance or the issuance of a Facility LC hereunder.

“Credit Extension Date” means the Borrowing Date for an Advance or the issuance date for a Facility LC.

“Deemed Dividend Problem” means, with respect to any Foreign Subsidiary, such Foreign Subsidiary’s accumulated and undistributed earnings and profits being deemed to be repatriated to the Company or the applicable parent Domestic Subsidiary under Section 956 of the Code and the effect of such repatriation causing materially adverse tax consequences to the Company or such parent Domestic Subsidiary, in each case as determined by the Company in its commercially reasonable judgment acting in good faith and in consultation with its legal and tax advisors.

“Default” means an event described in Article VII.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety-one (91) days after the Facility Termination Date.

“DOL” means the United States Department of Labor and any successor department or agency.

“Dollar Amount” of any currency at any date shall mean (i) the amount of such currency if such currency is Dollars or (ii) the Equivalent Amount of Dollars if such currency is any currency other than Dollars.

“Dollars” and “$” means the lawful currency of the United States of America.

“Domestic Subsidiary” means a Subsidiary of the Company organized under the laws of a jurisdiction located in the United States of America.

“EBIT” means, for any period for the Company and its consolidated Subsidiaries, the sum of the amounts for such period, without duplication, calculated in each case in accordance with Agreement Accounting Principles, of (i) Net Income, plus (ii) Interest Expense to the extent deducted in computing Net Income, plus (iii) charges against income for foreign, federal, state and local taxes to the extent deducted in computing Net Income, plus (iv) any other non-recurring non-cash charges to the extent deducted in computing Net Income, plus (v) non-cash expenses associated with the Company’s stock compensation programs, plus (vi) any extraordinary non-recurring cash charges for the Company’s fiscal year 2007 not to exceed $7,300,000 to the extent deducted in computing Net Income, plus (vii) restructuring charges (whether cash or non-cash) not to exceed $7,000,000 during the term of this Agreement to the extent deducted in computing Net Income, plus (viii) non-cash write-offs of intangibles and the impairment of assets to the extent deducted in computing Net Income and minus (ix) any non-recurring non-cash credits to the extent added in computing Net Income.

“EBITDA” means, for any period for the Company and its consolidated Subsidiaries, the sum of the amounts for such period, without duplication, calculated in each case in accordance with Agreement Accounting Principles, of (i) EBIT, plus (ii) depreciation expense to the extent deducted in computing Net Income, plus (iii) amortization expense, including, without limitation, amortization of goodwill and other intangible assets to the extent deducted in computing Net Income.

“Effective Commitment Amount” is defined in Section 2.23(i).

“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof.

“Equivalent Amount” of any currency at any date shall mean the equivalent in Dollars of such currency, calculated on the basis of the arithmetic mean of the buy and sell spot rates of exchange of the Administrative Agent or an Affiliate of the Administrative Agent in the London interbank market (or other market where the Administrative Agent’s foreign exchange operations in respect of such currency are then being conducted) for such other currency at or about 11:00 a.m. (local time applicable to the transaction in question) on the date on which such amount is to be determined, rounded up to the nearest amount of such currency as determined by the Administrative Agent from time to time; provided, however, that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent or an Affiliate of the Administrative Agent may use any reasonable method it deems appropriate (after consultation with the Company) to determine such amount, and such determination shall be conclusive absent manifest error.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, including (unless the context otherwise requires) any rules or regulations promulgated thereunder.

“EU” means the European Union.

“euro” and/or “EUR” means the single currency of the participating member states of the EU.

“Eurocurrency” means any Agreed Currency.

“Eurocurrency Advance” means an Advance which, except as otherwise provided in Section 2.12, bears interest at a Eurocurrency Rate requested by a Borrower pursuant to Sections 2.9 and 2.10.

“Eurocurrency Base Rate” means, with respect to any Eurocurrency Advance for any Interest Period, the rate appearing on, in the case of Dollars, Reuters BBA Libor Rates Page 3750 and, in the case of any Foreign Currency, the appropriate page of such service which displays British Bankers Association Interest Settlement Rates for deposits in such Foreign Currency (or, in each case, on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to deposits in the relevant Agreed Currency in the London interbank market) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period, as the rate for deposits in the relevant Agreed Currency with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the “Eurocurrency Base Rate” with respect to such Eurocurrency Advance for such Interest Period shall be the rate at which deposits in the relevant Agreed Currency in an Equivalent Amount of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period.

“Eurocurrency Loan” means a Loan which, except as otherwise provided in Section 2.12, bears interest at a Eurocurrency Rate requested by a Borrower pursuant to Sections 2.9 and 2.10.

“Eurocurrency Payment Office” of the Administrative Agent shall mean, for each Foreign Currency, the office, branch, affiliate or correspondent bank of the Administrative Agent for such currency as specified from time to time by the Administrative Agent to the Company and each Lender.

“Eurocurrency Rate” means, with respect to a Eurocurrency Advance for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurocurrency Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period, plus (ii) the then Applicable Margin, changing as and when the Applicable Margin changes, plus (iii) in the case of Loans by a Lender from its office or branch in the United Kingdom, the Mandatory Cost.

“Excluded Taxes” means, in the case of each Lender or applicable Lending Installation and each Agent, taxes imposed on its overall net income, and franchise or branch office taxes imposed on it, by (i) the jurisdiction under the laws of which such Lender or Agent is incorporated or organized or any political combination or subdivision or taxing authority thereof or (ii) the jurisdiction in which such Agent’s or Lender’s principal executive office or such Lender’s applicable Lending Installation is located or in which, other than as a result of the transaction evidenced by this Agreement, such Agent or Lender otherwise is, or at any time was, engaged in business (or any political combination or subdivision or taxing authority thereof).

“Exhibit” refers to an exhibit to this Agreement, unless another document is specifically referenced.

“Facility Fee” is defined in Section 2.6.1.

“Facility LC” is defined in Section 2.21.1.

“Facility LC Application” is defined in Section 2.21.3.

“Facility LC Collateral Account” is defined in Section 2.21.11.

“Facility Termination Date” means October 19, 2012.

“Federal Funds Effective Rate” means, for any day, 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 on the next succeeding 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 (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“Financial Contract” of a Person means (i) any exchange-traded or over-the-counter futures, forward, swap or option contract or other financial instrument with similar characteristics or (ii) any agreements, devices or arrangements providing for payments related to fluctuations of interest rates, exchange rates, forward rates or commodity prices, including, but not limited to, interest rate swap or exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency, interest rate options puts or warrants.

“Floating Rate” means, for any day, a rate per annum equal to the Alternate Base Rate for such day, changing when and as the Alternate Base Rate changes.

“Floating Rate Advance” means an Advance which, except as otherwise provided in Section 2.12, bears interest at the Floating Rate.

“Floating Rate Loan” means a Loan or portion thereof, which, except as otherwise provided in Section 2.12, bears interest at the Floating Rate.

“Foreign Currencies” means Agreed Currencies other than Dollars.

“Foreign Currency Sublimit” means $25,000,000.

“Foreign Pension Plan” means any employee benefit plan as described in Section 3(3) of ERISA for which the Company or any member of its Controlled Group is a sponsor or administrator and which (i) is maintained or contributed to for the benefit of employees of the Company, any of its respective Subsidiaries or any member of its Controlled Group, (ii) is not covered by ERISA pursuant to Section 4(b)(4) of ERISA, and (iii) under applicable local law, is required to be funded through a trust or other funding vehicle.

“Foreign Subsidiary” means a Subsidiary of the Company which is not a Domestic Subsidiary.

“Foreign Subsidiary Borrower” means a Subsidiary Borrower which is a Foreign Subsidiary.

“Form 10” has the meaning set forth in the definition of Spin-Off Transaction.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Guarantor” means the Company and each Material Subsidiary of the Company (other than an SPV) as of the Closing Date and each other Subsidiary that has become a guarantor of the Obligations hereunder in accordance with the terms of Section 6.10.

“Guaranty” means that certain Guaranty (and any and all supplements thereto) executed from time to time by each Guarantor (other than the Company) in favor of the Administrative Agent for the benefit of itself and the Lenders, in substantially the form of Exhibit G attached hereto, as amended, restated, supplemented or otherwise modified from time to time, and, in the case of any guaranty by a Foreign Subsidiary, any other guaranty agreements as are requested by the Administrative Agent and its counsel, in each case as amended, restated, supplemented or otherwise modified from time to time.

“Holders of Obligations” means the holders of the Obligations from time to time and shall include (i) each Lender and each LC Issuer in respect of its Outstanding Credit Exposure, (ii) the Administrative Agent, the LC Issuers and the Lenders in respect of all other present and future obligations and liabilities of the Company and each Subsidiary of every type and description arising under or in connection with the Credit Agreement or any other Loan Document, (iii) each indemnified party under Section 10.6 in respect of the obligations and liabilities of the Borrowers to such Person hereunder and under the other Loan Documents, and (iv) their respective successors and (in the case of a Lender, permitted) transferees and assigns.

“Indebtedness” of a Person means, without duplication, (a) Indebtedness For Borrowed Money and (b) any other obligation or other financial accommodation which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person (other than current accounts payable arising in the ordinary course of such Person’s business payable on terms customary in the trade).

“Indebtedness For Borrowed Money” of a Person means, without duplication, (a) the obligations of such Person (i) for borrowed money or which has been incurred in connection with the acquisition of property or assets (other than current accounts payable arising in the ordinary course of such Person’s business payable on terms customary in the trade), (ii) under or with respect to notes payable and drafts accepted which represent extensions of credit (whether or not representing obligations for borrowed money) to such Person, (iii) constituting reimbursement obligations with respect to letters of credit issued for the account of such Person or (iv) for the deferred purchase price of property or services (other than current accounts payable arising in the ordinary course of such Person’s business payable on terms customary in the trade), (b) the Indebtedness For Borrowed Money of others, whether or not assumed, secured by Liens on property of such Person or payable out of the proceeds of, or production from, property or assets now or hereafter owned or acquired by such Person, (c) the Capitalized Lease Obligations of such Person, (d) the obligations of such Person under guaranties by such Person of any Indebtedness For Borrowed Money (other than obligations for borrowed money incurred to finance the purchase of property leased to such Person pursuant to a Capitalized Lease of such Person) of any other Person, (e) all Receivable Facility Attributed Indebtedness of such Person, (f) all Off-Balance Sheet Liabilities of such Person, and (g) all Disqualified Stock.

“Interest Expense” means, for any period for any group of Persons, the total gross interest expense of such group of Persons, whether paid or accrued, including, without duplication, the interest component of Capitalized Leases, commitment and letter of credit fees, the discount or implied interest component of Off-Balance Sheet Liabilities, capitalized interest expense, pay-in-kind interest expense, amortization of debt discount and net payments (if any) pursuant to Financial Contracts relating to interest rate protection, all as determined on a consolidated basis in conformity with Agreement Accounting Principles.

“Interest Expense Coverage Ratio” is defined in Section 6.23.2.

“Interest Period” means, with respect to a Eurocurrency Advance, a period of seven days or one, two, three or six months or such other period agreed to by the Lenders and the Borrowers, commencing on a Business Day selected by the applicable Borrower pursuant to this Agreement. Such Interest Period shall end on but exclude the day which corresponds numerically to such date seven days or one, two, three or six months or such other agreed upon period thereafter, provided, however, that if there is no such numerically corresponding day in such seventh day or next, second, third or sixth succeeding month or such other succeeding period, such Interest Period shall end on the last Business Day of such seventh day or next, second, third or sixth succeeding month or such other succeeding period. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.

“IRS” means the United States Internal Revenue Service and any successor agency.

“JPMorgan” means JPMorgan Chase Bank, National Association, in its individual capacity, and its successors.

“LC Fee” is defined in Section 2.21.4.

“LC Issuer” means JPMorgan (or any Affiliate of JPMorgan designated by JPMorgan) or any of the other Lenders, as applicable, in its respective capacity as issuer of Facility LCs hereunder.

“LC Obligations” means, at any time, the sum, without duplication, of (i) the aggregate undrawn stated amount of all Facility LCs outstanding at such time plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations.

“LC Payment Date” is defined in Section 2.21.5.

“Lenders” means the lending institutions listed on the signature pages of this Agreement and their respective successors and assigns. Unless otherwise specified, the term “Lender” includes JPMorgan in its capacity as Swing Line Lender.

“Lender Increase Notice” is defined in Section 2.23(i).

“Lending Installation” means, with respect to a Lender or the Agents, the office, branch, subsidiary or affiliate of such Lender or Agent listed on the signature pages hereof, or on the administrative information sheets provided to the Administrative Agent in connection herewith, or on a Schedule or otherwise selected by such Lender or Agent pursuant to Section 2.18.

“Leverage Ratio” is defined in Section 6.23.1.

“Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement, and, in the case of stock, stockholders agreements, voting trust agreements and all similar arrangements).

“Loan” means a Revolving Loan or a Swing Line Loan, as applicable.

“Loan Documents” means this Agreement, the Facility LC Applications, each Guaranty, each Pledge Agreement, each Assumption Letter executed hereunder, and all other documents, instruments, notes (including any Notes issued pursuant to Section 2.14 (if requested)) and agreements executed in connection herewith or therewith or contemplated hereby or thereby, as the same may be amended, restated or otherwise modified and in effect from time to time.

“Loan Party” is defined in Section 4.1(i).

“Mandatory Cost” is described in Schedule 2.2.

“Material Adverse Effect” means a material adverse effect on (i) the business, financial condition, operations or properties of the Company and its Subsidiaries taken as a whole, (ii) the ability of the Company or any of its Subsidiaries to perform its respective obligations under the Loan Documents to which it is a party, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of the Agents, the LC Issuers or the Lenders thereunder.

“Material Indebtedness” is defined in Section 7.5.

“Material Subsidiary” means each Borrower (other than the Company) and any other Subsidiary of the Company that at any time has (i) assets with a total book value equal to or greater than five percent (5%) of the aggregate book value of the Consolidated Total Assets of the Company and its Subsidiaries or (ii) Consolidated Net Worth that is equal to or greater than five percent (5%) of the Consolidated Net Worth of the Company and its Subsidiaries, or (iii) assets that contributed five percent (5%) or more of the Company’s Consolidated Net Income, in each case as reported in the most recent annual audited financial statements delivered to the Lenders pursuant to Section 6.1(i) (or, prior to the delivery of the first of such annual audited financial statements under Section 6.1(i), as reported in the Form 10).

“Modify” and “Modification” are defined in Section 2.21.1.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

“Multiemployer Plan” means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Company or any member of its Controlled Group is a party to which more than one employer is obligated to make contributions.

“Net Income” means, for any period for any group of Persons, the net earnings (or loss) after taxes of such group of Persons on a consolidated basis for such period taken as a single accounting period determined in conformity with Agreement Accounting Principles.

“Non-U.S. Lender” is defined in Section 3.5(iv).

“Note” is defined in Section 2.14.

“Obligations” means all Loans, Reimbursement Obligations, advances, debts, liabilities, obligations, covenants and duties owing by the Borrowers to any of the Agents, any LC Issuer, any Lender, the Arrangers, any affiliate of the Agents, any LC Issuer, or any Lender, the Arrangers, or any indemnitee under the provisions of Section 10.6 or any other provisions of the Loan Documents, in each case of any kind or nature, present or future, arising under this Agreement or any other Loan Document, whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether arising by reason of an extension of credit, loan, foreign exchange risk, guaranty, indemnification, or in any other manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and however acquired. The term includes, without limitation, all interest, charges, expenses, fees, attorneys’ fees and disbursements, paralegals’ fees (in each case whether or not allowed), and any other sum chargeable to the Company or any of its Subsidiaries under this Agreement or any other Loan Document.

“Off-Balance Sheet Liability” of a Person means (i) Receivables Facility Attributed Indebtedness and any repurchase obligation or liability of such Person or any of its Subsidiaries with respect to Receivables or notes receivable sold by such Person or any of its Subsidiaries (calculated to include the unrecovered investment of purchasers or transferees of Receivables or any other obligation of the Company or such transferor to purchasers/transferees of interests in Receivables or notes receivable or the agent for such purchasers/transferees), (ii) any liability under any sale and leaseback transaction which is not a Capitalized Lease, other than any such transactions involving the sale of assets not in excess of $5,000,000 in the aggregate, (iii) any liability under any financing lease or Synthetic Lease or “tax ownership operating lease” transaction entered into by such Person,

including any Synthetic Lease Obligations, or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheets of such Person, but excluding from this clause (iv) Operating Leases.

“Operating Lease” of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more.

“Originator” means the Company and/or any of its Subsidiaries in their respective capacities as parties to any Receivables Purchase Documents, as sellers or transferors of any Receivables and Related Security in connection with a Permitted Receivables Transfer.

“Other Taxes” is defined in Section 3.5(ii).

“Outstanding Credit Exposure” means, as to any Lender at any time, the sum of (i) the aggregate principal amount of its Revolving Loans outstanding at such time, plus (ii) an amount equal to its Pro Rata Share of the obligations to purchase participations in Swing Line Loans, plus (iii) an amount equal to its Pro Rata Share of the LC Obligations at such time.

“Participants” is defined in Section 13.2.1.

“Payment Date” means the last day of each March, June, September and December and the Facility Termination Date.

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

“Performance LC” means a Facility LC that is a documentary letter of credit which is drawable upon presentation of documents evidencing the sale or shipment of goods purchased by the Company or a Subsidiary in the ordinary course of business.

“Permitted Acquisition” is defined in Section 6.12.2.

“Permitted Liens” means the Liens expressly permitted under clauses (i) through (xv) of Section 6.13.

“Permitted Receivables Transfer” means (i) a sale or other transfer by an Originator to a SPV of Receivables and Related Security for fair market value and without recourse (except for limited recourse typical of such structured finance transactions), and/or (ii) a sale or other transfer (including the grant of Liens) by a SPV to (a) purchasers of, lenders on or other investors in such Receivables and Related Security (or interests therein) or (b) any other Person (including a SPV) in a transaction in which purchasers or other investors purchase or are otherwise transferred such Receivables and Related Security (or interests therein including Liens), in each case pursuant to and in accordance with the terms of the Receivables Purchase Documents.

“Permitted Refinancing Indebtedness” means any replacement, renewal, refinancing or extension of any Indebtedness permitted by this Agreement that (i) does not exceed the aggregate principal amount (plus accrued interest and any applicable premium and associated fees and expenses) of the Indebtedness being replaced, renewed, refinanced or extended, (ii) does not have a Weighted Average Life to Maturity at the time of such replacement, renewal, refinancing or

extension that is less than the Weighted Average Life to Maturity of the Indebtedness being replaced, renewed, refinanced or extended, and (iii) does not rank at the time of such replacement, renewal, refinancing or extension senior to the Indebtedness being replaced, renewed, refinanced or extended.

“Person” means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.

“Plan” means an employee benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Company or any member of its Controlled Group may have any liability.

“Pledge Agreements” means those pledge agreements executed by the relevant Loan Parties with respect to the pledge of Capital Stock of a Material Subsidiary which is an Affected Foreign Subsidiary, any other pledge agreements, share mortgages, charges and comparable instruments and documents from time to time executed pursuant to the terms of Section 6.10 in favor of the Administrative Agent for the benefit of the Holders of Obligations, in each case, as amended, restated, supplemented or otherwise modified from time to time.

“Pounds Sterling” means the lawful currency of the United Kingdom.

“Pricing Schedule” means the Schedule identifying the Applicable Margin and Applicable Facility Fee Rate attached hereto identified as such.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank, National Association as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“Property” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

“Proposed New Lender” is defined in Section 2.23(i).

“Pro Rata Share” means, with respect to a Lender, a portion equal to a fraction the numerator of which is such Lender’s Commitment at such time (in each case, as adjusted from time to time in accordance with the provisions of this Agreement) and the denominator of which is the Aggregate Commitment at such time, or, if the Aggregate Commitment has been terminated, a fraction the numerator of which is such Lender’s Outstanding Credit Exposure at such time and the denominator of which is the sum of the Aggregate Outstanding Credit Exposure at such time.

“Purchase Price” means the total consideration and other amounts payable in connection with any Acquisition, including, without limitation, any portion of the consideration payable in cash, all Indebtedness, liabilities and contingent obligations incurred or assumed in connection with such Acquisition and all transaction costs and expenses incurred in connection with such Acquisition, but exclusive of the value of any Capital Stock or other equity interests of the Company or any Subsidiary issued as consideration for such Acquisition.

“Purchasers” is defined in Section 13.3.1.

“Receivable(s)” means and includes all of applicable Originator’s or SPV’s presently existing and hereafter arising or acquired accounts, accounts receivable, and all present and future rights of such Originator or SPV, as applicable, to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether or not they have been earned by performance, and all rights in any merchandise or goods which any of the same may represent, and all rights, title, security, contracts, books and records, and guaranties with respect to each of the foregoing, including, without limitation, any right of stoppage in transit.

“Receivables and Related Security” means the Receivables and the related security and collections with respect thereto which are sold or transferred by any Originator or SPV in connection with any Permitted Receivables Transfer.

“Receivables Facility Attributed Indebtedness” means the amount of obligations outstanding under a receivables purchase facility on any date of determination that would be characterized as principal if such facility were structured as a secured lending transaction rather than as a purchase.

“Receivables Facility Financing Costs” means such portion of the cash fees, service charges, and other costs, as well as all collections or other amounts retained by purchasers of receivables pursuant to a receivables purchase facility, which are in excess of amounts paid to the Company and its consolidated Subsidiaries under any receivables purchase facility for the purchase of receivables pursuant to such facility and are the equivalent of the interest component of the financing if the transaction were characterized as an on-balance sheet transaction.

“Receivables Purchase Documents” means any series of receivables purchase or sale, credit or servicing agreements generally consistent with terms contained in comparable structured finance transactions pursuant to which an Originator or Originators sell or transfer to SPVs all of their respective right, title and interest in and to certain Receivables and Related Security for further sale or transfer (or granting of Liens) to other purchasers of or investors in such assets or interests therein (and the other documents, instruments and agreements executed in connection therewith), as any such agreements may be amended, restated, supplemented or otherwise modified from time to time, or any replacement or substitution therefor.

“Receivables Purchase Financing” means any financing consisting of a securitization facility made available to the Company or any of its consolidated Subsidiaries, whereby the Receivables and Related Security (or interests therein) of the Originators are transferred to one or more SPVs, and thereafter to certain investors (or are used as collateral to enable one or more SPVs to obtain loans from certain investors), pursuant to the terms and conditions of the Receivables Purchase Documents.

“Redeemable Preferred Stock” means, for any Person, any preferred stock issued by such Person which is at any time prior to the Facility Termination Date either (i) mandatorily redeemable (by required sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.

“Regulation T” means Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by and to brokers and dealers of securities for the purpose of purchasing or carrying margin stock (as defined therein).

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks, non-banks and non-broker lenders for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.

“Regulation X” means Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by foreign lenders for the purpose of purchasing or carrying margin stock (as defined therein).

“Reimbursement Obligations” means with respect to any LC Issuer, at any time, the aggregate of all obligations of the Borrowers then outstanding under Section 2.21 to reimburse such LC Issuer for amounts paid by such LC Issuer in respect of any one or more drawings under Facility LCs issued by such LC Issuer; or, as the context may require, all such Reimbursement Obligations then outstanding to reimburse all of the LC Issuers.

“Reportable Event” means a reportable event, as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation or otherwise waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.

“Required Lenders” means Lenders in the aggregate having fifty-one percent (51%) or more of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding fifty-one percent (51%) or more of the Aggregate Outstanding Credit Exposure.

“Reserve Requirement” means, with respect to any currency, a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve, liquid asset, fees or similar requirements (including any marginal, special, emergency or supplemental reserves or other requirements) established by any central bank, monetary authority, the Board, the Financial Services Authority, the European Central Bank or other Governmental Authority for any category of deposits or liabilities customarily used to fund loans in such currency, expressed in the case of each such requirement as a decimal. Such reserve percentages shall, in the case of Dollar denominated Loans, include those imposed pursuant to Regulation D of the Board. Eurocurrency Loans shall be deemed to be subject to such reserve, liquid asset or similar requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under any applicable law, rule or regulation, including Regulation D. The Reserve Requirement shall be adjusted automatically on and as of the effective date of any change in any reserve, liquid asset or similar requirement.

“Revolving Loan” means, with respect to a Lender, such Lender’s loan made pursuant to its commitment to lend set forth in Section 2.1 (and any conversion or continuation thereof).

“Risk Based Capital Guidelines” is defined in Section 3.2.

“S&P” means Standard and Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

“Sale and Leaseback Transaction” means any sale or other transfer of any property or asset by any Person with the intent to lease such property or asset as lessee.

“Schedule” refers to a specific schedule to this Agreement, unless another document is specifically referenced.

“Section” means a numbered section of this Agreement, unless another document is specifically referenced.

“Selling Lender” is defined in Section 2.23(ii).

“Single Employer Plan” means a Plan maintained by the Company or any member of its Controlled Group for employees of the Company or any member of its Controlled Group.

“Solvent” means, when used with respect to any Person, that at the time of determination:

(i) the fair value of its assets (both at fair valuation and at present fair saleable value) is equal to or in excess of the total amount of its liabilities, including, without limitation, contingent liabilities; and

(ii) it is then able and expects to be able to pay its debts as they mature; and

(iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted.

With respect to contingent liabilities (such as litigation, guarantees and pension plan liabilities), such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at the time, represent the amount which can be reasonably be expected to become an actual or matured liability.

“Spin-Off Special Dividend” means a dividend payable to Acuity Brands, Inc. in an amount not to exceed $62,500,000 on or prior to the date of the Spin-Off Transaction.

“Spin-Off Transaction” means Acuity Brands, Inc.’s plan, authorized by its board of directors, to separate its lighting equipment business and its specialty products business by spinning off the Company into an independent publicly-traded company, pursuant to which the Capital Stock of the Company will be distributed to the record holders of the shares of Acuity Brands, Inc. as set forth in Acuity Brands, Inc.’s Form S-10 filed with the Securities and Exchange Commission on July 31, 2007, as amended prior to the Closing Date (the “Form 10”).

“SPV” means any special purpose entity established for the purpose of purchasing receivables in connection with a Receivables Purchase Financing permitted under the terms of this Agreement.

“Standby LC” means any Facility LC other than a Performance LC.

“Stockholders’ Equity” means, at any time, the shareholders’ equity of the Company and its consolidated Subsidiaries, as set forth or reflected on the most recent consolidated balance sheet of the Company and its consolidated Subsidiaries delivered pursuant to Section 6.1(i) and (ii), as applicable, but excluding any Redeemable Preferred Stock of the Company or any of its consolidated Subsidiaries.

“Subsidiary” of a Person means (i) any corporation more than fifty percent (50%) of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than fifty percent (50%) of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Company.

“Subsidiary Borrower” means each of Acuity Specialty Products, Inc. and any Subsidiaries of the Company duly designated by the Company pursuant to Section 2.22 to request Credit Extensions hereunder, which Subsidiary shall have delivered to the Administrative Agent an Assumption Letter in accordance with Section 2.22 and such other documents as may be required pursuant to this Agreement, in each case, together with its respective successors and assigns, including a debtor-in-possession on behalf of such Subsidiary Borrower.

“Substantial Portion” means, with respect to the Property of the Company and its Subsidiaries, Property which (i) represents more than twenty percent (20%) of the consolidated assets of the Company and its Subsidiaries as reflected in the consolidated financial statements of the Company and its Subsidiaries as at the end of the fiscal quarter ending immediately prior to the date on which such determination is made, or (ii) is responsible for providing more than twenty percent (20%) of the Consolidated Net Income of the Company and its Subsidiaries as reflected in the financial statements for the four fiscal quarter period ending immediately prior to the date on which such determination is made.

“Swing Line Borrowing Notice” is defined in Section 2.2.2.

“Swing Line Commitment” means the obligation of the Swing Line Lender to make Swing Line Loans up to a maximum principal amount of $20,000,000 at any one time outstanding.

“Swing Line Lender” means JPMorgan or such other Lender which may succeed to its rights and obligations as Swing Line Lender pursuant to the terms of this Agreement.

“Swing Line Loan” means a Loan made available to the Borrowers by the Swing Line Lender pursuant to Section 2.2.

“Syndication Agent” means Bank of America, N.A. in its capacity as the syndication agent for the Lenders pursuant to Article XI, and not in its individual capacity as a Lender, and any successor Syndication Agent appointed pursuant to Article XI.

“Synthetic Lease” means any so-called “synthetic”, off-balance sheet or tax retention lease, or any other agreement for the use or possession of property creating obligations that are not treated as a capital lease under Agreement Accounting Principles, but that is treated as a financing under the Code.

“Synthetic Lease Obligations” means, collectively, the payment obligations of the Company or any of its Subsidiaries pursuant to a Synthetic Lease.

“TARGET” means the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) payment system (or, if such payment system ceases to be operative, such other payment system (if any) reasonably determined by the Administrative Agent to be a suitable replacement) for the settlement of payments in euro.

“Taxes” means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes.

“Transferee” is defined in Section 13.4.

“Type” means, with respect to any Advance, its nature as a Floating Rate Advance or a Eurocurrency Advance.

“Unfunded Liabilities” means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans using PBGC actuarial assumptions for single employer plan terminations.

“Unmatured Default” means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default.

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

“Wholly-Owned Subsidiary” of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled; provided that in the case of clause (i) or (ii) above, there shall be excluded (x) directors’ qualifying shares, (y) nominal ownership interests in Foreign Subsidiaries required to be held by third parties under the laws of the foreign jurisdiction in which such Foreign Subsidiary is organized, or (z) Disqualified Stock or Redeemable Preferred Stock.

The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.

Any accounting terms used in this Agreement which are not specifically defined herein shall have the meanings customarily given them in accordance with Agreement Accounting Principles.

1.2. References. Any references to the Company’s Subsidiaries shall not in any way be construed as consent by the Administrative Agent or any Lender to the establishment, maintenance or acquisition of any Subsidiary, except as may otherwise be permitted hereunder.

1.3. Supplemental Disclosure. At any time at the reasonable request of the Administrative Agent (which shall not be done more frequently than on a quarterly basis in the absence of a Default) and at such additional times as the Company determines, the Company shall supplement each schedule or representation herein or in the other Loan Documents with respect to any matter hereafter arising which, if existing or occurring at the Closing Date, would have been required to be set forth as an exception to such representation or which is necessary to correct any information in such representation which has been rendered materially inaccurate thereby. Notwithstanding that any such supplement to such representation may disclose the existence or occurrence of events, facts or circumstances which are either prohibited by the terms of this Agreement or any other Loan Documents or which result in the material breach of any representation or warranty, such supplement to such representation shall not be deemed either an amendment thereof or a waiver of such breach unless expressly consented to in writing by Administrative Agent and the requisite number of Lenders under Section 8.2, and no such amendments, except as the same may be consented to in a writing which expressly includes a waiver, shall be or be deemed a waiver by the Administrative Agent or any Lender of any Default disclosed therein. Any items disclosed in any such supplemental disclosures shall be included in the calculation of any limits, baskets or similar restrictions contained in this Agreement or any of the other Loan Documents.

ARTICLE II

THE CREDITS

2.1. Commitment. From and including the Closing Date and prior to the Facility Termination Date, upon the satisfaction of the conditions precedent set forth in Section 4.1, 4.2 and 4.3, as applicable, each Lender severally and not jointly agrees, on the terms and conditions set forth in this Agreement, to (i) make Revolving Loans to the Borrowers in Agreed Currencies and (ii) participate in Facility LCs issued upon the request of the Borrowers in Agreed Currencies, from time to time in amounts not to exceed in the aggregate at any one time outstanding the Dollar Amount of its Pro Rata Share of the Available Aggregate Commitment; provided that (i) at no time shall the Aggregate Outstanding Credit Exposure hereunder exceed the Aggregate Commitment, (ii) at no time shall the aggregate outstanding Dollar Amount of all Eurocurrency Advances denominated in an Agreed Currency other than Dollars exceed the Foreign Currency Sublimit, and (iii) all Floating Rate Loans shall be made in Dollars. Subject to the terms of this Agreement, the Borrowers may borrow, repay and reborrow Revolving Loans at any time prior to the Facility Termination Date. The Commitments to lend hereunder shall expire automatically on the Facility Termination Date. The LC Issuers will issue Facility LCs hereunder on the terms and conditions set forth in Section 2.21.

2.2. Swing Line Loans.

2.2.1. Amount of Swing Line Loans. Upon the satisfaction of the conditions precedent set forth in Section 4.2 and, if such Swing Line Loan is to be made on the date of the initial Advance hereunder, the satisfaction of the conditions precedent set forth in Section 4.1 and 4.3 as well, from and including the Closing Date and prior to the Facility Termination Date, the Swing Line Lender agrees, on the terms and conditions set forth in this Agreement, to make Swing Line Loans, in Dollars, to the Borrowers from time to time in an aggregate principal amount not to exceed the Swing Line Commitment, provided that the Aggregate Outstanding Credit Exposure shall not at any time exceed the Aggregate Commitment, and provided further that at no time shall the sum of (i) the Swing Line Lender’s share of the obligations to participate in the Swing Line Loans, plus (ii) the outstanding Revolving Loans made by the Swing Line Lender pursuant to Section 2.1, exceed the Swing Line Lender’s Commitment at such time. Subject to the terms of this Agreement, the Borrowers may borrow, repay and reborrow Swing Line Loans at any time prior to the Facility Termination Date.

2.2.2. Borrowing Notice. The applicable Borrower shall deliver to the Administrative Agent and the Swing Line Lender irrevocable notice (a “Swing Line Borrowing Notice”) not later than 11:00 a.m. (Chicago time) on the Borrowing Date of each Swing Line Loan, specifying (i) the applicable Borrowing Date (which date shall be a Business Day), and (ii) the aggregate amount of the requested Swing Line Loan which shall be an amount not less than $1,000,000 and integral multiples of $500,000 in excess thereof. Each Swing Line Loan shall bear interest on the outstanding principal amount thereof, for each day from and including the day such Swing Line Loan is made to but excluding the date it is paid, at a rate per annum equal to the Alternate Base Rate or such other rate as shall be agreed to by the Swing Line Lender and the applicable Borrower.

2.2.3. Making of Swing Line Loans. Promptly after receipt of a Swing Line Borrowing Notice, the Administrative Agent shall notify each Lender by fax, or other similar form of transmission, of the requested Swing Line Loan. Not later than 2:00 p.m. (Chicago time) on the applicable Borrowing Date, the Swing Line Lender shall make available the Swing Line Loan, in funds immediately available in Chicago, to the Administrative Agent at its address specified pursuant to Article XIV. The Administrative Agent will promptly make the funds so received from the Swing Line Lender available to the applicable Borrower on the Borrowing Date at the Administrative Agent’s aforesaid address.

2.2.4. Repayment of Swing Line Loans. Each Swing Line Loan shall be paid in full by the Borrowers on or before the fifth (5th) Business Day after the Borrowing Date for such Swing Line Loan. In addition, the Swing Line Lender (i) may at any time in its sole discretion with respect to any outstanding Swing Line Loan, or (ii) shall on the fifth (5th) Business Day after the Borrowing Date of any Swing Line Loan, require each Lender (including the Swing Line Lender) to make a Revolving Loan in the amount of such Lender’s Pro Rata Share of such Swing Line Loan (including, without limitation, any interest accrued and unpaid thereon), for the purpose of repaying such Swing Line Loan. Not later than 12:00 noon (Chicago time) on the date of any notice received pursuant to this Section 2.2.4, each Lender shall make available its required Revolving Loan, in funds immediately available in Chicago to the Administrative Agent at its address specified pursuant to Article XIV. Revolving Loans made pursuant to this Section 2.2.4 shall initially be Floating Rate Loans and thereafter may be continued as Floating Rate Loans or converted into Eurocurrency Loans in the manner provided in Section 2.10 and subject to the other conditions and limitations set forth in this Article II. Unless a Lender shall have notified the Swing Line Lender, prior to its making any

Swing Line Loan, that any applicable condition precedent set forth in Sections 4.1, 4.2 or 4.3 had not then been satisfied, such Lender’s obligation to make Revolving Loans pursuant to this Section 2.2.4 to repay Swing Line Loans shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against any Agent, the Swing Line Lender or any other Person, (b) the occurrence or continuance of a Default or Unmatured Default, (c) any adverse change in the condition (financial or otherwise) of any Borrower, or (d) any other circumstances, happening or event whatsoever. In the event that any Lender fails to make payment to the Administrative Agent of any amount due under this Section 2.2.4, the Administrative Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Administrative Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. In addition to the foregoing, if for any reason any Lender fails to make payment to the Administrative Agent of any amount due under this Section 2.2.4, such Lender shall be deemed, at the option of the Administrative Agent, to have unconditionally and irrevocably purchased from the Swing Line Lender, without recourse or warranty, an undivided interest and participation in the applicable Swing Line Loan in the amount of such Revolving Loan, and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Effective Rate for each day during the period commencing on the date of demand and ending on the date such amount is received. On the Facility Termination Date, the Borrowers shall repay in full the outstanding principal balance of the Swing Line Loans.

2.3. Determination of Dollar Amounts; Required Payments; Termination.

2.3.1. Determination of Dollar Amounts. The Administrative Agent will determine the Dollar Amount of:

(a) each Credit Extension as of the date three Business Days prior to the Credit Extension Date or, if applicable, date of conversion/continuation of such Credit Extension, and

(b) all outstanding Credit Extensions on and as of the last Business Day of each quarter and on any other Business Day elected by the Administrative Agent in its discretion or upon instruction by the Required Lenders.

Each day upon or as of which the Administrative Agent determines Dollar Amounts as described in the preceding clauses (i) and (ii) is herein described as a “Computation Date” with respect to each Credit Extensions for which a Dollar Amount is determined on or as of such day. If at any time the Dollar Amount of the sum of the aggregate principal amount of all outstanding Credit Extension (calculated, with respect to those Credit Extensions denominated in Agreed Currencies other than Dollars, as of the most recent Computation Date with respect to each such Credit Extension) exceeds the Aggregate Commitment, the Borrowers shall immediately repay Advances in an aggregate principal amount sufficient to eliminate any such excess.

2.3.2. Required Payments. This Agreement shall be effective until the Facility Termination Date. Any outstanding Advances and all other unpaid Obligations shall be paid in full by the Borrowers on the Facility Termination Date.

2.3.3. Termination. Notwithstanding the termination of this Agreement on the Facility Termination Date, until all of the Obligations (other than contingent indemnity obligations) shall

have been fully paid and satisfied and all financing arrangements among the Borrowers and the Lenders hereunder and under the other Loan Documents shall have been terminated, all of the rights and remedies under this Agreement and the other Loan Documents shall survive and the Administrative Agent shall be entitled to retain its security interest in and to all existing and future collateral (if any).

2.4. Revolving Loans. Each Advance hereunder (other than any Swing Line Loan) shall consist of Revolving Loans made from the several Lenders ratably in proportion to the ratio that their respective Commitments bear to the Aggregate Commitment.

2.5. Types of Advances. The Advances may be Revolving Loans consisting of Floating Rate Advances or Eurocurrency Advances, or a combination thereof, selected by the applicable Borrower in accordance with Sections 2.9 and 2.10, or Swing Line Loans selected by the applicable Borrower in accordance with Section 2.2.

2.6. Facility Fee; Reductions in Aggregate Commitment.

2.6.1. Facility Fee. The Borrowers agree to pay to the Administrative Agent for the account of each Lender a facility fee (the “Facility Fee”) at a per annum rate equal to the Applicable Facility Fee Rate on the average daily amount of such Lender’s Commitment (regardless of usage) (or, from and after the Facility Termination Date, such Lender’s average daily Outstanding Credit Exposure) from and including the Closing Date to and including the date on which this Agreement is terminated in full and all Obligations hereunder have been paid in full pursuant to Section 2.3, payable quarterly in arrears on each Payment Date hereafter and until all Obligations hereunder have been paid in full.

2.6.2. Reductions in Aggregate Commitment. The Borrowers may permanently reduce the Aggregate Commitment in whole, or in part ratably among the Lenders in a minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess thereof) (or the Approximate Equivalent Amount if denominated in a Foreign Currency), upon at least three (3) Business Days’ prior written notice to the Administrative Agent of such reduction, which notice shall specify the amount of any such reduction; provided, however, that the amount of the Aggregate Commitment may not be reduced below the Dollar Amount of the Aggregate Outstanding Credit Exposure. All accrued Facility Fees shall be payable on the effective date of any termination of all or any part of the obligations of the Lenders to make Credit Extensions hereunder.

2.7. Minimum Amount of Each Advance. Each Eurocurrency Advance shall be in the minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess thereof) (or the Approximate Equivalent Amount if denominated in a Foreign Currency), and each Floating Rate Advance shall be in the minimum amount of $1,000,000 (and in multiples of $250,000 if in excess thereof), provided, however, that any Floating Rate Advance may be in the amount of the Available Aggregate Commitment.

2.8. Optional Principal Payments. The Borrowers may from time to time pay, without penalty or premium, all outstanding Floating Rate Advances, or any portion of the outstanding Floating Rate Advances, in a minimum aggregate amount of $1,000,000 or any integral multiple of $250,000 in excess thereof, upon prior notice to the Administrative Agent at or before 12:00 noon (Chicago time) one (1) Business Day prior to the date of such payment. The Borrowers may from time to time pay, subject to the payment of any funding indemnification amounts required by Section 3.4 but without penalty or premium, all outstanding Eurocurrency Advances, or, in a minimum

aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof (or the Approximate Equivalent Amount if denominated in a Foreign Currency), any portion of the outstanding Eurocurrency Advances upon five (5) Business Days’ prior notice to the Administrative Agent. The Borrowers may at any time pay, without penalty or premium, all outstanding Swing Line Loans, or, in a minimum amount of $1,000,000 and increments of $500,000 in excess thereof, any portion of the outstanding Swing Line Loans, with notice to the Administrative Agent and the Swing Line Lender by 12:00 noon (Chicago time) on the date of repayment.

2.9. Method of Selecting Types and Interest Periods for New Advances.

2.9.1. Method of Selecting Types and Interest Periods for New Advances. Other than with respect to Swing Line Loans (which shall be governed by Section 2.2), the applicable Borrower shall select the Type of Advance and, in the case of each Eurocurrency Advance, the Interest Period and Agreed Currency applicable thereto from time to time; provided that there shall be no more than ten (10) Interest Periods in effect with respect to all of the Revolving Loans at any time, unless such limit has been waived by the Administrative Agent in its sole discretion. The applicable Borrower shall give the Administrative Agent irrevocable notice (a “Borrowing Notice”) not later than 10:00 a.m. (Chicago time) on the Borrowing Date of each Floating Rate Advance, three (3) Business Days before the Borrowing Date for each Eurocurrency Advance denominated in Dollars, and four (4) Business Days before the Borrowing Date for each Eurocurrency Advance denominated in Foreign Currencies, specifying:

(i)

the Borrowing Date, which shall be a Business Day, of such Advance,

(ii)

the aggregate amount of such Advance,

(iii)

the Type of Advance selected, and

(iv)

in the case of each Eurocurrency Advance, the Interest Period and Agreed Currency applicable thereto.

2.9.2. Method of Borrowing. On each Borrowing Date, each Lender shall make available its Loan or Loans, if any, (i) if such Loan is denominated in Dollars, not later than noon, Chicago time, in Federal or other funds immediately available to the Administrative Agent, in Chicago, Illinois at its address specified in or pursuant to Article XIV and (ii) if such Loan is denominated in a Foreign Currency, not later than noon, local time, in the city of the Administrative Agent’s Eurocurrency Payment Office for such currency, in such funds as may then be customary for the settlement of international transactions in such currency in the city of and at the address of the Administrative Agent’s Eurocurrency Payment Office for such currency. Unless the Administrative Agent determines that any applicable condition specified in Article IV has not been satisfied, the Administrative Agent will make the funds so received from the Lenders available to the applicable Borrower at the Administrative Agent’s aforesaid address by not later than 2:30 p.m., local time. Notwithstanding the foregoing provisions of this Section 2.9.2, to the extent that a Loan made by a Lender matures on the Borrowing Date of a requested Loan, such Lender shall apply the proceeds of the Loan it is then making to the repayment of principal of the maturing Loan.

2.10. Conversion and Continuation of Outstanding Advances. Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into Eurocurrency Advances pursuant to this Section 2.10 or are repaid in accordance with Section 2.8.

Each Eurocurrency Advance shall continue as a Eurocurrency Advance until the end of the then applicable Interest Period therefor, at which time (i) each such Eurocurrency Advance shall be automatically converted into a Floating Rate Advance unless (x) such Eurocurrency Advance is or was repaid in accordance with Section 2.8 or (y) the applicable Borrower shall have given the Administrative Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurocurrency Advance continue as a Eurocurrency Advance for the same or another Interest Period or be converted into a Floating Rate Advance; and (ii) each such Eurocurrency Advance denominated in a Foreign Currency shall automatically continue as a Eurocurrency Advance in the same Agreed Currency with an Interest Period of one month unless (x) such Eurocurrency Advance is or was repaid in accordance with Section 2.8, or (y) the applicable Borrower shall have given the Administrative Agent a Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest Period, such Eurocurrency Advance continue as a Eurocurrency Advance for the same or another Interest Period.

Subject to the terms of Section 2.7, the Borrowers may elect from time to time to convert all or any part of an Advance of any Type into any other Type or Types of Advances denominated in the same or any other Agreed Currency; provided that any conversion of any Eurocurrency Advance shall be made on, and only on, the last day of the Interest Period applicable thereto. Notwithstanding anything to the contrary contained in this Section 2.10, no Advance may be converted or continued as a Eurocurrency Advance (except with the consent of the Required Lenders) when any Default or Unmatured Default is continuing. The applicable Borrower shall give the Administrative Agent irrevocable notice (a “Conversion/Continuation Notice”) of each conversion of an Advance or continuation of a Eurocurrency Advance not later than 10:00 a.m. (Chicago time) at least one (1) Business Day, in the case of a conversion into a Floating Rate Advance, three (3) Business Days, in the case of a conversion into or continuation of a Eurocurrency Advance denominated in Dollars, or four (4) Business Days, in the case of a conversion into or continuation of a Eurocurrency Advance denominated in a Foreign Currency, prior to the date of the requested conversion or continuation, specifying:

(i)

the requested date, which shall be a Business Day, of such conversion or continuation,

(ii)

the Agreed Currency, the aggregate amount and Type of the Advance which is to be converted or continued, and

(iii)

the amount of such Advance which is to be converted into or continued as a Eurocurrency Advance and the duration of the Interest Period applicable thereto.

Promptly after receipt of any Conversion/Continuation Notice, the Administrative Agent shall provide the Lenders with notice thereof.

2.11. Changes in Interest Rate, etc. Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is automatically converted from a Eurocurrency Advance into a Floating Rate Advance pursuant to Section 2.10, to but excluding the date it is paid or is converted into a Eurocurrency Advance pursuant to Section 2.10 hereof, at a rate per annum equal to the Floating Rate for such day. Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate. Each Eurocurrency Advance shall bear interest on the outstanding principal amount thereof from and including the first

day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined by the Administrative Agent as applicable to such Eurocurrency Advance based upon the applicable Borrower’s selections under Sections 2.9 and 2.10 and otherwise in accordance with the terms hereof. No Interest Period may end after the Facility Termination Date.

2.12. No Conversion or Continuation of Eurocurrency Advances After Default; Dates Applicable After Default. Notwithstanding anything to the contrary contained in Section 2.10, no Advance may be converted or continued as a Eurocurrency Advance (except with the consent of the Required Lenders) when any Default or Unmatured Default is continuing. During the continuance of a Default (including the Borrowers’ failure to pay any Loan at maturity) the Required Lenders may, at their option, by notice to the Borrowers (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) the Advances, all fees or any other Obligations hereunder shall bear interest at the Floating Rate plus 2% per annum and (ii) the LC Fee shall be increased by 2% per annum, provided that, during the continuance of a Default under Section 7.6 or 7.7, such interest rate and such increase in the LC Fee set forth above shall be applicable to all Credit Extensions, Advances, fees and other Obligations hereunder without any election or action on the part of the Administrative Agent, any LC Issuer or any Lender.

2.13. Method of Payment.

(i) Each Advance shall be repaid and each payment of interest thereon shall be paid in the currency in which such Advance was made or, where such currency has converted to euro, in euro. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Administrative Agent at (except as set forth in the next sentence) the Administrative Agent’s address specified pursuant to Article XIV, or at any other Lending Installation of the Administrative Agent specified in writing by the Administrative Agent to the Company, by 12:00 noon (Chicago time) on the date when due and shall (except (i) in the case of Reimbursement Obligations for which the applicable LC Issuer has not been fully indemnified by the Lenders or (ii) with respect to repayments of Swing Line Loans) be applied ratably by the Administrative Agent among the Lenders. All payments to be made by the Borrowers hereunder in any currency other than Dollars shall be made in such currency on the date due in such funds as may then be customary for the settlement of international transactions in such currency for the account of the Administrative Agent, at its Eurocurrency Payment Office for such currency and shall be applied ratably by the Administrative Agent among the Lenders. Each payment delivered to the Administrative Agent for the account of any Lender shall be delivered promptly by the Administrative Agent to such Lender in the same type of funds that the Administrative Agent received at, (a) with respect to Floating Rate Loans and Eurocurrency Loans denominated in Dollars, such Lender’s address specified pursuant to Article XIV or at any Lending Installation specified in a notice received by the Administrative Agent from such Lender and (b) with respect to Eurocurrency Loans denominated in an Agreed Currency other than Dollars, in the funds received from the Borrowers at the address of the Administrative Agent’s Eurocurrency Payment Office for such currency. Each reference to the Administrative Agent in this Section 2.13 shall also be deemed to refer, and shall apply equally, to the applicable LC Issuer, in the case of payments required to be made by the applicable Borrower to such LC Issuer pursuant to Section 2.21.6. The Administrative Agent is hereby authorized to charge the account of the Borrowers maintained with JPMorgan or any of its Affiliates for each payment of principal, interest and fees as it becomes due hereunder.

(ii) Notwithstanding the foregoing provisions of this Section, if, after the making of any Advance in any currency other than Dollars, currency control or exchange regulations are imposed in the country which issues such currency with the result that the type of currency in which the Advance was made (the “Original Currency”) no longer exists or any Borrower is not able to make payment to the Administrative Agent for the account of the Lenders in such Original Currency, then all payments to be made by any Borrower hereunder in such currency shall instead be made when due in Dollars in an amount equal to the Dollar Amount (as of the date of repayment) of such payment due, it being the intention of the parties hereto that the Borrowers take all risks of the imposition of any such currency control or exchange regulations.

2.14. Noteless Agreement; Evidence of Indebtedness.

(i) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(ii) The Administrative Agent shall also maintain accounts in which it will record (a) the date and the amount of each Revolving Loan made hereunder, the Agreed Currency and Type thereof and the Interest Period, if any, applicable thereto, (b) the amount of any principal or interest due and payable or to become due and payable from any Borrower to each Lender hereunder, (c) the effective date and amount of each Assignment Agreement delivered to and accepted by it and the parties thereto pursuant to Section 13.3, (d) the original stated amount of each Facility LC and the amount of LC Obligations outstanding at any time, (e) the amount of any sum received by the Administrative Agent hereunder from the Borrowers and each Lender’s share thereof, and (f) all other appropriate debits and credits as provided in this Agreement, including, without limitation, all fees, charges, expenses and interest.

(iii) The entries maintained in the accounts maintained pursuant to clauses (i) and (ii) above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded in the absence of manifest error; provided, however, that the failure of the Administrative Agent or any Lender to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Obligations in accordance with their terms.

(iv) Any Lender may request that its Loans be evidenced by a promissory note or, in the case of the Swing Line Lender, promissory notes representing its Revolving Loans and Swing Line Loans, respectively, substantially in the form of Exhibit E, with appropriate changes for notes evidencing Swing Line Loans (each, a “Note”). In such event, the Borrowers shall prepare, execute and deliver to such Lender such Note or Notes payable to the order of such Lender. Thereafter, the Loans evidenced by each such Note and interest thereon shall at all times (including after any assignment pursuant to Section 13.3) be represented by one or more Notes payable to the order of the payee named therein or any assignee pursuant to Section 13.3, except to the extent that any such Lender or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in clauses (i) and (ii) above.

2.15. Telephonic Notices. The Borrowers hereby authorize the Lenders and the Administrative Agent to extend, convert or continue Advances, effect selections of Types of Advances and transfer funds based on telephonic notices made by any person or persons the Administrative Agent or any Lender in good faith believes to be acting on behalf of a Borrower, it

being understood that the foregoing authorization is specifically intended to allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The Borrowers agree to deliver promptly to the Administrative Agent a written confirmation, signed by an Authorized Officer, if such confirmation is requested by the Administrative Agent or any Lender, of each telephonic notice. If the written confirmation differs in any material respect from the action taken by the Administrative Agent and the Lenders, the records of the Administrative Agent and the Lenders shall govern absent manifest error.

2.16. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each Floating Rate Advance and Swing Line Loan shall be payable in arrears on each Payment Date, commencing with the first such date to occur after the Closing Date, on any date on which the Floating Rate Advance or Swing Line Loan is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on that portion of the outstanding principal amount of any Floating Rate Advance converted into a Eurocurrency Advance on a day other than a Payment Date shall be payable on the date of conversion. Interest accrued on each Eurocurrency Advance shall be payable on the last day of its applicable Interest Period, on any date on which the Eurocurrency Advance is prepaid, whether by acceleration or otherwise, and at maturity; provided, that interest accrued on each Eurocurrency Advance having an Interest Period longer than three (3) months shall also be payable on the last day of each three-month interval during such Interest Period. Interest on Eurocurrency Advances and Swing Line Loans and LC Fees and Facility Fees shall be calculated for actual days elapsed on the basis of a 360-day year; interest on Floating Rate Advances shall be calculated for actual days elapsed on the basis of a 365/366-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to 12:00 noon (Chicago time) at the place of payment. If any payment of principal of or interest on an Advance, any fees or any other amounts payable to any Agent or any Lender hereunder shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of time shall be included in computing interest, fees and commissions in connection with such payment.

2.17. Notification of Advances, Interest Rates, Prepayments and Commitment Reductions. Promptly after receipt thereof, the Administrative Agent will notify each Lender of the contents of each Aggregate Commitment reduction notice, Borrowing Notice, Swing Line Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder. Promptly after notice from the applicable LC Issuer, the Administrative Agent will notify each Lender of the contents of each request for issuance of a Facility LC hereunder. The Administrative Agent will notify each Lender of the interest rate applicable to each Eurocurrency Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate.

2.18. Lending Installations. Subject to the provisions of Section 3.6, each Lender may book its Loans and its participation in any LC Obligations and the LC Issuers may book the Facility LCs at any Lending Installation selected by such Lender or the applicable LC Issuer, as the case may be, and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans, Facility LCs, participations in LC Obligations and any Notes issued hereunder shall be deemed held by each Lender or the applicable LC Issuer, as the case may be, for the benefit of any such Lending Installation. Subject to the provisions of Section 3.6, each Lender and each LC Issuer may, by written notice to the Administrative Agent and the Company in accordance with Article XIV, designate replacement or additional Lending Installations through which Loans will be made by it or Facility LCs will be issued by it and for whose account Loan payments or payments with respect to Facility LCs are to be made.

2.19. Non-Receipt of Funds by the Administrative Agent. Unless a Borrower or a Lender, as the case may be, notifies the Administrative Agent prior to the time on which it is scheduled to make payment to the Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of a Borrower, a payment of principal, interest or fees to the Administrative Agent for the account of the Lenders, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or Borrower, as the case may be, has not in fact made such payment to the Administrative Agent, the recipient of such payment shall, on demand by the Administrative Agent, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to (x) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three (3) days and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by a Borrower, the interest rate applicable to the relevant Loan, including the interest rate applicable pursuant to Section 2.12.

2.20. Replacement of Lender. The Borrowers shall have the right, in their sole discretion, at any time and from time to time to terminate or replace the Commitment of any Lender (an “Affected Lender”), in whole, upon at least thirty (30) days’ prior notice to the Administrative Agent and such Lender, (a) if such Lender has failed or refused to make available the full amount of any Revolving Loans as required by its Commitment hereunder, (b) if such Lender has been merged or consolidated with, or transferred all or substantially all of its assets to, or otherwise been acquired by any other Person, or (c) if such Lender has demanded that the Borrowers make any additional payment to any Lender pursuant to Section 3.1, 3.2 or 3.5, or if such Lender’s obligation to make or continue, or convert Floating Rate Advances into, Eurocurrency Advances has been suspended pursuant to Section 3.3; provided, however that no such Commitment termination shall reduce the Aggregate Commitment by more than fifteen percent (15%) thereof; provided, further, that no Default or Unmatured Default shall have occurred and be continuing at the time of such termination or replacement, and that, concurrently with such termination or replacement, (i) if the Affected Lender is being replaced, another bank or other entity which is reasonably satisfactory to the Borrowers and the Administrative Agent shall agree, as of such date, to purchase for cash the Advances and other Obligations due to the Affected Lender pursuant to an Assignment Agreement substantially in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 13.3 applicable to assignments, (ii) the Borrowers shall pay to such Affected Lender in immediately available funds on the day of such replacement (A) all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrowers hereunder to and including the date of termination, including without limitation payments due to such Affected Lender under Sections 3.1, 3.2 and 3.5, to the extent applicable, and (B) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected Lender been prepaid on such date rather than sold to the replacement Lender, and (iii) if the Affected Lender is being terminated, the Borrowers shall pay to such Affected Lender all Obligations due to such Affected Lender (including the amounts described in the immediately preceding clauses (i) and (ii) plus the outstanding principal balance of such Affected Lender’s Credit Extensions).

2.21. Facility LCs.

2.21.1. Issuance; Transitional Facility LCs.

(i) Issuance. The LC Issuers hereby agree, on the terms and conditions set forth in this Agreement, to issue standby and performance letters of credit in Dollars (each, together with the letters of credit deemed issued by the LC Issuers hereunder pursuant to Section 2.21.1(ii), a “Facility LC”) and to renew, extend, increase, decrease or otherwise modify each Facility LC (“Modify,” and each such action a “Modification”), from time to time from and including the Closing Date and prior to the Facility Termination Date upon the request of any Borrower; provided that immediately after each such Facility LC is issued or Modified, (i) the aggregate amount of the outstanding LC Obligations shall not exceed $40,000,000 and (ii) the Aggregate Outstanding Credit Exposure shall not exceed the Aggregate Commitment. No Facility LC shall have an expiry date later than the earlier of (x) the fifth (5^th) Business Day prior to the Facility Termination Date and (y) one year after its issuance; provided, that any Facility LC (x) may contain customary “evergreen” provisions pursuant to which the expiry date is automatically extended for a specific time period unless the LC Issuer gives notice to the beneficiary of such Facility LC at least a specified time prior to the expiry date then in effect and/or (y) may have an expiration date more than one year from the date of issuance if required under related industrial revenue bond documents and agreed to by the LC Issuer.

(ii) Transitional Provision. Schedule 2.21 contains a schedule of certain letters of credit issued for the account of the Borrowers prior to the Closing Date. Subject to the satisfaction of the conditions contained in Sections 4.1, 4.2 and 4.3, from and after the Closing Date such letters of credit shall be deemed to be Facility LCs issued pursuant to this Section 2.21.

2.21.2. Participations. On the Closing Date, with respect to the Facility LCs identified on Schedule 2.21, and upon the issuance or Modification by the applicable LC Issuer of a Facility LC in accordance with this Section 2.21, such LC Issuer shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably sold to each Lender, and each Lender shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from such LC Issuer, a participation in such Facility LC (and each Modification thereof) and the related LC Obligations in proportion to its Pro Rata Share.

2.21.3. Notice. Subject to Section 2.21.1, the applicable Borrower shall give the applicable LC Issuer notice prior to 10:00 a.m. (Chicago time) at least five (5) Business Days prior to the proposed date of issuance or Modification of each Facility LC, specifying the beneficiary, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC and the nature of the transactions proposed to be supported thereby. Upon receipt of such notice, the applicable LC Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Lender, of the contents thereof and of the amount of such Lender’s participation in such proposed Facility LC. The issuance or Modification by any LC Issuer of any Facility LC shall, in addition to the conditions precedent set forth in Article IV (the satisfaction of which such LC Issuer shall have no duty to ascertain), be subject to the conditions precedent that such Facility LC shall be satisfactory to such LC Issuer and that the applicable Borrower shall have executed and delivered such application agreement and/or such other instruments and agreements relating to such Facility LC as the applicable LC Issuer shall have reasonably requested (each, a “Facility LC Application”). In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control.

2.21.4. LC Fees. With respect to each Standby LC, the Borrowers shall pay to the Administrative Agent, for the account of the Lenders ratably in accordance with their respective Pro Rata Shares, a letter of credit fee at a per annum rate equal to the Applicable Margin for Eurocurrency Loans in effect from time to time on the average daily undrawn stated amount under such Standby LC, such fees to be payable in arrears on each Payment Date (each such fee described in this sentence being an “LC Fee”). The Borrowers shall also pay to each LC Issuer for its own account (x) at the time of such LC Issuer’s issuance of any Standby LC, a fronting fee equal to 0.125% per annum on the initial stated amount available for drawing under each such Facility LC issued by such LC Issuer, and (y) other customary, documentary and processing charges in connection with the issuance or Modification of and draws under Facility LCs in accordance with the applicable LC Issuer’s standard schedule for such charges as in effect from time to time.

2.21.5. Administration; Reimbursement by Lenders. Upon receipt from the beneficiary of any Facility LC of any demand for payment under such Facility LC, the applicable LC Issuer shall notify the Administrative Agent and the Administrative Agent shall promptly notify the Company and each other Lender as to the amount to be paid by such LC Issuer as a result of such demand and the proposed payment date (the “LC Payment Date”). The responsibility of each LC Issuer to the Borrowers and each Lender shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC issued by such LC Issuer in connection with such presentment shall be in conformity in all material respects with such Facility LC. Each LC Issuer shall endeavor to exercise the same care in the issuance and administration of the Facility LCs issued by such LC Issuer as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by the applicable LC Issuer, each Lender shall be unconditionally and irrevocably liable without regard to the occurrence of any Default, the Facility Termination Date or any condition precedent whatsoever, to reimburse such LC Issuer on demand for (i) such Lender’s Pro Rata Share of the amount of each payment made by such LC Issuer under each Facility LC issued by such LC Issuer to the extent such amount is not reimbursed by the Borrowers pursuant to Section 2.21.6 below, plus (ii) interest on the foregoing amount to be reimbursed by such Lender, for each day from the date of the applicable LC Issuer’s demand for such reimbursement (or, if such demand is made after 11:00 a.m. (Chicago time) on such date, from the next succeeding Business Day) to the date on which such Lender pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of interest equal to the rate applicable to Floating Rate Advances.

2.21.6. Reimbursement by the Borrowers. The Borrowers shall be irrevocably and unconditionally obligated to reimburse the LC Issuers on or before the applicable LC Payment Date for any amounts to be paid by any LC Issuer upon any drawing under any Facility LC issued by such LC Issuer, without presentment, demand, protest or other formalities of any kind; provided that neither any Borrower nor any Lender shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by such Borrower or such Lender to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of the applicable LC Issuer in determining whether a request presented under any Facility LC issued by it complied with the terms of such Facility LC or (ii) the applicable LC Issuer’s failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Commencing on the date that the Administrative Agent gives notice to the Company by 11:00 a.m. (Chicago time) as required under Section 2.21.5 of the applicable LC Payment Date, all such amounts paid by any LC Issuer and remaining unpaid by the Borrowers shall bear interest, payable on demand, for each day from and including such LC Payment Date until paid at a rate per annum equal to (x) the rate applicable to Floating Rate Advances for such day if such day falls on or before the applicable LC Payment Date and (y) the sum of 2% plus the rate applicable to Floating

Rate Advances for such day if such day falls after such LC Payment Date. Each LC Issuer will pay to each Lender ratably in accordance with its Pro Rata Share all amounts received by it from the Borrowers for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Facility LC issued by such LC Issuer, but only to the extent such Lender has made payment to such LC Issuer in respect of such Facility LC pursuant to Section 2.21.5. Subject to the terms and conditions of this Agreement (including without limitation the submission of a Borrowing Notice in compliance with Section 2.9 and the satisfaction of the applicable conditions precedent set forth in Article IV), the applicable Borrower may request an Advance hereunder for the purpose of satisfying any Reimbursement Obligation.

2.21.7. Obligations Absolute. The Borrowers’ obligations under this Section 2.21 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which any Borrower may have or have had against any LC Issuer, any Lender or any beneficiary of a Facility LC. The Borrowers further agree with the LC Issuers and the Lenders that the LC Issuers and the Lenders shall not be responsible for, and no Borrower’s Reimbursement Obligation in respect of any Facility LC shall be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among any Borrower, any of its Affiliates, the beneficiary of any Facility LC or any financing institution or other party to whom any Facility LC may be transferred or any claims or defenses whatsoever of any Borrower or of any of its Affiliates against the beneficiary of any Facility LC or any such transferee. No LC Issuer shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Facility LC. The Borrowers agree that any action taken or omitted by any LC Issuer or any Lender under or in connection with each Facility LC and the related drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon the Borrowers and shall not put any LC Issuer or any Lender under any liability to the Borrowers. Nothing in this Section 2.21.7 is intended to limit the right of the Borrowers to make a claim against any LC Issuer for damages as contemplated by the proviso to the first sentence of Section 2.21.6.

2.21.8. Actions of LC Issuers. Each LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon any Facility LC, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by such LC Issuer. Each LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Notwithstanding any other provision of this Section 2.21, each LC Issuer shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and any future holders of a participation in any Facility LC.

2.21.9. Indemnification. The Borrowers hereby agree to indemnify and hold harmless each Lender, each LC Issuer and the Administrative Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses which such Lender, such LC Issuer or the Administrative Agent may incur (or which may be claimed

against such Lender, such LC Issuer or the Administrative Agent by any Person whatsoever) by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which any LC Issuer may incur by reason of or in connection with (i) the failure of any other Lender to fulfill or comply with its obligations to such LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrowers may have against any defaulting Lender) or (ii) by reason of or on account of such LC Issuer issuing any Facility LC which specifies that the term “Beneficiary” included therein includes any successor by operation of law of the named Beneficiary, but which Facility LC does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to such LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrowers shall not be required to indemnify any Lender, any LC Issuer or the Administrative Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the applicable LC Issuer in determining whether a request presented under any Facility LC issued by such LC Issuer complied with the terms of such Facility LC or (y) any LC Issuer’s failure to pay under any Facility LC issued by such LC Issuer after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.21.9 is intended to limit the obligations of the Borrowers under any other provision of this Agreement.

2.21.10. Lenders’ Indemnification. Each Lender shall, ratably in accordance with its Pro Rata Share, indemnify each LC Issuer, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrowers) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees’ gross negligence or willful misconduct or the applicable LC Issuer’s failure to pay under any Facility LC issued by such LC Issuer after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC) that such indemnitees may suffer or incur in connection with this Section 2.21 or any action taken or omitted by such indemnitees hereunder.

2.21.11. Facility LC Collateral Account.

(i) Each Borrower agrees that it will, as required by Section 8.1 and until the final expiration date of any Facility LC and thereafter as long as any amount is payable to the LC Issuers or the Lenders in respect of any Facility LC, maintain a special collateral account pursuant to arrangements satisfactory to the Administrative Agent (the “Facility LC Collateral Account”) at the Administrative Agent’s office at the address specified pursuant to Article XIV, in the name of such Borrower but under the sole dominion and control of the Administrative Agent, for the benefit of the Lenders and in which such Borrower shall have no interest other than as set forth in this Section 2.21.11. Each Borrower hereby pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Lenders and the LC Issuers, a security interest in all of such Borrower’s right, title and interest in and to all funds which may from time to time be on deposit in the Facility LC Collateral Account to secure the prompt and complete payment and performance of the Obligations. The Administrative Agent will invest any funds on deposit from time to time in the Facility LC Collateral Account in certificates of deposit of JPMorgan having a maturity not exceeding 30 days. Nothing in this Section 2.21.11 shall either obligate the Administrative Agent to require the Borrowers to deposit any funds in the Facility LC Collateral Account or limit the right of the Administrative Agent to release any funds held in the Facility LC Collateral Account in each case other than as required by clause (iv) below.

(ii) If at any time while any Default is continuing, the Administrative Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Administrative Agent may make demand on the Borrowers to pay, and the Borrowers will, forthwith upon such demand and without any further notice or act, pay to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account.

(iii) The Administrative Agent may at any time or from time to time after funds are deposited in the Facility LC Collateral Account, apply such funds to the payment of the Obligations as shall from time to time have become due and payable by any Borrower to the Lenders or the LC Issuers under the Loan Documents.

(iv) If any Default is continuing, neither the Borrowers nor any Person claiming on behalf of or through the Borrowers shall have any right to withdraw any of the funds held in the Facility LC Collateral Account. After all of the Obligations have been indefeasibly paid in full (other than contingent indemnity obligations) and the Aggregate Commitment has been terminated, any funds remaining in the Facility LC Collateral Account shall be returned by the Administrative Agent to the Borrowers or paid to whomever may be legally entitled thereto at such time.

2.21.12. Rights as a Lender. In its capacity as a Lender, each LC Issuer shall have the same rights and obligations as any other Lender.

2.22. Subsidiary Borrowers. So long as no Default or Unmatured Default has occurred and is continuing, the Company may at any time or from time to time, add as a party to this Agreement any Wholly-Owned Subsidiary of the Company to be a Subsidiary Borrower hereunder by the execution and delivery to the Administrative Agent and the Lenders of (a) a duly completed Assumption Letter by such Subsidiary, with the written consent of the Borrowers at the foot thereof, (b) such guaranty and subordinated intercompany indebtedness documents and, if applicable, security documents as may be reasonably required by the Administrative Agent and such other opinions, agreements, documents, certificates or other items as may be required by Section 4.3 and (c) in the case of a Foreign Subsidiary which is a Wholly-Owned Subsidiary, receipt of evidence satisfactory to the Administrative Agent that such Subsidiary would not, in its capacity as a Subsidiary Borrower hereunder, be required by law to withhold or deduct any Taxes from or in respect of any sum payable hereunder by such Subsidiary to the Administrative Agent or any Lender and that no other adverse tax, regulatory or other consequences would affect the Administrative Agent or any Lender as a result of such Subsidiary’s status as a Subsidiary Borrower, such documents with respect to any additional Subsidiaries to be substantially similar in form and substance to the Loan Documents executed on or about the date hereof by the Subsidiaries parties hereto as of the Closing Date. No Foreign Subsidiary may be a Subsidiary Borrower without the consent of the Administrative Agent and each of the Lenders. Upon such execution, delivery and consent such Subsidiary shall for all purposes be a party hereto as a Subsidiary Borrower as fully as if it had executed and delivered this Agreement. So long as the principal of and interest on any Credit Extensions made to any Subsidiary Borrower under this Agreement shall have been repaid or paid in full, all Facility LCs issued for the account of such Subsidiary Borrower have expired or been returned and terminated and all other Obligations (other than contingent indemnity obligations) of such Subsidiary Borrower under this Agreement shall have been fully performed, the Company may, by not less than five (5) Business Days’ prior notice to the Administrative Agent (which shall promptly notify the Lenders thereof), terminate such Subsidiary Borrower’s status as a “Subsidiary Borrower” or “Borrower,” and such Subsidiary Borrower shall be released from any future liability (other than contingent indemnity obligations) as a “Subsidiary Borrower” or “Borrower” hereunder or under the other Loan Documents. The Administrative Agent shall give the Lenders written of the addition of any Subsidiary Borrowers to this Agreement.

2.23. Increase of Commitments.

(i) At any time prior to the Facility Termination Date, the Company may request that the Aggregate Commitment be increased; provided that, without the prior written consent of all of the Lenders, (a) the Aggregate Commitment shall at no time exceed $150,000,000 minus the aggregate amount of all reductions in the Aggregate Commitment previously made pursuant to Section 2.6.2; and (b) each such request shall be in a minimum amount of at least $10,000,000 and increments of $5,000,000 in excess thereof. Such request shall be made in a written notice given to the Administrative Agent and the Lenders by the Company not less than twenty (20) Business Days prior to the proposed effective date of such increase, which notice (a “Commitment Increase Notice”) shall specify the amount of the proposed increase in the Aggregate Commitment and the proposed effective date of such increase. In the event of such a Commitment Increase Notice, each of the Lenders shall be given the opportunity to participate in the requested increase ratably in proportions that their respective Commitments bear to the Aggregate Commitment. No Lender shall have any obligation to increase its Commitment pursuant to a Commitment Increase Notice. On or prior to the date that is fifteen (15) Business Days after receipt of the Commitment Increase Notice, each Lender shall submit to the Administrative Agent a notice indicating the maximum amount by which it is willing to increase its Commitment in connection with such Commitment Increase Notice (any such notice to the Administrative Agent being herein a “Lender Increase Notice”). Any Lender which does not submit a Lender Increase Notice to the Administrative Agent prior to the expiration of such fifteen (15) Business Day period shall be deemed to have denied any increase in its Commitment. In the event that the increases of Commitments set forth in the Lender Increase Notices exceed the amount requested by the Company in the Commitment Increase Notice, the Administrative Agent shall have the right, in consultation with the Company, to allocate the amount of increases necessary to meet the Company’s Commitment Increase Notice. In the event that the Lender Increase Notices are less than the amount requested by the Company, not later than three (3) Business Days prior to the proposed effective date the Company may notify the Administrative Agent of any financial institution that shall have agreed to become a “Lender” party hereto (a “Proposed New Lender”) in connection with the Commitment Increase Notice. Any Proposed New Lender shall be consented to by the Administrative Agent (which consent shall not be unreasonably withheld). If the Company shall not have arranged any Proposed New Lender(s) to commit to the shortfall from the Lender Increase Notices, then the Company shall be deemed to have reduced the amount of its Commitment Increase Notice to the aggregate amount set forth in the Lender Increase Notices. Based upon the Lender Increase Notices, any allocations made in connection therewith and any notice regarding any Proposed New Lender, if applicable, the Administrative Agent shall notify the Company and the Lenders on or before the Business Day immediately prior to the proposed effective date of the amount of each Lender’s and Proposed New Lenders’ Commitment (the “Effective Commitment Amount”) and the amount of the Aggregate Commitment, which amounts shall be effective on the following Business Day. Any increase in the Aggregate Commitment shall be subject to the following conditions precedent: (A) the Company shall have obtained the consent thereto of each Guarantor and its reaffirmation of the Loan Document(s) executed by it, which consent and reaffirmation shall be in writing and in form and substance reasonably satisfactory to the Administrative Agent, (B) as of the date of the Commitment Increase Notice and as of the proposed effective date of the increase in the Aggregate Commitment all representations and warranties shall be true and correct in all material respects as though made on such date and no event shall have occurred and then be continuing which constitutes a Default or Unmatured Default, (C) the

Borrowers, the Administrative Agent and each Proposed New Lender or Lender that shall have agreed to provide a “Commitment” in support of such increase in the Aggregate Commitment shall have executed and delivered a “Commitment and Acceptance” substantially in the form of Exhibit I hereto, (D) counsel for the Borrowers and for the Guarantors shall have provided to the Administrative Agent supplemental opinions in form and substance reasonably satisfactory to the Administrative Agent and (E) the Borrowers and the Proposed New Lender shall otherwise have executed and delivered such other instruments and documents as may be required under Article IV or that the Administrative Agent shall have reasonably requested in connection with such increase. If any fee shall be charged by the Lenders in connection with any such increase, such fee shall be in accordance with then prevailing market conditions, which market conditions shall have been reasonably documented by the Administrative Agent to the Company. Upon satisfaction of the conditions precedent to any increase in the Aggregate Commitment, the Administrative Agent shall promptly advise the Company and each Lender of the effective date of such increase. Upon the effective date of any increase in the Aggregate Commitment that is supported by a Proposed New Lender, such Proposed New Lender shall be a party to this Agreement as a Lender and shall have the rights and obligations of a Lender hereunder and thereunder. Nothing contained herein shall constitute, or otherwise be deemed to be, a commitment on the part of any Lender to increase its Commitment hereunder at any time.

(ii) For purposes of this clause (ii), (A) the term “Buying Lender(s)” shall mean (1) each Lender the Effective Commitment Amount of which is greater than its Commitment prior to the effective date of any increase in the Aggregate Commitment, and (2) each Proposed New Lender that is allocated an Effective Commitment Amount in connection with any Commitment Increase Notice and (b) the term “Selling Lender(s)” shall mean each Lender whose Commitment is not being increased from that in effect prior to such increase in the Aggregate Commitment. Effective on the effective date of any increase in the Aggregate Commitment pursuant to clause (i) above, each Selling Lender hereby sells, grants, assigns and conveys to each Buying Lender, without recourse, warranty, or representation of any kind, except as specifically provided herein, an undivided percentage in such Selling Lender’s right, title and interest in and to its outstanding Loans in the respective dollar amounts and percentages necessary so that, from and after such sale, each such Selling Lender’s outstanding Loans shall equal such Selling Lender’s Pro Rata Share (calculated based upon the Effective Commitment Amounts) of the outstanding Loans. Effective on the effective date of the increase in the Aggregate Commitment pursuant to clause (i) above, each Buying Lender hereby purchases and accepts such grant, assignment and conveyance from the Selling Lenders. Each Buying Lender hereby agrees that its respective purchase price for the portion of the outstanding Loans purchased hereby shall equal the respective dollar amount necessary so that, from and after such payments, each Buying Lender’s outstanding Loans shall equal such Buying Lender’s Pro Rata Share (calculated based upon the Effective Commitment Amounts) of the outstanding Loans. Such amount shall be payable on the effective date of the increase in the Aggregate Commitment by wire transfer of immediately available funds to the Administrative Agent. The Administrative Agent, in turn, shall wire transfer any such funds received to the Selling Lenders, in same day funds, for the sole account of the Selling Lenders. Each Selling Lender hereby represents and warrants to each Buying Lender that such Selling Lender owns the Loans being sold and assigned hereby for its own account and has not sold, transferred or encumbered any or all of its interest in such Loans, except for participations which will be extinguished upon payment to Selling Lender of an amount equal to the portion of the outstanding Loans being sold by such Selling Lender. Each Buying Lender hereby acknowledges and agrees that, except for each Selling Lender’s representations and warranties contained in the foregoing sentence, each such Buying Lender has entered into its Commitment and Acceptance with respect to such increase on the basis of its own

independent investigation and has not relied upon, and will not rely upon, any explicit or implicit written or oral representation, warranty or other statement of the Lenders or the Administrative Agent concerning the authorization, execution, legality, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan Documents. The Borrowers hereby agree to compensate each Selling Lender for all losses, expenses and liabilities incurred by each Lender in connection with the sale and assignment of any Loan hereunder on the terms and in the manner as set forth in Section 3.4.

2.24. Interest. In no event shall the amount of interest, and all charges, amounts or fees contracted for, charged or collected pursuant to this Agreement, the Notes or the other Loan Documents and deemed to be interest under applicable law (collectively, “Interest”) exceed the highest rate of interest allowed by applicable law (the “Maximum Rate”), and in the event any such payment is inadvertently received by the Administrative Agent or any Lender then the excess sum (the “Excess”) shall be credited as a payment of principal, unless the relevant Borrower shall notify the Administrative Agent in writing that it elects to have the Excess returned forthwith. It is the express intent hereof that no Borrower pay, and the Administrative Agent and the Lenders not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by such Borrower under applicable law. The right to accelerate maturity of any of the Obligations does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and the Administrative Agent and the Lenders do not intend to collect any unearned interest in the event of any such acceleration. All monies paid to the Administrative Agent or the Lenders hereunder or under any of the Notes or the other Loan Documents, whether at maturity or by prepayment, shall be subject to rebate of unearned interest as and to the extent required by applicable law. By the execution of this Agreement, each Borrower covenants, to the fullest extent permitted by law that (i) the credit or return of any Excess shall constitute the acceptance by such Borrower of such Excess, and (ii) such Borrower shall not seek or pursue any other remedy, legal or equitable, against the Administrative Agent or any Lender, based in whole or in part upon contracting for charging or receiving any Interest in excess of the Maximum Rate. For the purpose of determining whether or not any Excess has been contracted for, charged or received by the Administrative Agent or any Lender, all interest at any time contracted for, charged or received from such Borrower in connection with this Agreement, the Notes or any of the other Loan Documents shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of the Commitments. Each Borrower, the Administrative Agent and each Lender shall, to the maximum extent permitted under applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as Interest and (ii) exclude voluntary prepayments and the effects thereof. The provisions of this Section shall be deemed to be incorporated into each Note and each of the other Loan Documents (whether or not any provision of this Section is referred to therein). All such Loan Documents and communications relating to any Interest owed by any Borrower and all figures set forth therein shall, for the sole purpose of computing the extent of obligations hereunder and under the Notes and the other Loan Documents be automatically recomputed by such Borrower, and by any court considering the same, to give effect to the adjustments or credits required by this Section.

2.25. Judgment Currency. If for the purposes of obtaining judgment in any court, it is necessary to convert a sum due from any Borrower hereunder in the currency expressed to be payable herein (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the specified currency with such other currency at the Administrative Agent’s main office in Chicago, Illinois on

the Business Day preceding that on which the final, non-appealable judgment is given. The obligations of each Borrower in respect of any sum due to any Lender or the Administrative Agent hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender or the Administrative Agent (as the case may be) may in accordance with normal, reasonable banking procedures purchase the specified currency with such other currency. If the amount of the specified currency so purchased is less than the sum originally due to such Lender or the Administrative Agent, as the case may be, in the specified currency, each Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Lender or the Administrative Agent, as the case may be, in the specified currency and (b) any amounts shared with other Lenders as a result of allocations of such excess as a disproportionate payment to such Lender under Section 12.2, such Lender or the Administrative Agent, as the case may be, agrees to remit such excess to the applicable Borrower.

2.26. Market Disruption. Notwithstanding the satisfaction of all conditions referred to in Article II and Article IV with respect to any Credit Extension to be effected in any Foreign Currency, if (i) there shall occur on or prior to the date of such Credit Extension any change in national or international financial, political or economic conditions or currency exchange rates or exchange controls which would in the reasonable opinion of the Administrative Agent, the applicable LC Issuer (if such Credit Extension is a Facility LC) or the Required Lenders make it impracticable for the Eurocurrency Advances or Facility LCs comprising such Credit Extension to be denominated in the Agreed Currency specified by the applicable Borrower or (ii) an Equivalent Amount of such currency is not readily calculable, then the Administrative Agent shall forthwith give notice thereof to such Borrower, the Lenders and, if such Credit Extension is a Facility LC, the applicable LC Issuer, and such Credit Extensions shall not be denominated in such Agreed Currency but shall, except as otherwise set forth in Section 2.9.2, be made on the date of such Credit Extension in Dollars, (a) if such Credit Extension is an Advance, in an aggregate principal amount equal to the Dollar Amount of the aggregate principal amount specified in the related request for a Credit Extension or Conversion/Continuation Notice, as the case may be, as Floating Rate Loans, unless such Borrower notifies the Administrative Agent at least one (1) Business Day before such date that (i) it elects not to borrow on such date or (ii) it elects to borrow on such date in a different Agreed Currency, as the case may be, in which the denomination of such Loans would in the reasonable opinion of the Administrative Agent and the Required Lenders be practicable and in an aggregate principal amount equal to the Dollar Amount of the aggregate principal amount specified in the related request for a Credit Extension or Conversion/Continuation Notice, as the case may be or (b) if such Credit Extension is a Facility LC, in a face amount equal to the Dollar Amount of the face amount specified in the related request or application for such Facility LC, unless such Borrower notifies the Administrative Agent at least one (1) Business Day before such date that (i) it elects not to request the issuance of such Facility LC on such date or (ii) it elects to have such Facility LC issued on such date in a different Agreed Currency, as the case may be, in which the denomination of such Facility LC would in the reasonable opinion of the applicable LC Issuer, the Administrative Agent and the Required Lenders be practicable and in face amount equal to the Dollar Amount of the face amount specified in the related request or application for such Facility LC, as the case may be.

ARTICLE III

YIELD PROTECTION; TAXES

3.1. Yield Protection. If, on or after the Closing Date, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in any such law, rule, regulation, policy, guideline or directive or in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation or any LC Issuer with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:

(i)

subjects any Lender or any applicable Lending Installation or any LC Issuer to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender or any LC Issuer in respect of its Eurocurrency Loans, Facility LCs or participations therein, or

(ii)

imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation or any LC Issuer (other than reserves and assessments taken into account in determining the interest rate applicable to Eurocurrency Advances), or

(iii)

imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation or any LC Issuer of making, funding or maintaining its Eurocurrency Loans or Commitment (including, without limitation, any conversion of any Loan denominated in an Agreed Currency other than euro into a Loan denominated in euro), or of issuing or participating in Facility LCs, or reduces any amount receivable by any Lender or any applicable Lending Installation or any LC Issuer in connection with its Eurocurrency Loans or Commitment, Facility LCs or participations therein, or requires any Lender or any applicable Lending Installation or any LC Issuer to make any payment calculated by reference to the amount of Eurocurrency Loans or Commitment, Facility LCs or participants therein held or interest or LC Fees received by it, by an amount deemed material by such Lender or such LC Issuer as the case may be,

and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation or such LC Issuer, as the case may be, of making or maintaining its Eurocurrency Loans or Commitment (including, without limitation, any conversion of any Loan denominated in an Agreed Currency other than euro into a Loan denominated in euro) or of issuing or participating in Facility LCs or to reduce the return received by such Lender or applicable Lending Installation or such LC Issuer, as the case may be, in connection with such Eurocurrency Loans or Commitment, Facility LCs or participations therein, then, within fifteen (15) days of demand by such Lender, the Borrowers shall pay such Lender or LC Issuer such additional amount or amounts as will compensate such Lender or such LC Issuer, as the case may be, for such increased cost or reduction in amount received; provided, that the Borrowers shall not be required to compensate a Lender or LC Issuer under this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender or LC Issuer notifies the Company in writing of such increased costs or reductions

and of such Lender’s or LC Issuer’s intention to claim compensation therefor; provided, further, that if such adoption or such change giving rise to such increased costs or reduction is retroactive such 90-day period shall be extended to include the period of retroactive effect.

3.2. Changes in Capital Adequacy Regulations. If a Lender or any LC Issuer determines the amount of capital required or expected to be maintained by such Lender, such LC Issuer, any Lending Installation of such Lender or such LC Issuer, or any corporation controlling such Lender or such LC Issuer, is increased as a result of a Change, then, within fifteen (15) days of demand by such Lender, or such LC Issuer, the Borrowers shall pay such Lender or such LC Issuer the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender or such LC Issuer determines is attributable to this Agreement, its Outstanding Credit Exposure or its Commitment to make Loans and issue or participate in Facility LCs, as the case may be, hereunder (after taking into account such Lender’s or such LC Issuer’s policies as to capital adequacy); provided, that the Borrowers shall not be required to pay to such Lender or LC Issuer such additional amounts under this Section for any amount incurred as a result of such Change more than 90 days prior to the date that such Lender or LC Issuer notifies the Company in writing of such Change and of such Lender’s or LC Issuer’s intention to claim compensation therefor; provided, further, that if such Change giving rise to such amounts is retroactive such 90-day period shall be extended to include the period of retroactive effect. “Change” means (i) any change after the Closing Date in the Risk-Based Capital Guidelines or (ii) any adoption of, change in, or change in the interpretation or administration of any other law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the Closing Date which affects the amount of capital required or expected to be maintained by any Lender or any LC Issuer or any Lending Installation or any corporation controlling any Lender or any LC Issuer. “Risk-Based Capital Guidelines” means (i) the risk-based capital guidelines in effect in the United States on the Closing Date, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the United States implementing the July 1988 report of the Basle Committee on Banking Regulation and Supervisory Practices Entitled “International Convergence of Capital Measurements and Capital Standards,” including transition rules, and any amendments to such regulations adopted prior to the Closing Date.

3.3. Availability of Types of Advances. If (x) any Lender determines that maintenance of its Eurocurrency Loans at a suitable Lending Installation would violate any applicable law, rule, regulation or directive, whether or not having the force of law, or (y) the Required Lenders determine that (i) deposits of a type, currency and maturity appropriate to match fund Eurocurrency Advances are not available or (ii) the interest rate applicable to Eurocurrency Advances does not accurately reflect the cost of making or maintaining Eurocurrency Advances, or (iii) no reasonable basis exists for determining the Eurocurrency Base Rate, then the Administrative Agent shall suspend the availability of Eurocurrency Advances and require any affected Eurocurrency Advances to be immediately repaid or converted to Floating Rate Advances, subject to the payment of any funding indemnification amounts required by Section 3.4.

3.4. Funding Indemnification. If any payment of a Eurocurrency Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a Eurocurrency Advance is not made or continued, or a Floating Rate Advance is not converted into a Eurocurrency Advance, on the date specified by any Borrower for any reason other than default by the Lenders, or a Eurocurrency Advance is not prepaid on the date specified by the applicable Borrower for any reason, the Borrowers will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in liquidating or employing deposits acquired to fund or maintain such Eurocurrency Advance.

3.5. Taxes.

(i) All payments by the Borrowers to or for the account of any Lender, any LC Issuer or Agent hereunder or under any Note or Facility LC Application shall be made free and clear of and without deduction for any and all Taxes. If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender, any LC Issuer or Agent, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender, such LC Issuer or Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) such Borrower shall make such deductions, (c) such Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable law and (d) such Borrower shall furnish to the Administrative Agent the original copy of a receipt evidencing payment thereof within thirty (30) days after such payment is made.

(ii) In addition, the Borrowers hereby agree to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or Facility LC Application or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note or Facility LC Application (“Other Taxes”).

(iii) The Borrowers hereby agree to indemnify the Agents, the LC Issuers and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Agents, the LC Issuers or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. Payments due under this indemnification shall be made within thirty (30) days of the date the Agents, the LC Issuers or such Lender makes demand therefor pursuant to Section 3.6.

(iv) Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a “Non-U.S. Lender”) agrees that it will, not more than ten (10) Business Days after the date on which it becomes a party to this Agreement, (i) deliver to each of the Company and the Administrative Agent two (2) duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to each of the Company and the Administrative Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender further undertakes to deliver to each of the Company and the Administrative Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Company or the Administrative Agent. All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such

Lender advises the Company and the Administrative Agent in writing that it is not capable of receiving payments without any deduction or withholding of United States federal income tax.

(v) For any period during which a Non-U.S. Lender has failed to provide the Company with an appropriate form pursuant to clause (iv), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States, and each Borrower, if required by law to do so, shall be permitted to withhold such Taxes and pay the same to the appropriate United States taxing authority; provided that, should a Non-U.S. Lender which is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a form required under clause (iv), above, the Borrowers shall take such steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover such Taxes.

(vi) Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Company (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate.

(vii) If the IRS or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Administrative Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to the Administrative Agent under this subsection, together with all costs and expenses related thereto (including attorneys’ fees and time charges of attorneys for the Administrative Agent, which attorneys may be employees of the Administrative Agent). The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement.

(viii) Within 60 days after receipt of the written request of the Company, each Lender, LC Issuer and Agent shall execute and deliver such certificates, forms or other documents, which in each such case can be reasonably furnished by such Lender, LC Issuer or Agent consistent with the facts and which are reasonably necessary to assist any Borrower in applying for refunds of Taxes remitted by such Borrower hereunder.

(ix) Each Lender, LC Issuer and Agent shall also use commercially reasonable efforts to avoid and minimize any amounts which might otherwise be payable by any Borrower pursuant to this Section 3.5, except to the extent that such Lender, LC Issuer or Agent, determines that such efforts would be disadvantageous to such Lender, LC Issuer or Agent, as determined by such Lender, LC Issuer or Agent and which determination, if made in good faith, shall be binding and conclusive on all parties hereto.

(x) To the extent that the payment of any Lender’s, LC Issuer’s or Agent’s Taxes by any Borrower hereunder gives rise from time to time to a Tax Benefit to such Lender, LC Issuer or Agent in any jurisdiction other than the jurisdiction which imposed such Taxes, such Lender, LC Issuer or Agent shall pay to such Borrower the amount of each such Tax Benefit so recognized or received. The amount of each Tax Benefit and, therefore, payment to such Borrower will be determined from time to time by the relevant Lender, LC Issuer or Agent in its sole discretion, which determination shall be binding and conclusive on all parties hereto. Each such payment will be due and payable by such Lender, LC Issuer or Agent to such Borrower within a reasonable time after the filing of the tax return in which such Tax Benefit is recognized or, in the case of any tax refund, after the refund is received; provided, however, if at any time thereafter such Lender, LC Issuer or Agent, is required to rescind such Tax Benefit or such Tax Benefit is otherwise disallowed or nullified, the relevant Borrower shall promptly, after notice thereof from such Lender, LC Issuer or Agent, repay to such Lender, LC Issuer or Agent the amount of such Tax Benefit previously paid to such Lender, LC Issuer or Agent and which has been rescinded, disallowed or nullified. For purposes hereof, the term “Tax Benefit” shall mean the amount by which any Lender’s, LC Issuer’s or Agent’s income tax liability for the taxable period in question is reduced below what would have been payable had the relevant Borrower not been required to pay such Lender’s LC Issuer’s or Agent’s Taxes hereunder.

3.6. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurocurrency Loans to reduce any liability of the Borrowers to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of Eurocurrency Advances under Section 3.3, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Company (with a copy to the Administrative Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrowers in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurocurrency Loan shall be calculated as though each Lender funded its Eurocurrency Loan through the purchase of a deposit of the type, currency and maturity corresponding to the deposit used as a reference in determining the Eurocurrency Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Company of such written statement. The obligations of the Borrowers under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement.

3.7. Mitigation of Obligations. If any Lender requests compensation under Section 3.2 or if any Borrower is required to pay any additional amount to any Lender or any governmental authority for the account of any Lender pursuant to Section 3.1, then such Lender shall use commercially reasonable efforts to designate a different Lending Installation for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the sole discretion of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable under Section 3.1 or Section 3.2, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrowers hereby agree to pay all costs and expenses incurred by any Lender in connection with such designation or assignment.

ARTICLE IV

CONDITIONS PRECEDENT

4.1. Initial Credit Extension. The Lenders shall not be required to make the initial Credit Extension hereunder unless (a) the representations and warranties contained in Article V are true and correct in all material respects as of such date and (b) the Company has furnished to the Agents with sufficient copies for the Lenders:

(i)

Copies of the articles or certificates of incorporation (or similar Constitutive Documents) of the Company, each other Borrower and each Guarantor (each a “Loan Party”), together with all amendments thereto, and a certificate of good standing, each certified by the appropriate governmental officer in its jurisdiction of incorporation, as well as any other information required by Section 326 of the USA PATRIOT ACT.

(ii)

Copies, certified by the Secretary or Assistant Secretary of each Loan Party of its by-laws (or similar Constitutive Documents) and of its Board of Directors’ resolutions and of resolutions or actions of any other body authorizing the execution of the Loan Documents to which it is a party.

(iii)

An incumbency certificate, executed by the Secretary or Assistant Secretary of each Loan Party, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of such Loan Party authorized to sign the Loan Documents to which it is a party and, in the case of the Borrowers, to request Loans hereunder, upon which certificate the Agents and the Lenders shall be entitled to rely until informed of any change in writing by the applicable Loan Party.

(iv)

An opening compliance certificate in substantially the form of Exhibit B, signed by the chief financial officer, treasurer or vice president of finance of the Company, showing the calculations necessary to determine compliance with this Agreement on the initial Credit Extension Date and stating that on the initial Credit Extension Date (a) no Default or Unmatured Default has occurred and is continuing, (b) all of the representations and warranties in Article V shall be true and correct in all material respects as of such date and (c) no material adverse change in the business, financial condition or operations of the Company or any of its Subsidiaries has occurred since August 31, 2006.

(v)

A certificate in form and substance satisfactory to the Administrative Agent stating that there exists no injunction or temporary restraining order which would prohibit the making of the initial Credit Extensions or any litigation seeking such an injunction or restraining order.

(vi)

A certificate of value, solvency and other appropriate factual information in form and substance reasonably satisfactory to the Administrative Agent and the Arrangers from the chief financial officer of the Company (on behalf of the Company and the Borrowers) in his or her representative capacity supporting the conclusions that as of the initial funding date the Company and its Subsidiaries on a consolidated basis are Solvent and will be Solvent subsequent to incurring the Indebtedness contemplated under the Loan Documents, will be able to pay its debts and liabilities as they become due and will not be left with unreasonably small working capital for general corporate purposes.

(vii)

Written opinions of Sutherland Asbill & Brennan LLP, special counsel to the Borrowers and each Guarantor, in form and substance satisfactory to the Agents and addressed to the Lenders in substantially the form of Exhibit A.

(viii)

Any Notes requested by a Lender pursuant to Section 2.14 payable to the order of each such requesting Lender.

(ix)

If the initial Credit Extension shall be the issuance of a Facility LC, a properly completed Facility LC Application.

(x)

Written money transfer instructions, in substantially the form of Exhibit D, addressed to the Administrative Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Administrative Agent may have reasonably requested.

(xi)

Evidence satisfactory to the Administrative Agent that the Spin-Off Transaction and the Spin-Off Dividend will be consummated substantially simultaneously with the initial Credit Extension hereunder or promptly thereafter.

(xii)

Such other documents as any Lender or its counsel may have reasonably requested including, without limitation, each document identified on the List of Closing Documents attached hereto as Exhibit F.

4.2. Each Credit Extension. The Lenders shall not (except as otherwise set forth in Section 2.2.4 with respect to Revolving Loans for the purpose of repaying Swing Line Loans) be required to make any Credit Extension unless on the applicable Credit Extension Date:

(i)

There exists no Default or Unmatured Default.

(ii)

The representations and warranties contained in Article V are true and correct in all material respects as of such Credit Extension Date except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct in all material respects on and as of such earlier date.

(iii)

No law or regulation shall prohibit, and no order, judgment or decree of any Governmental Authority shall enjoin, prohibit or restrain, any Lender from making the requested Loan or the applicable LC Issuer or any Lender from issuing, renewing, extending or increasing the face amount of or participating in the Facility LC requested to be issued, renewed, extended or increased.

Each Borrowing Notice or request for issuance of a Facility LC, or Swing Line Borrowing Notice, as the case may be, with respect to each such Credit Extension shall constitute a representation and warranty by the Borrowers that the conditions contained in Section 4.2(i) and (ii) have been satisfied. Any lender may require a duly completed compliance certificate in substantially the form of Exhibit B as a condition to making a Credit Extension.

4.3. Initial Advance to Each New Subsidiary Borrower. The Lenders shall not be required to make a Credit Extension hereunder to a new Subsidiary Borrower added after the Closing Date unless the Company has furnished or caused to be furnished to the Administrative Agent with sufficient copies for the Lenders:

(i)

The Assumption Letter executed and delivered by such Subsidiary Borrower and containing the written consent of the Borrowers, as contemplated by Section 2.22.

(ii)

Copies, certified by the Secretary, Assistant Secretary, Director or Authorized Officer of the Subsidiary Borrower, of its Board of Directors’ resolutions (and/or resolutions of other bodies, if any are deemed necessary by the Administrative Agent) approving the Assumption Letter.

(iii)

An incumbency certificate, executed by the Secretary, Assistant Secretary, Director or Authorized Officer of the Subsidiary Borrower, which shall identify by name and title and bear the signature of the officers of such Subsidiary Borrower authorized to sign the Assumption Letter and the other documents to be executed and delivered by such Subsidiary Borrower hereunder, upon which certificate the Administrative Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Company.

(iv)

An opinion of counsel to such Subsidiary Borrower, substantially in the form of Exhibit E hereto.

(v)

Guaranty documentation from such Subsidiary Borrower in form and substance acceptable to the Administrative Agent as required pursuant to Section 6.10.

(vi)

With respect to the initial Credit Extension made to any Foreign Subsidiary Borrower, the Administrative Agent shall have received originals and/or copies, as applicable, of all filings required to be made and such other evidence as the Administrative Agent may reasonably require establishing that each Lender, Swing Line Lender and each LC Issuer is entitled to receive payments under the Loan Documents without deduction or withholding of any taxes or with such deductions and withholding of taxes as may be reasonably acceptable to the Administrative Agent.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Company represents and warrants as follows to each Lender and the Agents as of each of (i) the Closing Date, (ii) the date of the initial Credit Extension hereunder (if different from the Closing Date) and (iii) other than with respect to Section 5.5 below, each date as required by Section 4.2:

5.1. Existence and Standing. The Company and each of its Subsidiaries is a corporation, partnership or limited liability company duly and properly incorporated or organized, as the case may be, validly existing and (to the extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization and has all requisite authority to conduct its

business in each jurisdiction in which its business is conducted, except to the extent that the failure to have such standing or authority could not reasonably be expected to have a Material Adverse Effect.

5.2. Authorization and Validity. The Company and each of its Subsidiaries (to the extent applicable) has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder, and to file the Loan Documents which have been filed by it as required by this Agreement. The execution and delivery by the Company and any such Subsidiary of the Loan Documents to which it is a party and the performance of its obligations thereunder have been duly authorized by proper proceedings, and the Loan Documents to which such entity is a party constitute legal, valid and binding obligations of such entity enforceable against such entity in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally or by general equitable principles.

5.3. No Conflict; Government Consent. Neither the execution and delivery by the Company or any of its Subsidiaries of the Loan Documents, nor compliance with the provisions thereof will violate (i) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Company or any of its Subsidiaries or (ii) the Company’s or any Subsidiary’s articles or certificate of incorporation, partnership agreement, certificate of partnership, articles or certificate of organization, by-laws, or operating agreement or other management agreement, as the case may be, or (iii) the provisions of any indenture, instrument or agreement to which the Company or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with, or constitute a default under, or result in, or require, the creation or imposition of any Lien in, of or on the Property of the Company or a Subsidiary pursuant to the terms of, any such indenture, instrument or agreement. No order, consent, adjudication, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, or other action in respect of any governmental or public body or authority, or any subdivision thereof, which has not been obtained by the Company or any of its Subsidiaries, is required to be obtained by the Company or any of its Subsidiaries in connection with the execution and delivery of the Loan Documents, the borrowings under this Agreement, the payment and performance by any Borrower of the Obligations or the legality, validity, binding effect or enforceability of any of the Loan Documents.

5.4. Financial Statements. The August 31, 2006 audited consolidated financial statements of the Company and its Subsidiaries set forth in (or otherwise incorporated by reference into) the Form 10, and heretofore delivered to the Arrangers and the Lenders were prepared in accordance with generally accepted accounting principles in effect on the date such statements were prepared and fairly present in all material respects, the consolidated financial condition and operations of the Company and its Subsidiaries at such date and the consolidated results of their operations and cash flows for the fiscal year then ended.

5.5. Material Adverse Change. Since August 31, 2006, and except as disclosed on Schedule 5.5, there has been no change in the business, property, financial condition or operations of the Company and its Subsidiaries taken as a whole, which could reasonably be expected to have a Material Adverse Effect.

5.6. Taxes. The Company and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Company or any of its Subsidiaries, except (i) such taxes, if any, as are being contested in good faith and as to which adequate reserves have

been provided in accordance with Agreement Accounting Principles or (ii) where the failure to file such return or pay such taxes could not reasonably be expected to have a Material Adverse Effect. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of any taxes or other governmental charges are adequate in all material respects.

5.7. Litigation and Contingent Obligations. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Company or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which seeks to prevent, enjoin or delay the making of any Credit Extensions or otherwise question the validity of any Loan Document. Other than any liability which could not reasonably be expected to have a Material Adverse Effect, neither the Company nor any of its Subsidiaries have any contingent obligations not provided for or disclosed in the financial statements referred to in Section 5.4.

5.8. Subsidiaries. Schedule 5.8 (as supplemented from time to time by the Company promptly after the formation or acquisition of any new Subsidiary as permitted under this Agreement) contains an accurate list of all Subsidiaries of the Company as of the Closing Date, setting forth their respective jurisdictions of organization and the percentage of their respective capital stock or other ownership interests owned by the Company or other Subsidiaries. All of the issued and outstanding shares of capital stock or other ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and are fully paid and non-assessable.

5.9. Accuracy of Information. No information, schedule, exhibit or report furnished by the Company or any of its Subsidiaries to the Arrangers, any Agent or Lender (including, without limitation, the Company’s Confidential Information Memorandum dated September 2007) in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading.

5.10. Regulation U. Neither the Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate of buying or carrying margin stock (within the meaning of Regulations U or X); and after applying the proceeds of each Advance, margin stock (as defined in Regulation U) constitutes less than twenty-five (25%) of the value of those assets of the Company and its Subsidiaries which are subject to any limitation on sale or pledge, or any other restriction hereunder.

5.11. Material Agreements. Neither the Company nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party, which default could reasonably be expected to have a Material Adverse Effect.

5.12. Compliance With Laws. The Company and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property, except to the extent that the failure to comply could not reasonably be expected to have a Material Adverse Effect.

5.13. Ownership of Properties. On the Closing Date, the Company and its Subsidiaries will have good title, free of all Liens other than Permitted Liens, to all of the Property and assets reflected in the Company’s most recent consolidated financial statements provided to the Arrangers and the Lenders as owned by the Company and its Subsidiaries, other than Property and assets disposed of in the ordinary course of business.

5.14. ERISA; Foreign Pension Matters. The sum of (a) the Unfunded Liabilities of all Plans and (b) the present value of the aggregate unfunded liabilities to provide the accrued benefits under all Foreign Pension Plans do not in the aggregate exceed $30,000,000. Each Plan and each Foreign Pension Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither the Company nor any other member of its Controlled Group has withdrawn from any Multiemployer Plan or initiated steps to do so, and no steps have been taken to terminate any Plan, except to the extent that such non-compliance, Reportable Event, withdrawal or termination could not reasonably be expected to result in liability of the Company or any of its Subsidiaries individually or in the aggregate in an amount greater than $30,000,000.

5.15. Plan Assets; Prohibited Transactions. No Borrower is an entity deemed to hold “plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of Loans hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code, except to the extent that such event or prohibited transaction could not reasonably be expected to result in liability of the Company or any of its Subsidiaries individually or in the aggregate in an amount greater than $30,000,000.

5.16. Environmental Matters.

(a) In the ordinary course of its business, the officers of the Company consider the effect of Environmental Laws on the business of the Company and its Subsidiaries, in the course of which they identify and evaluate potential risks and liabilities accruing to the Company and its Subsidiaries due to Environmental Laws. On the basis of this consideration, the Company has concluded that Environmental Laws cannot reasonably be expected to have a Material Adverse Effect, except as set forth on Schedule 5.16. Except as set forth on Schedule 5.16, neither the Company nor any Subsidiary has received any notice to the effect that its operations are not in compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect.

(b) The Company and each of its Subsidiaries have obtained all necessary governmental permits, licenses and approvals which are material to the operations conducted on their respective properties, including without limitation, all required permits, licenses and approvals for (i) the emission of air pollutants or contaminates, (ii) the treatment or pretreatment and discharge of waste water or storm water, (iii) the treatment, storage, disposal or generation of hazardous wastes, (iv) the withdrawal and usage of ground water or surface water, and (v) the disposal of solid wastes, except where a failure to obtain such permits, licenses and approvals would not result in a Material Adverse Effect.

5.17. Investment Company Act. Neither the Company nor any Subsidiary is an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

5.18. Insurance. The Property of the Company and its Subsidiaries is insured with financially sound and reputable insurance companies, in such amounts, with such deductibles and covering such properties and risks as is required under Section 6.6.

5.19. Solvency. After giving effect to (i) the Credit Extensions to be made on the Closing Date or such other date as Credit Extensions requested hereunder are made, (ii) the other transactions contemplated by this Agreement and the other Loan Documents, and (iii) the payment and accrual of all transaction costs with respect to the foregoing, the Company and its Subsidiaries taken as a whole are Solvent.

5.20. Patriot Act. Neither the Company nor any Subsidiary or Affiliate of any of the foregoing is a country, individual or entity named on the Specifically Designated National and Blocked Persons (SDN) List issued by the Office of Foreign Asset Control of the Department of the Treasury of the United States of America.

ARTICLE VI

COVENANTS

During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing:

6.1. Reporting. The Company will maintain, for itself and each Subsidiary, a system of accounting established and administered in accordance with generally accepted accounting principles, and furnish to the Lenders:

(i)

Within ninety (90) days (or such later date as may be permitted by the Securities and Exchange Commission) after the close of each of its fiscal years, an audit report certified by independent certified public accountants acceptable to the Required lenders and with such certifications to be free of exceptions and qualifications not acceptable to the Required Lenders, prepared in accordance with Agreement Accounting Principles on a consolidated basis for itself and its Subsidiaries, including a balance sheet as of the end of such period, related statements of income, shareholders’ equity and cash flows.

(ii)

Within forty-five (45) days (or such later date as may be permitted by the Securities and Exchange Commission) after the close of the first three (3) quarterly periods of each of its fiscal years, for itself and its Subsidiaries, a consolidated unaudited balance sheet as at the close of each such period and consolidated statements of income and cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified as to fairness of presentation, compliance with Agreement Accounting Principles and consistency by its chief financial officer, chief accounting officer, treasurer or vice president of finance.

(iii)

Together with the financial statements required under Sections 6.1(i) and (ii), a compliance certificate in substantially the form of Exhibit B signed by its chief financial officer, chief accounting officer, treasurer or vice president of finance showing the calculations necessary to determine compliance with this Agreement and stating that no Default or Unmatured Default exists, or if any Default or Unmatured Default exists, stating the nature and status thereof.

(iv)

As soon as possible and in any event within ten (10) days after the Company knows that any Reportable Event has occurred with respect to any Plan, or any material unfunded liability has arisen with respect to any Foreign Pension Plan, a statement, signed by the chief financial officer, treasurer or vice president of finance of the Company, describing said Reportable Event or material unfunded liability and the action which the Company proposes to take with respect thereto, which, in any case, could reasonably be expected to give rise to liability of more than $10,000,000 on the part of the Company or any of its Subsidiaries.

(v)

As soon as possible and in any event within ten (10) days after receipt by the Company, a copy of (a) any notice or claim to the effect that the Company or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Company, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by the Company or any of its Subsidiaries, which, in either case, could reasonably be expected to have a Material Adverse Effect.

(vi)

Promptly upon the furnishing thereof to the shareholders of the Company, copies of all financial statements, reports and proxy statements so furnished.

(vii)

Promptly upon the filing thereof, copies of all registration statements (other than exhibits thereto and any registration statements on Form S-8 or its equivalent) or other regular reports not otherwise provided pursuant to this Section 6.1 which the Company or any of its Subsidiaries files with the Securities and Exchange Commission.

(viii)

Upon the request of any Agent, prior to the execution thereof, draft copies of the Receivables Purchase Documents and, promptly after execution thereof, copies of such Receivables Purchase Documents and all material amendments thereto.

(ix)

Promptly upon any officer of the Company obtaining knowledge of the institution of, or written threat of, any action, suit, proceeding, governmental investigation or arbitration against or affecting the Company or any of its Subsidiaries or any property of the Company or any of its Subsidiaries, which action, suit, proceeding, investigation or arbitration exposes, or in the case of multiple actions, suits, proceedings, investigations or arbitrations arising out of the same general allegations or circumstances which expose, in the Company’s reasonable judgment, the Company or any of its Subsidiaries to liability in an amount aggregating $15,000,000

or more, give written notice thereof to the Administrative Agent and the Lenders and provide such other information as may be reasonably available to the Company (without jeopardizing any attorney-client privilege by disclosure thereof) to enable each Lender and the Administrative Agent and its counsel to evaluate such matters.

(x)

Such other information (including non-financial information) as any Agent or Lender may from time to time reasonably request (except such plans and forecasts which have not been made available by the Company to its creditors).

6.2. Use of Proceeds. The Company will, and will cause each Subsidiary to, use the proceeds of the Credit Extensions for general corporate purposes, including for working capital, commercial paper liquidity support and Permitted Acquisitions, to pay fees and expenses incurred in connection with this Agreement and the Spin-Off Transaction and to fund the Spin-Off Special Dividend. The Borrowers shall use the proceeds of Credit Extensions in compliance with all applicable legal and regulatory requirements and any such use shall not result in a violation of any such requirements, including, without limitation, Regulations T, U and X, the Securities Act of 1933 and the Securities Exchange Act of 1934 and the regulations promulgated thereunder.

6.3. Notice of Default. Within five (5) Business Days after an Authorized Officer becomes aware thereof, the Company will, and will cause each Subsidiary to, give notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise, which could reasonably be expected to have a Material Adverse Effect.

6.4. Conduct of Business. The Company will, and will cause each Subsidiary to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as conducted by the Company or its Subsidiaries as of the Closing Date, and, except as otherwise permitted by Section 6.12, do all things necessary to remain duly incorporated or organized, validly existing and (to the extent such concept applies to such entity) in good standing as a corporation, partnership or limited liability company in its jurisdiction of incorporation or organization, as the case may be, and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to maintain such good standing or authority could not reasonably be expected to have a Material Adverse Effect; provided that nothing in this Section shall prevent the Company and its Subsidiaries from discontinuing any line of business or liquidating, dissolving or disposing of any Subsidiary if (i) no Default or Unmatured Default is in existence or would be caused thereby and (ii) the Board of Directors of the Company determines in good faith that such termination, liquidation, dissolution or disposition is in the best interest of the Company and its Subsidiaries taken as a whole.

6.5. Taxes. The Company will, and will cause each Subsidiary to, file on a timely basis complete and correct United States federal and material foreign, state and local tax returns required by law and pay when due all material taxes, assessments and governmental charges and levies upon it or its income, profits or Property, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside in accordance with Agreement Accounting Principles.

6.6. Insurance. The Company will, and will cause each Subsidiary to, maintain with financially sound and reputable insurance companies insurance on their Property in such amounts and covering such risks as is consistent with sound business practice, and the Company will furnish to any Lender upon request full information as to the insurance carried.

6.7. Compliance with Laws; Maintenance of Plans. The Company will, and will cause each Subsidiary to, (i) comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws, and (ii) establish, maintain and operate all Plans to comply in all material respects with the provisions of ERISA and the Code, and the regulations and interpretations thereunder, where in the case of either (i) or (ii) above the failure to so comply could reasonably be expected to have a Material Adverse Effect.

6.8. Maintenance of Properties. The Company will, and will cause each Subsidiary to, do all things necessary to maintain, preserve, protect and keep its Property material to the conduct of its business in good repair, working order and condition, and make all necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times.

6.9. Inspection; Keeping of Books and Records.

(i) The Company will, and will cause each Subsidiary to, permit the Agents and the Lenders, by their respective representatives and agents, to inspect any of the Property, books and financial records of the Company and each Subsidiary, to examine and make copies of the books of accounts and other financial records of the Company and each Subsidiary, and to discuss the affairs, finances and accounts of the Company and each Subsidiary with, and to be advised as to the same by, their respective officers at such reasonable times and intervals as any Agent or Lender may designate. If a Default has occurred and is continuing, the Company, upon the Administrative Agent’s request, shall turn over copies of any such records to the Administrative Agent or its representatives. Unless a Default has occurred and is then continuing, each Lender shall give the Company not less than three (3) Business Days’ prior written notice of its intent to conduct such visit or inspection. To the extent that any Lender, in the course of such visit or inspection, obtains possession of any proprietary information pertaining to the Company or any Subsidiary, such Lender shall handle such information in accordance with the requirements of Section 10.11.

(ii) The Company shall keep and maintain, and cause each of its Subsidiaries to keep and maintain, in all material respects, proper books of record and account in which entries in conformity with Agreement Accounting Principles shall be made of all dealings and transactions in relation to their respective businesses and activities (except that any Foreign Subsidiary may comply with local accounting principles).

6.10. Addition of Guarantors; Pledge of Capital Stock.

6.10.1. Addition of Guarantors. As promptly as possible but in any event within thirty (30) days (or such later date as may be agreed upon by the Administrative Agent in its discretion) after any Subsidiary (other than any SPV or an Affected Foreign Subsidiary) becomes a Material Subsidiary of the Company, the Company shall cause each such Material Subsidiary to deliver to the Administrative Agent a duly executed Guaranty or supplement to an existing Guaranty pursuant to which such Material Subsidiary agrees to be bound by the terms and provisions of such Guaranty; provided, that if at any time (i) the aggregate amount of the book value of assets of all Subsidiaries that are not Guarantors exceeds ten percent (10%) of the aggregate book value of the Consolidated Total Assets of the Company and its Subsidiaries, or (ii) the Consolidated Net Worth of all Subsidiaries that are not Guarantors exceeds ten percent (10%) of the Consolidated Net Worth of the Company and its Subsidiaries, or (iii) the assets of all Subsidiaries that are not Guarantors

contributed more than ten percent (10%) of the Company’s Consolidated Net Income, in each case as reported in the most recent annual audited financial statements delivered to the Lenders pursuant to Section 6.1(i) (or, prior to the delivery of the first of such annual audited financial statements under Section 6.1(i), as reported in the Form 10), the Company shall cause additional Subsidiaries (other than any SPV) to become parties to a Guaranty as Guarantors thereunder, or to have their Capital Stock pledged pursuant to Section 6.10.2 to eliminate such excess.

6.10.2. Pledge of Capital Stock. Each Borrower shall execute or cause to be executed, by no later than sixty (60) days (or such later date as may be agreed upon by the Administrative Agent in its discretion) after the date on which any Material Subsidiary which is an Affected Foreign Subsidiary would qualify or be designated by the Company as a Guarantor, a Pledge Agreement in favor of the Administrative Agent for the benefit of the Holders of Obligations with respect to 65% of all of the outstanding Capital Stock of such Material Subsidiary; provided that no such pledge of the Capital Stock of a Foreign Subsidiary shall be required hereunder to the extent such pledge is prohibited by applicable law or the Administrative Agent and its counsel reasonably determine that, in light of the cost and expense associated therewith, such pledge would not provide material credit support for the benefit of the Holders of Obligations pursuant to legally binding, valid and enforceable Pledge Agreements. The Company further agrees to deliver to the Administrative Agent all such Pledge Agreements, together with appropriate corporate resolutions and other documentation (including legal opinions, the stock certificates representing the Capital Stock subject to such pledge, stock powers with respect thereto executed in blank, and such other documents as shall be reasonably requested to perfect the Lien of such pledge) in each case in form and substance reasonably satisfactory to the Administrative Agent, and in a manner that the Administrative Agent shall be reasonably satisfied that it has a first priority perfected pledge of or charge over the Capital Stock related thereto.

6.11. Indebtedness. The Company will not, and will not permit any Subsidiary to, create, incur or suffer to exist any Indebtedness, except:

(i)

The obligations arising under the Loan Documents.

(ii)

Indebtedness existing on the Closing Date and described on Schedule 6.11, and Permitted Refinancing Indebtedness in respect thereof.

(iii)

Indebtedness owed (a) to the Company or any Guarantor by any Guarantor, (b) to any Subsidiary that is not a Guarantor by any other Subsidiary that is not a Guarantor, and (c) to the Company or any Guarantor by any Subsidiary that is not a Guarantor in an aggregate amount under this clause (c) not to exceed five percent (5%) of the aggregate book value of the Company’s Consolidated Total Assets as reported in the most recent annual audited financial statements delivered to the Lenders pursuant to Section 6.1(i) (or, prior to the delivery of the first of such annual audited financial statements under Section 6.1(i), as reported in the Form 10).

(iv)

Receivables Facility Attributed Indebtedness in an aggregate amount not to exceed $75,000,000.

(v)

Indebtedness in an aggregate amount not to exceed $25,000,000 incurred or assumed for the purpose of financing or refinancing all or any part of the cost of acquiring or constructing any specific fixed asset of such Subsidiary (including without limitation

Capital Leases); provided, that such Indebtedness (a) is incurred (1) at a time when no Default or Unmatured Default has occurred and is continuing or would result from such incurrence and (2) within eighteen (18) months after the acquisition or construction of such fixed asset, and (b) does not exceed 100% of the total cost of such acquisition or construction (plus interest, fees and closing costs related thereto).

(vi)

Payment obligations arising under that certain Agreement and Plan of Distribution, dated as of October 31, 2007, by and between Acuity Brands, Inc. and the Company, as in effect on the date of the Spin-Off Transaction.

(vii)

Additional Indebtedness (including, without limitation, Indebtedness secured by Liens permitted under Section 6.13(xv)) in an aggregate amount not to exceed $75,000,000.

6.12. Consolidations and Mergers; Permitted Acquisitions.

6.12.1. Consolidations and Mergers. Each Borrower agrees that it will not, nor will the Company permit any Subsidiary to, consolidate or merge with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of the assets of any Borrower or such Borrower and its Subsidiaries take as a whole (whether now owned or hereafter acquired) to, any other Person, provided that if, after giving effect to any of the following, no Default will be in existence: (i) any Subsidiary may merge or consolidate with, or dispose of assets to, the Company if the Company, as the case may be, is the corporation surviving such merger, (ii) any Borrower may merge or consolidate with, or dispose of assets to, any other Borrower, (iii) any Subsidiary which is a Guarantor may merge or consolidate with, or dispose of assets to any other Subsidiary which is a Guarantor, (iv) any Subsidiary which is not a Borrower or Guarantor may merge or consolidate with, or dispose of assets to, any other Subsidiary which is not a Borrower or Guarantor, (v) any Subsidiary which is not a Borrower or a Guarantor may merge or consolidate with, or dispose of assets to, any other Subsidiary which is a Borrower or a Guarantor, if such Borrower or Guarantor, as the case may be, is the corporation surviving such merger, (vi) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to a Loan Party and (vii) any Borrower or Subsidiary may merge or consolidate with any other Person if (a) such Person was organized under the laws of the United States of America or one of its States, (b) either (1) such Borrower or Subsidiary is the corporation surviving such merger or (2) such Person becomes a Subsidiary as a result of such merger or consolidation and expressly assumes in writing (in form and substance reasonably acceptable to the Administrative Agent) all obligations of such Borrower or Subsidiary, as the case may be, under the Loan Documents executed by such Borrower or Subsidiary, provided, in any merger or consolidation involving a Domestic Subsidiary, the survivor shall be a Domestic Subsidiary, and in any merger or consolidation involving a Foreign Subsidiary, the survivor shall be a Foreign Subsidiary, and (c) immediately after giving effect to such merger, no Default shall have occurred and be continuing. Notwithstanding the foregoing, for the avoidance of doubt, so long as, after giving effect thereto, no Default will be in existence, any consolidations or mergers or dispositions of assets consummated in connection with the Spin-Off Transaction shall be permitted under this Agreement.

6.12.2. Permitted Acquisitions. Each Borrower agrees that it will not, nor will the Company permit any Subsidiary to, make any Acquisitions other than Acquisitions meeting the following requirements or otherwise approved by the Required Lenders (which approval shall not be unreasonably withheld or delayed) (each such Acquisition constituting a “Permitted Acquisition”):

(i)

as of the date of the consummation of such Acquisition, no Default or Unmatured Default shall have occurred and be continuing or would result from such Acquisition, and the representation and warranty contained in Section 5.10 shall be true both before and after giving effect to such Acquisition;

(ii)

such Acquisition is consummated on a non-hostile basis pursuant to a negotiated acquisition agreement approved by the board of directors or other applicable governing body of the seller or entity to be acquired, and no material challenge to such Acquisition (excluding the exercise of appraisal rights) shall be pending or threatened by any shareholder or director of the seller or entity to be acquired;

(iii)

the business to be acquired in such Acquisition is similar or related to one or more of the lines of business in which the Company and its Subsidiaries are engaged on the Closing Date;

(iv)

as of the date of the consummation of such Acquisition, (x) all material governmental and corporate approvals required in connection therewith shall have been obtained and (y) the Company shall be in compliance with Section 6.10; and

(v)

not less than ten (10) days prior to each such Acquisition the Purchase Price of which shall be $25,000,000 or more, the Company shall have delivered to the Administrative Agent a pro forma consolidated balance sheet, income statement and cash flow statement of the Company and its Subsidiaries (the “Acquisition Pro Forma”), based on the Company’s most recent financial statements delivered pursuant to Section 6.1(i) and using historical financial statements for the acquired entity provided by the seller(s) or which shall be complete and shall fairly present, in all material respects, the financial condition and results of operations and cash flows of the Company and its Subsidiaries in accordance with Agreement Accounting Principles, but taking into account such acquisition and the funding of all Credit Extensions in connection therewith, and such Acquisition Pro Forma shall reflect that, on a pro forma basis, the Leverage Ratio for the four fiscal quarter period reflected in the compliance certificate most recently delivered to the Administrative Agent pursuant to Section 6.1(iii) prior to the consummation of such acquisition (computed after giving effect to such acquisition and all Credit Extensions funded in connection therewith as if made on the first day of such period) shall not exceed 3.00 to 1.00.

6.13. Liens. The Company will not, nor will it permit any Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the Property of the Company or any of its Subsidiaries, except:

(i)

Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books.

(ii)

Liens imposed by law, such as landlords’, wage earners’, carriers’, warehousemen’s and mechanics’ liens and other similar liens, arising in the ordinary course of business which secure payment of obligations not more than sixty (60) days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with Agreement Accounting Principles shall have been set aside on its books.

(iii)

Liens arising out of pledges or deposits under worker’s compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation or to secure the performance of tenders, statutory obligations, surety or appeal bonds, bids, leases, government contracts and other similar obligations (provided that such Liens do not secure any Indebtedness).

(iv)

Utility easements, building restrictions, zoning ordinances and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Company or its Subsidiaries.

(v)

Liens existing on the Closing Date and described on Schedule 6.13.

(vi)

Liens, if any, securing the Loans and other Obligations hereunder.

(vii)

Liens arising under the Receivables Purchase Documents.

(viii)

Liens existing on any specific fixed asset of any Subsidiary of the Company at the time such Subsidiary becomes a Subsidiary and not created in contemplation of such event.

(ix)

Liens on any specific fixed asset securing Indebtedness incurred or assumed for the purpose of financing or refinancing all or any part of the cost of acquiring or constructing such asset; provided that such Lien attaches to such asset concurrently with or within eighteen (18) months after the acquisition or completion or construction thereof.

(x)

Liens existing on any specific fixed asset of any Subsidiary of the Company at the time such Subsidiary is merged or consolidated with or into the Company or any Subsidiary and not created in contemplation of such event.

(xi)

Liens existing on any specific fixed asset prior to the acquisition thereof by the Company or any Subsidiary and not created in contemplation thereof.

(xii)

Liens arising out of the refinancing, extension, renewal or refunding of any Indebtedness secured by any Lien permitted by any of the foregoing clause (v) or clauses (vii) through (xi); provided that (a) such Indebtedness is not secured by any additional assets, and (b) the amount of such Indebtedness secured by any such Lien is not increased.

(xiii)

Inchoate Liens arising under ERISA to secure current service pension liabilities as they are incurred under the provisions of Plans from time to time in effect.

(xiv)

Liens securing intercompany Indebtedness owing by (a) any Guarantor to the Company or any other Guarantor and (b) any Subsidiary that is not a Guarantor to the Company or any Wholly-Owned Subsidiary of the Company.

(xv)

Liens not otherwise permitted under this Section 6.13 securing Indebtedness in an aggregate principal amount at any time outstanding, together with the amount of Indebtedness permitted under Section 6.11(vii) (but without duplication), does not exceed fifteen percent (15%) of the aggregate book value of the Company’s Consolidated Total Assets as reported in the most recent annual audited financial statements delivered to the Lenders pursuant to Section 6.1(i) (or, prior to the delivery of the first of such annual audited financial statements under Section 6.1(i), as reported in the Form 10).

6.14. Transactions with Affiliates. The Company will not, and will not permit any Subsidiary to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate (other than the Company or any Subsidiary of the Company) except in the ordinary course of business and pursuant to the reasonable requirements of the Company’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than the Company or such Subsidiary would obtain in a comparable arm’s-length transaction, other than Permitted Receivables Transfers and transactions, payments or transfers entered into or made in connection with the Spin-Off Transaction.

6.15. Financial Contracts. The Company shall not and shall not permit any of its consolidated Subsidiaries to enter into any Financial Contract, other than Financial Contracts pursuant to which the Company or such Subsidiary hedged its actual or anticipated interest rate, foreign currency or commodity exposure existing or anticipated at the time thereof.

6.16. ERISA. Except to the extent that such act, or failure to act would not result singly, or in the aggregate, after taking into account all other such acts or failures to act, in a liability of the Company or any of its Subsidiaries which could reasonably be expected to exceed $30,000,000, the Company shall not (i) engage, or permit any Controlled Group member to engage, in any prohibited transaction described in Sections 406 of ERISA or 4975 of the Code for which a statutory or class exemption is not available or a private exemption has not been previously obtained from the DOL; (ii) permit to exist any accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of the Code); (iii) fail, or permit any member of its Controlled Group to fail, to pay timely required contributions or annual installments due with respect to any waived funding deficiency of any Plan; (iv) terminate, or permit any member of its Controlled Group to terminate, any Plan which would result in any liability of the Company or any member of its Controlled Group under Title IV of ERISA; (v) fail to make any contribution or payment to any Multiemployer Plan which the Company or any member of its Controlled Group may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto; (vi) fail, or permit any member of its Controlled Group to fail, to pay any required installment or any other payment required under Section 412 of the Code on or before the due date for such installment or other payment; (vii) amend, or permit any member of its Controlled Group to amend, a Plan resulting in an increase in current liability for the plan year such that the Company or any member of its Controlled Group is required to provide security to such Plan under Section 401(a)(29) of the Code.

6.17. Environmental Compliance. The Company will not become, or permit any Subsidiary to become, subject to any liabilities or costs which could reasonably be expected to have a Material Adverse Effect arising out of or related to (i) the release or threatened release at any location of any contaminant into the environment, or any remedial action in response thereto, or (ii) any violation of any environmental, health or safety requirements of law (including, without limitation, any Environmental Laws).

6.18. Sale of Assets. The Company will not, nor will it permit any Subsidiary to, lease, sell, transfer or otherwise dispose of its Property to any other Person, except:

(i)

Sales of inventory and obsolete or excess assets in the ordinary course of business.

(ii)

Sales, leases and transfers of Property (a) from the Company to any Loan Party and (b) from any Subsidiary of the Company to any Loan Party.

(iii)

Any transfer of an interest in Receivables and Related Security, accounts or notes receivable on a limited recourse basis under the Receivables Purchase Documents; provided that such transfer qualifies as a legal sale and as a sale under Agreement Accounting Principles and that the amount of Receivables Facility Attributable Indebtedness would be permitted under Section 6.11(iv).

(iv)

Any other leases, sales, transfers or dispositions that, together with all other Property of the Company and its Subsidiaries previously leased, sold or disposed of as permitted by this clause (iv) during any fiscal year of the Company, does not exceed ten percent (10%) of the aggregate book value of the Company’s Consolidated Total Assets as reported in the most recent annual audited financial statements delivered to the Lenders pursuant to Section 6.1(i) (or, prior to the delivery of the first of such annual audited financial statements under Section 6.1(i), as reported in the Form 10).

6.19. Restricted Payments. The Company will not, nor will it permit any Subsidiary to, declare or pay any dividends or make any distributions on its capital stock (other than dividends payable in its own capital stock) or redeem, repurchase or otherwise acquire or retire any of its capital stock at any time outstanding, except that (i) any Wholly-Owned Subsidiary may declare and pay dividends or make distributions to the Company or to a Wholly-Owned Subsidiary, (ii) any Subsidiary of the Company which is not a Wholly-Owned Subsidiary may declare and pay dividends or make distributions to its shareholders generally so long as the Company or its respective Subsidiary which owns the equity interest or interests in the Subsidiary paying such dividends or making such distribution receives at least its proportionate share thereof, (iii) on or prior to the date of the consummation of the Spin-Off Transaction, the Company may make the Spin-Off Special Dividend, and (iv) the Company may (x) declare and pay dividends or make any distributions on its capital stock and (y) redeem, repurchase or otherwise acquire or retire any of its capital stock provided that no Default or Unmatured Default shall exist before or after giving effect (including pro forma effect) to such dividends, distributions redemptions, repurchases, acquisitions or retirements or be created as a result thereof and the aggregate amount of such dividends, distributions redemptions, repurchases, acquisitions and retirements during any fiscal year of the Company does not exceed the greater of (A) $10,000,000 and (B) ten percent (10%) of the Company’s Consolidated Net Worth as reported in the most recent annual audited financial statements delivered to the Lenders pursuant to Section 6.1(i) (or, prior to the delivery of the first of such annual audited financial statements under Section 6.1(i), as reported in the Form 10); provided, that the foregoing aggregate limitation for such

dividends, distributions redemptions, repurchases, acquisitions and retirements shall not apply so long as the Leverage Ratio does not exceed 2.00 to 1.00 immediately prior to and immediately after giving effect (including pro forma effect) to any such dividends, distributions redemptions, repurchases, acquisitions or retirements.

6.20. Investments. The Company will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or to create any Subsidiary or to become or remain a partner in any partnership or joint venture, except:

(i)

Cash Equivalent Investments.

(ii)

Existing Investments in Subsidiaries and other Investments in existence on the date hereof and described in Schedule 6.20.

(iii)

Investments resulting from Financial Contracts entered into in the ordinary course of business and which do not violate the terms of Section 6.15.

(iv)

Investments, loans or advances made by any Loan Party in or to any Subsidiary and made by any Subsidiary to any Loan Party (provided that investments, loans or advances or capital contributions made and remaining outstanding during the term of this Agreement by any Loan Party to a Subsidiary which is not a Loan Party shall not exceed five percent (5%) of the aggregate book value of the Company’s Consolidated Total Assets as reported in the most recent annual audited financial statements delivered to the Lenders pursuant to Section 6.1(i) (or, prior to the delivery of the first of such annual audited financial statements under Section 6.1(i), as reported in the Form 10)).

(v)

Any other investment, loan or advance (other than acquisitions) so long as the aggregate amount of all such investments, loans and advances does not exceed $25,000,000 during the term of this Agreement.

6.21. Capital Expenditures. The Company will not, nor will it permit any Subsidiary to, make, or be committed to make, Capital Expenditures at any time except to the extent that, taking into account the making of any such Capital Expenditure on a pro forma basis as of the last day of the immediately preceding fiscal quarter, the Company shall be in compliance with the financial covenants under Section 6.23 as of the last day of such preceding fiscal quarter.

6.22. Sale and Leaseback Transactions. The Company shall not, nor shall it permit any Subsidiary to, enter into any Sale and Leaseback Transaction, except to the extent that, taking into account the entering into of any such Sale and Leaseback Transaction on a pro forma basis as of the last day of the immediately preceding fiscal quarter, the Company shall be in compliance with the financial covenants under Section 6.23 as of the last day of such preceding fiscal quarter.

6.23. Financial Covenants.

6.23.1. Maximum Leverage Ratio. The Company shall not permit the ratio (the “Leverage Ratio”) as of the end of each fiscal quarter ending on or after November 30, 2007 of (i) Indebtedness For Borrowed Money of the Company and its consolidated Subsidiaries (excluding any undrawn

amounts in respect of Facility LCs) to (ii) EBITDA to be greater than 3.25 to 1.00. The Leverage Ratio shall be calculated as of the last day of each fiscal quarter based upon (1) for Indebtedness For Borrowed Money, as of the last day of each such fiscal quarter; and (2) for EBITDA, the actual amount for the four-quarter period ending on such day, and shall be calculated, with respect to Permitted Acquisitions, on a pro forma basis using historical audited and reviewed unaudited financial statements obtained from the seller(s) in such Permitted Acquisition, broken down by fiscal quarter in the Company’s reasonable judgment and satisfactory to the Administrative Agent and as reported to the Administrative Agent.

6.23.2. Minimum Interest Expense Coverage Ratio. The Company shall maintain a ratio (the “Interest Expense Coverage Ratio”) of (i) EBIT to (ii) Interest Expense for the applicable period of at least 2.50 to 1.00 as of the end of each fiscal quarter ending on or after November 30, 2007. The Interest Expense Coverage Ratio shall be calculated as of the last day of each fiscal quarter for the actual amount of EBIT and Interest Expense for the four-quarter period ending on such day, and shall be calculated, with respect to Permitted Acquisitions, on a pro forma basis using historical audited and reviewed unaudited financial statements obtained from the seller(s) in such Permitted Acquisition, broken down by fiscal quarter in the Company’s reasonable judgment and satisfactory to the Administrative Agent.

ARTICLE VII

DEFAULTS

The occurrence of any one or more of the following events shall constitute a Default:

7.1. Breach of Representations or Warranties. Any representation or warranty made or deemed made by or on behalf of the Company or any of its Subsidiaries to the Lenders or the Agents under or in connection with this Agreement, any Credit Extension, or any certificate or information delivered in connection with this Agreement or any other Loan Document shall be false in any material respect on the date as of which made.

7.2. Failure to Make Payments When Due. Nonpayment of (i) principal of any Loan when due, (ii) any Reimbursement Obligation within one (1) Business Day after the same becomes due, or (iii) interest upon any Loan or any Facility Fee, LC Fee or other Obligations under any of the Loan Documents within five (5) Business Days after such interest, fee or other Obligation becomes due.

7.3. Breach of Covenants. The breach by any Borrower of any of the terms or provisions of Section 6.1(iii), Sections 6.2 through 6.4, (with respect to the Company’s or any of its Subsidiaries’ existence), Section 6.9(i), Sections 6.11 through 6.13 or Section 6.18 through 6.23.

7.4. Other Breaches. The breach by any Borrower (other than a breach which constitutes a Default under another Section of this Article VII) of any of the terms or provisions of this Agreement or any other Loan Document which is not remedied within thirty (30) days after the earlier to occur of (i) written notice thereof has been given to the Company by the Administrative Agent at the request of any Lender or (ii) an Authorized Officer otherwise becomes aware of any such breach; provided, however, that such cure period for such breach (other than a breach of the terms or provisions of Section 6.10) shall be extended for a period of time, not to exceed an additional thirty (30) days, reasonably sufficient to permit such Borrower to cure such failure if such

failure cannot be cured within the initial 30-day period but reasonably could be expected to be capable of cure within such additional thirty (30) days, such Borrower has commenced efforts to cure such failure during the initial 30-day period and such Borrower is diligently pursuing such cure.

7.5. Default as to Other Indebtedness.

(i) Failure of the Company or any of its Subsidiaries to pay when due (whether at stated maturity, by acceleration or otherwise) any Indebtedness which, individually or in the aggregate exceeds $15,000,000 (or the Approximate Equivalent Amount in currencies other than Dollars) (such Indebtedness being referred to as “Material Indebtedness”); or

(ii) Any Material Indebtedness of the Company or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid or repurchased (other than by a regularly scheduled payment) prior to the stated maturity thereof; or

(iii) The Company or any of its Material Subsidiaries shall fail to pay, or shall admit in writing its inability to pay, its debts generally as they become due; or

(iv) The default by the Company or any of its Subsidiaries in the performance (beyond the applicable grace period with respect thereto, if any) of any term, provision or condition contained in any agreement under which any such Material Indebtedness was created or is governed, or any other event shall occur or condition exist, the effect of which default or event is to cause, or to permit the holder or holders of such Material Indebtedness to cause such Material Indebtedness to become due prior to its stated maturity.

7.6. Voluntary Bankruptcy; Appointment of Receiver; Etc. The Company or any of its Material Subsidiaries shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief with respect to it under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate or partnership action to authorize or effect any of the foregoing actions set forth in this Section 7.6, or (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7.

7.7. Involuntary Bankruptcy; Appointment of Receiver; Etc. Without the application, approval or consent of the Company or any of its Material Subsidiaries, a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Company or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in Section 7.6(iv) shall be instituted against the Company or any of its Material Subsidiaries and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of sixty (60) consecutive days.

7.8. Judgments. The Company or any of its Subsidiaries shall fail within thirty (30) days after the final entry thereof to pay, bond or otherwise discharge one or more (i) judgments or orders for the payment of money (except to the extent covered by independent third-party insurance as to which the insurer has not disclaimed coverage) in the aggregate in excess of $15,000,000 (or the Approximate Equivalent Amount thereof in currencies other than Dollars), or (ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed on appeal or otherwise being appropriately contested in good faith.

7.9. Unfunded Liabilities. The sum of (a) the Unfunded Liabilities of all Plans and (b) the present value of the aggregate unfunded liabilities to provide the accrued benefits under all Foreign Pension Plans exceeds in the aggregate an amount equal to $30,000,000, or any Reportable Event shall occur in connection with any Plan if the liability of the Company or any of its Subsidiaries resulting from such Reportable Event exceeds in the aggregate an amount equal to $30,000,000.

7.10. Other ERISA Liabilities. The Company or any other member of its Controlled Group has incurred withdrawal liability or become obligated to make contributions to a Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Company or any other member of its Controlled Group as withdrawal liability (determined as of the date of such notification), exceeds in the aggregate an amount equal to $30,000,000.

7.11. Environmental Matters. The Company or any of its Subsidiaries shall (i) be the subject of any proceeding or investigation pertaining to the release by the Company, any of its Subsidiaries or any other Person of any toxic or hazardous waste or substance into the environment, or (ii) violate any Environmental Law, which, in the case of an event described in clause (i) or clause (ii), could reasonably be expected to have a Material Adverse Effect.

7.12. Change in Control. Any Change in Control shall occur.

7.13. Receivables Purchase Document Events. Other than at the request of an Affiliate of the Company party thereto (as permitted thereunder), an event shall occur which (i) permits the investors in a Receivables Purchase Facility to require amortization or liquidation of the facility or (ii) results in the termination of reinvestment or re-advancing of collections or proceeds of Receivables and Related Security shall occur under the Receivables Purchase Documents, and, in the case of an event described in clause (i) or clause (ii), the Company or any Subsidiary thereof (other than any SPV) has liability in excess of $75,000,000.

7.14. Guarantor Revocation; Failure of Loan Documents. Any guarantor of the Obligations shall deny, disaffirm, terminate or revoke any of its obligations under the applicable Guaranty (except in accordance with Section 11.15 hereof) or breach any of the material terms of such Guaranty, or any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or the Company or any Subsidiary shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms).

ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

8.1. Acceleration.

(i) If any Default described in Section 7.6 or 7.7 occurs with respect to any Borrower, the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuers to issue Facility LCs shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Administrative Agent, any LC Issuer or any Lender, and the Borrowers will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay to the Administrative Agent an amount in immediately available funds, which funds shall be held in the Facility LC Collateral Account, equal to the Collateral Shortfall Amount. If any other Default occurs, the Required Lenders (or the Administrative Agent with the consent of the Required Lenders) may (a) terminate or suspend the obligations of the Lenders to make Loans hereunder and the obligation and power of the LC Issuers to issue Facility LCs, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Borrowers hereby expressly waive, and (b) upon notice to the Borrowers and in addition to the continuing right to demand payment of all amounts payable under this Agreement, make demand on the Borrowers to pay, and the Borrowers will, forthwith upon such demand and without any further notice or act, pay to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account.

(ii) If, within thirty (30) days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans and the obligation and power of the LC Issuers to issue Facility LCs hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to any Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Administrative Agent shall, by notice to the Borrowers, rescind and annul such acceleration and/or termination.

8.2. Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the Administrative Agent with the consent in writing of the Required Lenders) and the Borrowers may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrowers hereunder or thereunder or waiving any Default hereunder or thereunder; provided, however, that no such supplemental agreement shall, without the consent of each Lender affected thereby:

(i)

Extend the final maturity of any Loan, or extend the expiry date of any Facility LC to a date after the Facility Termination Date or forgive all or any portion of the principal amount thereof or any Reimbursement Obligation related thereto, or reduce the rate or extend the time of payment of interest or fees thereon or Reimbursement Obligations related thereto (other than a waiver of the application of the default rate of interest or LC Fees pursuant to Section 2.12 hereof).

(ii)

Change the percentage specified in the definition of Required Lenders or any other percentage of Lenders specified to be the applicable percentage in this Agreement to act on specified matters or otherwise amend the definitions of “Required Lenders” or “Pro Rata Share”.

(iii)

Extend the Facility Termination Date, or increase the amount or otherwise extend the term of the Commitment of any Lender hereunder or the commitment to issue Facility LCs.

(iv)

Permit any Borrower to assign its rights or obligations under this Agreement.

(v)

Other than pursuant to a transaction permitted by the terms of this Agreement (including, without limitation, the Spin-Off Transaction), release any guarantor of the Obligations or any substantial portion of the collateral, if any, securing the Obligations.

(vi)

Amend this Section 8.2.

No amendment of any provision of this Agreement relating to any Agent shall be effective without the written consent of such Agent. No amendment of any provision of this Agreement relating to any LC Issuer shall be effective without the written consent of such LC Issuer. No amendment of any provision of this Agreement relating to the Swing Line Lender or any Swing Line Loans shall be effective without the written consent of the Swing Line Lender. The Administrative Agent may waive payment of the fee required under Section 13.3.2 without obtaining the consent of any other party to this Agreement.

8.3. Preservation of Rights. No delay or omission of the Lenders, the LC Issuers or Agents to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Credit Extension notwithstanding the existence of a Default or Unmatured Default or the inability of the Borrowers to satisfy the conditions precedent to such Credit Extension shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by, or by the Administrative Agent with the consent of, the requisite number of Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Agents, the LC Issuers and the Lenders until all of the Obligations have been paid in full.

ARTICLE IX

JOINT AND SEVERAL OBLIGATIONS

9.1. Joint and Several Liability. Each Borrower agrees that it is jointly and severally, directly and primarily liable to the Administrative Agent, the Lenders and the LC Issuers for payment, performance and satisfaction in full of the Obligations and that such liability is independent of the duties, obligations, and liabilities of the other Borrowers. The Administrative Agent, the Lenders and the LC Issuers may jointly bring a separate action or actions on each, any, or all of the Obligations against any Borrower, whether action is brought against the other Borrowers or whether the other Borrowers are joined in such action. In the event that any Borrower fails to make any payment of any Obligations on or before the due date thereof, the other Borrowers immediately shall cause such payment to be made or each of such Obligations to be performed, kept, observed, or fulfilled.

9.2. Primary Obligation; Waiver of Marshalling. This Agreement and the Loan Documents to which Borrowers are a party are a primary and original obligation of each Borrower, are not the creation of a surety relationship, and are an absolute, unconditional, and continuing promise of payment and performance which shall remain in full force and effect without respect to future changes in conditions, including any change of law or any invalidity or irregularity with respect to this Agreement or the Loan Documents to which Borrowers are a party. Each Borrower agrees that its liability under this Agreement and the Loan Documents to which it is a party shall be immediate and shall not be contingent upon the exercise or enforcement by the Administrative Agent, the Lenders and the LC Issuers of whatever remedies they may have against the other Borrowers. Each Borrower consents and agrees that the Administrative Agent, the Lenders and the LC Issuers shall be under no obligation to marshal any assets of any Borrower against or in payment of any or all of the Obligations.

9.3. Financial Condition of Borrowers. Each Borrower acknowledges that it is presently informed as to the financial condition of the other Borrowers and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. Each Borrower hereby covenants that it will continue to keep informed as to the financial condition of the other Borrowers, the status of the other Borrowers and of all circumstances which bear upon the risk of nonpayment. Absent a written request from any Borrower to the Administrative Agent, the Lenders and the LC Issuers for information, each Borrower hereby waives any and all rights it may have to require the Administrative Agent, the Lenders and the LC Issuers to disclose to such Borrower any information which the Administrative Agent, the Lenders and the LC Issuers may now or hereafter acquire concerning the condition or circumstances of the other Borrowers.

9.4. Continuing Liability. Subject to the provisions of Section 2.22, the liability of each Borrower under this Agreement and the Loan Documents to which such Borrower is a party includes Obligations arising under successive transactions continuing, compromising, extending, increasing, modifying, releasing, or renewing the Obligations, changing the interest rate, payment terms, or other terms and conditions thereof, or creating new or additional Obligations after prior Obligations have been satisfied in whole or in part. To the maximum extent permitted by law, each Borrower hereby waives any right to revoke its liability under this Agreement and Loan Documents as to future indebtedness.

9.5. Additional Waivers. Each Borrower absolutely, unconditionally, knowingly, and expressly waives (a) notice of acceptance hereof; (b) notice of any Loans or other financial accommodations made or extended under this Agreement and the Loan Documents to which Borrowers are a party or the creation or existence of any Obligations; (c) notice of the amount of the Obligations, subject, however, to each Borrower’s right to make inquiry of the Administrative Agent, the Lenders and the LC Issuers to ascertain the amount of the Obligations at any reasonable time; (d) notice of any adverse change in the financial condition of the other Borrowers or of any other fact that might increase such Borrower’s risk hereunder; (e) notice of presentment for payment, demand, protest, and notice thereof as to any instruments among the Loan Documents to which Borrowers are a party; (f) notice of any Default or Unmatured Default; (g) all other notices (except, in each case, if such notice is specifically required to be given to any Borrower hereunder or under the Loan Documents to which Borrowers are a party and demands to which such Borrower might otherwise be

entitled); (h) any right of subrogation such Borrower has or may have as against the other Borrowers with respect to the Obligations; (i) any right to proceed against the other Borrowers or any other Person, now or hereafter, for contribution, indemnity, reimbursement, or any other suretyship rights and claims, whether direct or indirect, liquidated or contingent, whether arising under express or implied contract or by operation of law, which such Borrower may now have or hereafter have as against the other Borrowers with respect to the Obligations; and (j) any right to proceed or seek recourse against or with respect to any property or asset of the other Borrowers.

9.6. Settlements or Releases. Each Borrower consents and agrees that, without notice to or by such Borrower, and without affecting or impairing the liability of such Borrower hereunder, the Administrative Agent, the Lenders and the LC Issuers may, by action or inaction (i) compromise, settle, extend the duration or the time for the payment of, or discharge the performance of, or may refuse to or otherwise not enforce this Agreement and the Loan Documents, or any part thereof, with respect to the other Borrowers or any Guarantor; (ii) release the other Borrowers or any Guarantor or grant other indulgences to the other Borrowers or any Guarantor in respect thereof; or (iii) release or substitute any Guarantor, if any, of the Obligations, or enforce, exchange, release, or waive any security, if any, for the Obligations or any other guaranty of the Obligations, or any portion thereof.

9.7. No Election. The Administrative Agent, the Lenders and the LC Issuers shall have the right to seek recourse against each Borrower to the fullest extent provided for herein, and no election by the Administrative Agent, the Lenders and the LC Issuers to proceed in one form of action or proceeding, or against any party, or on any obligation, shall constitute a waiver of the Administrative Agent’s, any Lenders’ or any LC Issuers’ right to proceed in any other form of action or proceeding or against other parties unless the Administrative Agent, the Lenders and the LC Issuers have expressly waived such right in writing.

9.8. Joint Loan Account. At the request of Borrowers to facilitate and expedite the administration and accounting processes and procedures of the Loans and the Facility LCs, the Administrative Agent, the Lenders and the LC Issuers have agreed, in lieu of maintaining separate loan accounts on the Administrative Agent’s, the Lenders’ and the LC Issuers’ books in the name of each of the Borrowers, that the Administrative Agent, the Lenders and the LC Issuers may maintain a single loan account under the name of all of the Borrowers (the “Joint Loan Account”). All Loans shall be charged to the Joint Loan Account, together with all interest and other charges as permitted under and pursuant to this Agreement. The Joint Loan Account shall be credited with all repayments of Obligations received by the Administrative Agent, the Lenders and the LC Issuers, on behalf of Borrowers, from any Borrower pursuant to the terms of this Agreement.

9.9. Apportionment of Proceeds of Loans. Each Borrower expressly agrees and acknowledges that the Administrative Agent, the Lenders and the LC Issuers shall have no responsibility to inquire into the correctness of the apportionment or allocation of or any disposition by any of Borrowers of (a) the Loans, the Reimbursement Obligations or any other Obligation, or (b) any of the expenses and other items charged to the Joint Loan Account pursuant to this Agreement. The Loans, the Reimbursement Obligations and the other Obligations and such expenses and other items shall be made for the collective, joint, and several account of Borrowers and shall be charged to the Joint Loan Account.

9.10. The Administrative Agent, Lenders and LC Issuers Held Harmless. Each Borrower agrees and acknowledges that the administration of this Agreement on a combined basis, as set forth herein, is being done as an accommodation to the Borrowers and at their request, and that the

Administrative Agent, the Lenders and the LC Issuers shall incur no liability to any Borrower as a result thereof. To induce the Administrative Agent, the Lenders and the LC Issuers to do so, and in consideration thereof, each Borrower hereby agrees to indemnify and hold the Administrative Agent, the Lenders and the LC Issuers harmless from and against any and all liability, expense, loss, damage, claim of damage, or injury, made against the Administrative Agent, the Lenders and the LC Issuers by Borrowers or by any other Person, arising from or incurred by reason of such administration of the Agreement on a combined basis, except to the extent such liability, expense, loss, damage, claim of damage, or injury solely arises from the gross negligence or willful misconduct or breach of the obligations under the Loan Documents of the Administrative Agent, the Lenders and the LC Issuers, as applicable.

9.11. Borrowers’ Integrated Operations. Each Borrower represents and warrants to the Administrative Agent, the Lenders and the LC Issuers that the collective administration of the Loans is being undertaken by the Administrative Agent, the Lenders and the LC Issuers pursuant to this Agreement because Borrowers are integrated in their operation and administration and require financing on a basis permitting the availability of credit from time to time to the Borrowers. Each Borrower will derive benefit, directly and indirectly, from such collective administration and credit availability because the successful operation of each Borrower is enhanced by the continued successful performance of the integrated group.

9.12. Foreign Subsidiary Borrowers. Notwithstanding anything contained in this Article IX to the contrary, no Foreign Subsidiary Borrower which is and remains an Affected Foreign Subsidiary shall be liable hereunder for any of the Loans made to, or any other Obligations incurred solely by or on behalf of, the Company or any Subsidiary Borrower which is a Domestic Subsidiary.

ARTICLE X

GENERAL PROVISIONS

10.1. Survival of Representations. All representations and warranties of the Borrowers contained in this Agreement shall survive the making of the Credit Extensions herein contemplated.

10.2. Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, neither any LC Issuer nor any Lender shall be obligated to extend credit to the Borrowers in violation of any limitation or prohibition provided by any applicable statute or regulation.

10.3. Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents.

10.4. Entire Agreement. The Loan Documents embody the entire agreement and understanding among the Borrowers, the Agents, the LC Issuers and the Lenders and supersede all prior agreements and understandings among the Borrowers, the Agents, the LC Issuers and the Lenders relating to the subject matter thereof other than the fee letter described in Section 11.13.

10.5. Several Obligations; Benefits of this Agreement. The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Agents are authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its

obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and assigns, provided, however, that the parties hereto expressly agree that the Arrangers shall enjoy the benefits of the provisions of Sections 10.6, 10.10, 11.11, and 11.13 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement.

10.6. Expenses; Indemnification.

(i) The Borrowers shall reimburse the Administrative Agent and J.P. Morgan Securities Inc., as Joint Lead Arranger and as Sole Bookrunner (in such capacity, for purposes of this Section 10.6(i), “JPMSI”), for any costs, internal charges and out-of-pocket expenses (including reasonable attorneys’ and paralegals’ fees, time charges and expenses of attorneys and paralegals for the Administrative Agent and JPMSI, which attorneys and paralegals may not be employees of the Administrative Agent or JPMSI, and expenses of and fees for other advisors and professionals engaged by the Administrative Agent or JPMSI) paid or incurred by the Administrative Agent or JPMSI in connection with the investigation, preparation, negotiation, documentation, execution, delivery, syndication, distribution (including, without limitation, via the internet), review, amendment, modification, administration and collection of the Loan Documents. The Borrowers also agree to reimburse the Agents, JPMSI, the LC Issuers and the Lenders for any reasonable costs, internal charges and out-of-pocket expenses (including reasonable attorneys’ and paralegals’ fees, time charges and expenses of attorneys and paralegals for the Agents, JPMSI, the LC Issuers and the Lenders, which attorneys and paralegals may not be employees of the Agents, the Arrangers, the LC Issuers or the Lenders) paid or incurred by the Agents, JPMSI, any LC Issuers or any Lender in connection with the collection and enforcement of the Loan Documents. Notwithstanding anything herein or in any other Loan Document to the contrary, any and all provisions in this Agreement or in any other Loan Document that obligates the Company or any of its Subsidiaries to pay the attorney’s fees or expenses of another Person shall be deemed to obligate the Company or such Subsidiary (as the case may be) to pay the actual and reasonable attorney’s fees and expenses of such Person and such fees and expenses shall be calculated without giving effect to any statutory presumptions as to the reasonableness or the amount thereof that may apply under applicable law.

(ii) The Borrowers hereby further agree to indemnify the Agents, the Arrangers, the LC Issuers, each Lender, their respective affiliates, and each of their directors, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all reasonable expenses of litigation or preparation therefor whether or not the Agents, the Arrangers, the LC Issuers, any Lender or any affiliate is a party thereto, and all reasonable attorneys’ and paralegals’ fees, time charges and expenses of attorneys and paralegals of the party seeking indemnification, which attorneys and paralegals may or may not be employees of such party seeking indemnification) which any of them may pay or incur arising out of or relating to this Agreement, the other Loan Documents or any other transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Credit Extension hereunder, except to the extent that they are determined in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the party seeking indemnification or by reason of such indemnified party’s breach of its obligations under the Loan Documents, or are the result of claims of any Lender against other Lenders or against the Administrative Agent not attributable to the Company’s or any of its Subsidiary’s actions and for which the Company and its Subsidiaries otherwise have no liability. The obligations of the Borrowers under this Section 10.6 shall survive the termination of this Agreement.

10.7. Numbers of Documents. All statements, notices, closing documents, and requests hereunder shall be furnished to the Administrative Agent with sufficient counterparts so that the Administrative Agent may furnish one to each of the Lenders, to the extent that the Administrative Agent deems necessary.

10.8. Accounting. Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with Agreement Accounting Principles. If any changes in generally accepted accounting principles are hereafter required or permitted and are adopted by the Company or any of its Subsidiaries with the agreement of its independent certified public accountants and such changes result in a change in the method of calculation of any of the financial covenants, tests, restrictions or standards herein or in the related definitions or terms used therein (“Accounting Changes”), the parties hereto agree, at the Company’s request, to enter into negotiations, in good faith, in order to amend such provisions in a credit neutral manner so as to reflect equitably such changes with the desired result that the criteria for evaluating the Company’s and its Subsidiaries’ financial condition shall be the same after such changes as if such changes had not been made; provided, however, until such provisions are amended in a manner reasonably mutually satisfactory to the Company, the Administrative Agent and the Required Lenders, no Accounting Change shall be given effect in such calculations and all financial statements and reports required to be delivered hereunder shall be prepared in accordance with Agreement Accounting Principles without taking into account such Accounting Changes. In the event such amendment is entered into, all references in this Agreement to Agreement Accounting Principles shall mean generally accepted accounting principles as of the date of such amendment.

10.9. Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.

10.10. Nonliability of Lenders. The relationship between the Borrowers on the one hand and the Lenders, the LC Issuers and the Agents on the other hand shall be solely that of borrower and lender. None of the Agents, the Arrangers, the LC Issuers or any Lender shall have any fiduciary responsibilities to the Borrowers. None of the Agents, the Arrangers, the LC Issuers or any Lender undertakes any responsibility to the Borrowers to review or inform the Borrowers of any matter in connection with any phase of any Borrower’s business or operations. The Borrowers agree that none of the Agents, the Arrangers, the LC Issuers or any Lender shall have liability to the Borrowers (whether sounding in tort, contract or otherwise) for losses suffered by the Borrowers in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final, non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct or breach of the obligations under the Loan Documents of the party from which recovery is sought. None of the Agents, the Arrangers, the LC Issuers or any Lender shall have any liability with respect to, and the Borrowers hereby waive, releases and agrees not to sue for, any special, indirect, consequential or punitive damages suffered by the Borrowers in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby.

10.11. Confidentiality. Each Lender agrees to hold any confidential information which it may receive from any Borrower pursuant to this Agreement in confidence, except for disclosure to

the following Persons for the following purposes (and under the terms of confidence that are substantially the same as this Section in the case of any disclosure covered by clause (i), (ii), (vi) or (vii) below): (i) to other Lenders and their respective Affiliates in connection with the transactions contemplated by this Agreement, (ii) to legal counsel, accountants, and other professional advisors to such Lender in connection with the transactions contemplated by this Agreement or to a Transferee or prospective Transferee in connection with the transactions contemplated by this Agreement, (iii) to regulatory officials as required by applicable law as determined by such Lender (which determination shall be conclusive and binding on all parties hereto), (iv) to any Person as required by law, regulation, or legal process as determined by such Lender (which determination shall be conclusive and binding on all parties hereto), (v) to any Person to the extent required in any legal proceeding to which such Lender is a party as determined by such Lender (which determination shall be conclusive and binding on all parties hereto), (vi) to such Lender’s direct or indirect contractual counterparties in swap agreements relating to the Loans or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by Section 13.4.

10.12. Lenders Not Utilizing Plan Assets. None of the consideration used by any of the Lenders, any LC Issuer or Designated Lenders to make its Credit Extensions constitutes for any purpose of ERISA or Section 4975 of the Code assets of any “plan” as defined in Section 3(3) of ERISA or Section 4975 of the Code and the rights and interests of each of the Lenders, the LC Issuers and Designated Lenders in and under the Loan Documents shall not constitute such “plan assets” under ERISA.

10.13. Nonreliance. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for herein.

10.14. Disclosure. The Borrowers and each Lender hereby acknowledge and agree that JPMorgan and/or its respective Affiliates and certain of the other Lenders and/or their respective Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrowers and its Affiliates.

10.15. Subordination of Intercompany Indebtedness. The Borrowers agree that any and all claims of any Borrower against any Guarantor with respect to any “Intercompany Indebtedness” (as hereinafter defined), any endorser, obligor or any other guarantor of all or any part of the Obligations, or against any of its properties shall be subordinate and subject in right of payment to the prior payment, in full and in cash, of all Obligations; provided that, and not in contravention of the foregoing, so long as no Default is continuing the Borrowers may make loans to and receive payments in the ordinary course with respect to such Intercompany Indebtedness to the extent otherwise permitted under this Agreement. Notwithstanding any right of any Borrower to ask, demand, sue for, take or receive any payment from any Guarantor, all rights, liens and security interests of the Borrowers, whether now or hereafter arising and howsoever existing, in any assets of any Guarantor (whether constituting part of any collateral given to any Agent or any Lender to secure payment of all or any part of the Obligations or otherwise) shall be and are subordinated to the rights of the Agents, the LC Issuers and the Lenders in those assets. No Borrower shall have any right to possession of any such asset or to foreclose upon any such asset, whether by judicial action or otherwise, unless and until all of the Obligations (other than contingent indemnity obligations) shall have been fully paid and satisfied (in cash) and all financing arrangements pursuant to all of the Loan Documents have been terminated. If all or any part of the assets of any Guarantor, or the proceeds thereof, are subject to any distribution, division or application to the creditors of any Guarantor,

whether partial or complete, voluntary or involuntary, and whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding, or if the business of any Guarantor is dissolved or if substantially all of the assets of any Guarantor are sold (other than in an transaction permitted under this Agreement), then, and in any such event (such events being herein referred to as an “Insolvency Event”), any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable upon or with respect to any indebtedness of any Guarantor to any Borrower (“Intercompany Indebtedness”) shall be paid or delivered directly to the Administrative Agent for application on any of the Obligations, due or to become due, until such Obligations (other than contingent indemnity obligations) shall have first been fully paid and satisfied (in cash). Should any payment, distribution, security or instrument or proceeds thereof be received by any Borrower upon or with respect to the Intercompany Indebtedness after any Insolvency Event and prior to the satisfaction of all of the Obligations (other than contingent indemnity obligations) and the termination of all financing arrangements pursuant to all of the Loan Documents, such Borrower shall receive and hold the same in trust, as trustee, for the benefit of the Agents, the LC Issuers and the Lenders and shall forthwith deliver the same to the Administrative Agent, for the benefit of the Agents, the LC Issuers and the Lenders, in precisely the form received (except for the endorsement or assignment of such Borrower where necessary), for application to any of the Obligations, due or not due, and, until so delivered, the same shall be held in trust by such Borrower as the property of the Agents, the LC Issuers and the Lenders. If any Borrower fails to make any such endorsement or assignment to the Administrative Agent, the Administrative Agent or any of its officers or employees is irrevocably authorized to make the same. Each Borrower agrees that until the Obligations (other than the contingent indemnity obligations) have been paid in full (in cash) and satisfied and all financing arrangements pursuant to any Loan Document among the Borrowers and the Agents, the LC Issuers and the Lenders have been terminated, no Borrower will assign or transfer to any Person (other than the Administrative Agent or any other transferee that agrees to be bound by the terms of this Agreement in writing (in form and substance acceptable to the Administrative Agent)) any claim any Borrower has or may have against any Guarantor.

10.16. USA PATRIOT ACT NOTIFICATION. The following notification is provided to the Borrowers pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for each Borrower: When any Borrower opens an account, if such Borrower is an individual, the Administrative Agent and the Lenders will ask for such Borrower’s name, residential address, tax identification number, date of birth, and other information that will allow the Administrative Agent and the Lenders to identify such Borrower, and, if such Borrower is not an individual, the Administrative Agent and the Lenders will ask for such Borrower’s name, tax identification number, business address, and other information that will allow the Administrative Agent and the Lenders to identify such Borrower. The Administrative Agent and the Lenders may also ask, if any Borrower is an individual, to see such Borrower’s driver’s license or other identifying documents, and, if such Borrower is not an individual, to see such Borrower’s legal organizational documents or other identifying documents.

ARTICLE XI

THE AGENTS

11.1. Appointment; Nature of Relationship. JPMorgan Chase Bank, National Association is hereby appointed by each of the Lenders as the Administrative Agent hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Administrative Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. Bank of America, N.A. is hereby appointed by each of the Lenders as the Syndication Agent hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Syndication Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. Each of KeyBank, National Association, Wachovia Bank, National Association, Regions Bank and Wells Fargo Bank, N.A. is hereby appointed by the Lenders as a Co-Documentation Agent hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Co-Documentation Agents to act as the contractual representatives of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. Each Agent agrees to act as such contractual representative upon the express conditions contained in this Article XI. Notwithstanding the use of the defined term “Administrative Agent”, “Syndication Agent” or “Co-Documentation Agent”, it is expressly understood and agreed that no Agent shall have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that each Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In their capacities as the Lenders’ contractual representative, the Agents (i) do not hereby assume any fiduciary duties to any of the Lenders, (ii) are “representatives” of the Lenders within the meaning of Section 9-102 of the Uniform Commercial Code and (iii) are acting as independent contractors, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against any Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives.

11.2. Powers. Each Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to such Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Agents shall have no implied duties or fiduciary duties to the Lenders or any obligation to the Lenders to take any action thereunder, except any action specifically provided by the Loan Documents to be taken by the applicable Agents.

11.3. General Immunity. No Agent or any of its respective directors, officers, agents or employees shall be liable to the Borrowers, the Lenders or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final, non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person.

11.4. No Responsibility for Loans, Recitals, etc. No Agent or any of its respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition

specified in Article IV, except receipt of items required to be delivered solely to the Agents or any of them; (d) the existence or possible existence of any Default or Unmatured Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any collateral security; or (g) the financial condition of the Borrowers or any guarantor of any of the Obligations or of any of the Company’s or any such guarantor’s respective Subsidiaries. The Agents shall have no duty to disclose to the Lenders information that is not required to be furnished by any Borrower to any Agent at such time, but is voluntarily furnished by any Borrower to such Agent (either in its capacity as an Agent or in its individual capacity).

11.5. Action on Instructions of Lenders. Each Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders (or all of the Lenders in the event that and to the extent that this Agreement expressly requires such), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that the Agents shall be under no duty to take any discretionary action permitted to be taken by any of them pursuant to the provisions of this Agreement or any other Loan Document unless they shall be requested in writing to do so by the Required Lenders (or all of the Lenders in the event that and to the extent that this Agreement expressly requires such). Each Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.

11.6. Employment of Agents and Counsel. Any Agent may execute any of its respective duties as an Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Each Agent shall be entitled to advice of counsel concerning the contractual arrangement between such Agent and the Lenders and all matters pertaining to such Agent’s duties hereunder and under any other Loan Document.

11.7. Reliance on Documents; Counsel. Each Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by such Agent, which counsel may be employees of such Agent.

11.8. Agents’ Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify each Agent ratably in proportion to the Lenders’ Pro Rata Shares of Aggregate Commitment (or, after the Facility Termination Date, of the Aggregate Outstanding Credit Exposure) (i) for any amounts not reimbursed by the Borrowers for which such Agent is entitled to reimbursement by the Borrowers under the Loan Documents, (ii) for any other expenses incurred by such Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, but not limited to, for any expenses incurred by such Agent in connection with any dispute between such Agent and any Lender or between two or more of the Lenders) and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against such Agent in any way

relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against such Agent in connection with any dispute between such Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final, non-appealable judgment in a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Agent and (ii) any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding the provisions of this Section 11.8, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section 11.8 shall survive payment of the Obligations and termination of this Agreement.

11.9. Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Unmatured Default hereunder unless such Agent has received written notice from a Lender or the Borrowers referring to this Agreement describing such Default or Unmatured Default and stating that such notice is a “notice of default”. In the event that any Agent receives such a notice, such Agent shall give prompt notice thereof to the Lenders.

11.10. Rights as a Lender. In the event any Agent is a Lender, such Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitment and its Credit Extensions as any Lender and may exercise the same as though it were not an Agent, and the term “Lender” or “Lenders” shall, at any time when any Agent is a Lender, unless the context otherwise indicates, include such Agent in its individual capacity. Each Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Company or any of its Subsidiaries in which the Company or such Subsidiary is not restricted hereby from engaging with any other Person.

11.11. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon any Agent, the Arrangers or any other Lender and based on the financial statements prepared by the Company and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon any Agent, the Arrangers or any other Lender 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 Loan Documents.

11.12. Successor Agents. Any Agent may resign at any time by giving written notice thereof to the Lenders and the Company, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five (45) days after the retiring Agent gives notice of its intention to resign. Any Agent may be removed at any time with or without cause by written notice received by such Agent from the Required Lenders, such removal to be effective on the date specified by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Borrowers and the Lenders, a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders within thirty (30) days after the resigning Agent’s giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of the Borrowers and the Lenders, a successor Agent. Notwithstanding the previous sentence, any Agent may at any time, without the consent of any Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as its successor

Agent hereunder. If an Agent has resigned or been removed and no successor Agent has been appointed, the Lenders may perform all the duties of such Agent hereunder and the Borrowers shall make all payments in respect of the Obligations to the applicable Lender if there is no Administrative Agent and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $100,000,000. Upon the acceptance of any appointment as an Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Agent. Upon the effectiveness of the resignation or removal of an Agent, the resigning or removed Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation or removal of an Agent, the provisions of this Article XI shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as an Agent hereunder and under the other Loan Documents. In the event that there is a successor to the Administrative Agent by merger, or the Administrative Agent assigns its duties and obligations to an Affiliate pursuant to this Section 11.12, then (a) the term “Prime Rate” as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Administrative Agent and (b) the references to “JPMorgan” in the definitions of “Eurocurrency Base Rate” and “Prime Rate” and in the last sentence of Section 2.13 shall be deemed to be a reference to such successor Administrative Agent in its individual capacity.

11.13. Agent and Arranger Fees. The Company agrees to pay to the Administrative Agent and J.P. Morgan Securities Inc., for their respective accounts, the fees agreed to by the Company, the Administrative Agent and J.P. Morgan Securities Inc. pursuant to that certain letter agreement dated on or about September 13, 2007 or as otherwise agreed from time to time.

11.14. Delegation to Affiliates. The Borrowers and the Lenders agree that any Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate’s directors, officers, agents and employees) which performs duties in connection with this Agreement shall be entitled to the same benefits of the indemnification, waiver and other protective provisions to which the applicable Agent is entitled under Articles IX and X.

11.15. Release of Guarantors. Upon the liquidation or dissolution of any Guarantor, the sale of all of the Capital Stock of any Guarantor owned by the Company and its Subsidiaries, in each case which does not violate the terms of any Loan Document or is consented to in writing by the Required Lenders or all of the Lenders, as applicable, such Guarantor shall be automatically released from all obligations under the applicable Guaranty and any other Loan Documents to which it is a party (other than contingent indemnity obligations), and upon at least five (5) Business Days’ prior written request by the Company, the Administrative Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the applicable Guarantor from its obligations under the applicable Guaranty and such other Loan Documents; provided, however, that (i) the Administrative Agent shall not be required to execute any such document on terms which, in the Administrative Agent’s reasonable opinion, would expose the Administrative Agent to liability or create any obligation or entail any consequence other than the release of such Guarantor without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations of the Borrowers, any other Guarantor’s obligations under the applicable Guaranty, or, if applicable, any obligations of the Company or any Subsidiary in respect of the proceeds of any such sale retained by the Company or any Subsidiary.

ARTICLE XII

SETOFF; RATABLE PAYMENTS

12.1. Setoff. In addition to, and without limitation of, any rights of the Lenders under applicable law, if any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or (to the extent permitted by applicable law) any Affiliate of any Lender to or for the credit or account of any Borrower may be offset and applied toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due.

12.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Outstanding Credit Exposure (other than payments received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a participation in the Aggregate Outstanding Credit Exposure held by the other Lenders so that after such purchase each Lender will hold its Pro Rata Share of the Aggregate Outstanding Credit Exposure. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their respective Pro Rata Shares of the Aggregate Outstanding Credit Exposure. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.

ARTICLE XIII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

13.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrowers and the Lenders and their respective successors and assigns permitted hereby, except that (i) no Borrower shall have the right to assign its rights or obligations under the Loan Documents without the prior written consent of each Lender, (ii) any assignment by any Lender must be made in compliance with Section 13.3, and (iii) any transfer by participation must be made in compliance with Section 13.2. Any attempted assignment or transfer by any party not made in compliance with this Section 13.1 shall be null and void, unless such attempted assignment or transfer is treated as a participation in accordance with Section 13.3.2. The parties to this Agreement acknowledge that clause (ii) of this Section 13.1 relates only to absolute assignments and this Section 13.1 does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a Fund, any pledge or assignment of all or any portion of its rights under this Agreement and any Note to its trustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 13.3. The Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 13.3; provided, however, that the Administrative Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct

payments relating to such Loan or Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan.

13.2. Participations.

13.2.1. Permitted Participants; Effect. Any Lender may at any time sell to one or more banks or other entities (“Participants”) participating interests in any Outstanding Credit Exposure owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Outstanding Credit Exposure and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrowers under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrowers and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents.

13.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Outstanding Credit Exposure or Commitment in which such Participant has an interest which would require consent of all of the Lenders pursuant to the terms of Section 8.2 or of any other Loan Document.

13.2.3. Benefit of Certain Provisions. The Borrowers agree that each Participant shall be deemed to have the right of setoff provided in Section 12.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 12.1 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 12.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 12.2 as if each Participant were a Lender. The Borrowers further agree that each Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4, 3.5, 10.6 and 10.10 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 13.3, provided that (i) a Participant shall not be entitled to receive any greater payment under Section 3.1, 3.2 or 3.5 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account, unless the sale of such interest to such Participant is made with the prior written consent of the Company, and (ii) any Participant not incorporated under the laws of the United States of America or any State thereof agrees to comply with the provisions of Section 3.5 to the same extent as if it were a Lender.

13.3. Assignments.

13.3.1. Permitted Assignments. Any Lender may at any time assign to one or more banks or other entities (“Purchasers”) all or any part of its rights and obligations under the Loan Documents. Such assignment shall be evidenced by an agreement substantially in the form of Exhibit C or in such other form as may be agreed to by the parties thereto (each such agreement, an “Assignment Agreement”). Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate of a Lender or an Approved Fund shall either be in an amount equal to the entire applicable Commitment and Outstanding Credit Exposure of the assigning Lender or (unless each of the Company and the Administrative Agent otherwise consents) be in an aggregate amount not less than $5,000,000. The amount of the assignment shall be based on the Commitment or Outstanding Credit Exposure (if the Commitment has been terminated) subject to the Assignment Agreement, determined as of the date of such assignment or as of the “Trade Date,” if the “Trade Date” is specified in the Assignment Agreement.

13.3.2. Consents. The consent of the Company shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund, provided that the consent of the Company shall not be required if a Default has occurred and is continuing or if such assignment is in connection with the physical settlement of credit derivative transactions, which credit derivative transactions shall have been entered into by the applicable Lender in connection with such Lender’s management of its credit portfolio in the ordinary course of business. The consent of the Administrative Agent and each LC Issuer shall be required prior to an assignment becoming effective unless the Purchaser is a Lender, an Affiliate of a Lender or an Approved Fund. Any consent required under this Section 13.3.2 shall not be unreasonably withheld or delayed.

13.3.3. Effect; Effective Date. Upon (i) delivery to the Administrative Agent of an Assignment Agreement, together with any consents required by Sections 13.3.1 and 13.3.2, and (ii) payment of a $3,500 fee to the Administrative Agent for processing such assignment (unless such fee is waived by the Administrative Agent or unless such assignment is made to such assigning Lender’s Affiliate), such assignment shall become effective on the effective date specified in such Assignment Agreement. The Assignment Agreement shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Outstanding Credit Exposure under such Assignment Agreement constitutes “plan assets” as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Documents will not be “plan assets” under ERISA. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party thereto, and the transferor Lender shall be released with respect to the Commitment and Outstanding Credit Exposure assigned to such Purchaser without any further consent or action by any Borrower, the Lenders or the Administrative Agent. In the case of an assignment covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a Lender hereunder but shall continue to be entitled to the benefits of, and subject to, those provisions of this Agreement and the other Loan Documents which survive payment of the Obligations and termination of the applicable agreement. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 13.3 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 13.2. Upon the consummation of any assignment to a Purchaser pursuant to this Section 13.3.3, the transferor Lender, the Administrative Agent and the Borrowers shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as

appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment.

13.3.4. The Register. The Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at one of its offices in Chicago, Illinois a copy of each Assignment Agreement delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender, and participations of each Lender in Facility LCs, pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrowers, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers at any reasonable time and from time to time upon reasonable prior notice.

13.4. Dissemination of Information. The Borrowers authorize each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a “Transferee”) and any prospective Transferee any and all information in such Lender’s possession concerning the creditworthiness of the Company and its Subsidiaries, including without limitation any information contained in any reports or other information delivered by any Borrower pursuant to Section 6.1; provided that each Transferee and prospective Transferee agrees to be bound by Section 10.11 of this Agreement.

13.5. Tax Treatment. If any interest in any Loan Document is transferred to any Transferee which is not incorporated under the laws of the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5(iv).

ARTICLE XIV

NOTICES

14.1. Notices. Except as otherwise permitted by Section 2.14 with respect to borrowing notices, all notices, requests and other communications to any party hereunder shall be in writing (including electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the initial Borrowers, the Agents or any Lender party hereto as of the Closing Date, at its respective address or facsimile number set forth on the signature pages hereof, (y) in the case of any Lender that becomes a party hereto pursuant to Section 13.3, at its address or facsimile number set forth in the applicable Assignment Agreement or, if none is provided therein, in its administrative questionnaire or (z) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Company in accordance with the provisions of this Section 14.1. Each such notice, request or other communication shall be effective (i) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (ii) if given by United States mail, 72 hours after such communication is deposited in such mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Administrative Agent under Article II shall not be effective until received. For all purposes under this Agreement and the other Loan Documents, (A) notice to the Administrative

Agent from any Borrower shall not be deemed to be effective until actually received by the Administrative Agent, and (B) delivery of any notice to the Company shall be deemed to have been delivered to the Borrowers.

14.2. Change of Address. The Borrowers, the Agents and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto.

ARTICLE XV

COUNTERPARTS

This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the initial Borrowers, the Agents, the LC Issuers and the Lenders and each party has notified the Agents by facsimile transmission or telephone that it has taken such action.

ARTICLE XVI

CHOICE OF LAW; CONSENT TO JURISDICTION AND SERVICE OF PROCESS;

WAIVER OF VENUE, FORUM AND JURY TRIAL

16.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

16.2. CONSENT TO JURISDICTION. EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LC ISSUER OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

16.3. SERVICE OF PROCESS. EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 14.1. EACH FOREIGN SUBSIDIARY BORROWER IRREVOCABLY DESIGNATES AND APPOINTS THE COMPANY, AS ITS AUTHORIZED AGENT, TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF, SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUIT, ACTION OR PROCEEDING OF THE NATURE REFERRED TO IN SECTION 16.2 IN ANY FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY. THE COMPANY HEREBY REPRESENTS, WARRANTS AND CONFIRMS THAT THE COMPANY HAS AGREED TO ACCEPT SUCH APPOINTMENT (AND ANY SIMILAR APPOINTMENT BY A GUARANTOR WHICH IS A FOREIGN SUBSIDIARY). SAID DESIGNATION AND APPOINTMENT SHALL BE IRREVOCABLE BY EACH SUCH FOREIGN SUBSIDIARY BORROWER UNTIL ALL LOANS, ALL REIMBURSEMENT OBLIGATIONS, INTEREST THEREON AND ALL OTHER AMOUNTS PAYABLE BY SUCH FOREIGN SUBSIDIARY BORROWER HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS SHALL HAVE BEEN PAID IN FULL IN ACCORDANCE WITH THE PROVISIONS HEREOF AND THEREOF AND SUCH FOREIGN SUBSIDIARY BORROWER SHALL HAVE BEEN TERMINATED AS A BORROWER HEREUNDER PURSUANT TO SECTION 2.22. EACH FOREIGN SUBSIDIARY BORROWER HEREBY CONSENTS TO PROCESS BEING SERVED IN ANY SUIT, ACTION OR PROCEEDING OF THE NATURE REFERRED TO IN SECTION 16.2 IN ANY FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY BY SERVICE OF PROCESS UPON THE COMPANY AS PROVIDED IN THIS SECTION 16.3; PROVIDED THAT, TO THE EXTENT LAWFUL AND POSSIBLE, NOTICE OF SAID SERVICE UPON SUCH AGENT SHALL BE MAILED BY REGISTERED OR CERTIFIED AIR MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE COMPANY AND (IF APPLICABLE TO) SUCH FOREIGN SUBSIDIARY BORROWER AT ITS ADDRESS SET FORTH IN THE ASSUMPTION LETTER TO WHICH IT IS A PARTY OR TO ANY OTHER ADDRESS OF WHICH SUCH FOREIGN SUBSIDIARY BORROWER SHALL HAVE GIVEN WRITTEN NOTICE TO THE ADMINISTRATIVE AGENT (WITH A COPY THEREOF TO THE COMPANY). EACH FOREIGN SUBSIDIARY BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL CLAIM OF ERROR BY REASON OF ANY SUCH SERVICE IN SUCH MANNER AND AGREES THAT SUCH SERVICE SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON SUCH FOREIGN SUBSIDIARY BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING AND SHALL, TO THE FULLEST EXTENT PERMITTED BY LAW, BE TAKEN AND HELD TO BE VALID AND PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO SUCH FOREIGN SUBSIDIARY BORROWER. TO THE EXTENT ANY FOREIGN SUBSIDIARY BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER FROM SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OF A JUDGMENT, EXECUTION OR OTHERWISE), EACH FOREIGN SUBSIDIARY BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS. NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

16.4. WAIVER OF VENUE AND FORUM. EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER

LOAN DOCUMENT IN ANY COURT REFERRED TO IN SECTION 16.2. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

16.5. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWERS, THE AGENTS, EACH LC ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

[Signature Pages Follow]

IN WITNESS WHEREOF, the initial Borrowers, the Lenders, the LC Issuers and the Agents have executed this Agreement as of the date first above written.


Zep Inc., as a Borrower

By:		/s/ John K. Morgan
Name:		John K. Morgan
Title:		President and Chief Executive Officer

Zep Inc.
4401 Northside Parkway
Suite 700
Atlanta, Georgia 30327
Attention: Mr. Mark Bachmann
Phone: 404-603-7815
Fax: 404-367-4083
E-mail: mark.bachmann@acuitysp.com

with a copy to:

Zep Inc.
4401 Northside Parkway
Suite 700
Atlanta, Georgia 30327
Attention: Mr. Frank Whitaker
Phone: 404-603-7834
Fax: 404-367-4083
E-mail: frank.whitaker@acuitysp.com


ACUITY SPECIALTY PRODUCTS, INC., as a Borrower

By:		/s/ John K. Morgan
Name:		John K. Morgan
Title:		President and Chief Executive Officer

Zep Inc.
4401 Northside Parkway
Suite 700
Atlanta, Georgia 30327
Attention: Mr. Mark Bachmann
Phone: 404-603-7815
Fax: 404-367-4083
E-mail: mark.bachmann@acuitysp.com

with a copy to:

Zep Inc.
4401 Northside Parkway
Suite 700
Atlanta, Georgia 30327
Attention: Mr. Frank Whitaker
Phone: 404-603-7834
Fax: 404-367-4083
E-mail: frank.whitaker@acuitysp.com


JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as the Administrative Agent, as the Swing Line Lender, as a LC Issuer and as a Lender

By:		/s/ Robert P. Carswell
Name:		Robert P. Carswell
Title:		Vice President

Lillian A. Arroyo
10 South Dearborn
Floor 07
Chicago, IL 60603-2003
Phone: (312) 385-7014
Fax: (312) 732-1544
E-mail: lillian.arroyo@jpmchase.com


BANK OF AMERICA, N.A., as the Syndication Agent and as a Lender

By:		/s/ Charles R. Dickerson
Name:		Charles R. Dickerson
Title:		Managing Director

Address:		100 N. Tryon St., 17th Floor
		Charlotte, NC 28255

Attention: Charles R. Dickerson
Phone: 704.386.5514
Fax: 704.386.3893
E-mail: charles.dickerson@bankofamerica.com


KEYBANK NATIONAL ASSOCIATION, as a Co-Documentation Agent and as a Lender

By:		/s/ Thomas J. Purcell
Name:		Thomas J. Purcell
Title:		Senior Vice President

127 Public Square
Cleveland, Ohio 44114

Attention: Brian Fox
Phone: 216-689-4599
Fax: 216-689-4649
E-mail: brian_fox@keybank.com


WACHOVIA BANK, NATIONAL ASSOCIATION, as a Co-Documentation Agent and as a Lender

By:		/s/ G. Mendel Lay, Jr.
Name:		G. Mendel Lay, Jr.
Title:		Senior Vice President

171 17th Street N.W., GA4507
Atlanta, GA 30363

Attention: G. Mendel Lay, Jr., SVP
Phone: 404-214-3849
Fax: 404-214-3861
E-mail: Mendel.lay@wachovia.com


REGIONS BANK, as a Co-Documentation Agent and as a Lender

By:		/s/ W. Brad Davis
Name:		W. Brad Davis
Title:		Vice President

One Glenlake Parkway, Suite 400
Atlanta, Georgia 30328

Attention: W. Brad Davis
Phone: (770) 481-4339
Fax: (770) 481-4395
E-mail: brad.davis@regions.com


WELLS FARGO BANK, N.A., as a Co-Documentation Agent and as a Lender

By:		/s/ Kevin Combs
Name:		Kevin Combs
Title:		Vice President

7000 Central Parkway NE, Suite 600
Atlanta, GA, 30328

Attention: Kevin Combs
Phone: (770) 551-4654
Fax: (770) 551-4643
E-mail: kevin.combs@wellsfargo.com

PRICING SCHEDULE

Level I
Status

Level II
Status

Level III
Status

Level IV
Status

Level V
Status

Applicable Margin

0.50

0.60

0.70

0.80

1.00

Applicable Facility Fee Rate

0.125

0.150

0.175

0.20

0.25

The Applicable Margin and Applicable Facility Fee Rate shall be determined in accordance with the foregoing table based on the Company’s Leverage Ratio as reflected in the then most recent Financials. Adjustments, if any, to the Applicable Margin or Applicable Facility Fee Rate shall be effective as of the fifth (5^th) Business Day following the date the Administrative Agent has received the applicable Financials. If the Company fails to deliver the Financials to the Administrative Agent at the time required pursuant to Section 6.1(i) or 6.1(ii), as applicable, then the adjustment to the Applicable Margin and Applicable Facility Fee Rate shall be the highest adjustment to the Applicable Margin and Applicable Facility Fee Rate set forth in the foregoing table until the fifth (5th) Business Day following the date such Financials are so delivered.

Notwithstanding anything herein to the contrary, from the Closing Date to but not including the fifth (5th) Business Day following the date the Administrative Agent has received the Financials for the period ending November 30, 2007, the Applicable Margin and Applicable Facility Fee Rate shall be determined based upon Level II Status.

For the purposes of this Schedule, the following terms have the following meanings, subject to the final paragraph of this Schedule:

“Financials” means the annual or quarterly financial statements of the Company delivered pursuant to Section 6.1(i) or 6.1(ii), respectively.

“Level I Status” exists at any date if, as of the last day of the fiscal quarter referred to in the most recent Financials, the Leverage Ratio is less than or equal to 1.25 to 1.00.

“Level II Status” exists at any date if, as of the last day of the fiscal quarter referred to in the most recent Financials, (i) the Company has not qualified for Level I Status and (ii) the Leverage Ratio is less than or equal to 1.75 to 1.00.

“Level III Status” exists at any date if, as of the last day of the fiscal quarter referred to in the most recent Financials, (i) the Company has not qualified for Level I Status or Level II Status and (ii) Leverage Ratio is less than or equal to 2.25 to 1.00.

“Level IV Status” exists at any date if, as of the last day of the fiscal quarter referred to in the most recent Financials, (i) the Company has not qualified for Level I Status, Level II Status or Level III Status and (ii) Leverage Ratio is less than or equal to 2.75 to 1.00.

“Level V Status” exists at any date if, on such date, the Company has not qualified for Level I Status, Level II Status, Level III Status or Level IV Status.

“Status” means Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status.

COMMITMENT SCHEDULE


LENDER	COMMITMENT
JPMorgan Chase Bank, National Association	$	20,000,000
Bank of America, N.A.	$	20,000,000
KeyBank National Association	$	15,000,000
Wachovia Bank, National Association	$	15,000,000
Regions Bank	$	15,000,000
Wells Fargo Bank, N.A.	$	15,000,000
AGGREGATE COMMITMENT	$	100,000,000

SCHEDULE 2.2

MANDATORY COST

The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

On the first day of each Interest Period (or as soon as possible thereafter) the Administrative Agent shall calculate, as a percentage rate, a rate (the “Associated Costs Rate”) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Administrative Agent as a weighted average of the Lenders’ Associated Costs Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

The Associated Costs Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Administrative Agent. This percentage will be certified by that Lender in its notice to the Administrative Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender’s participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.

4.	The Associated Costs Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Administrative Agent as follows:

(a)

in relation to a Loan in Pounds Sterling:


AB + C(B –D) + E x 0.01		per cent. per annum
100 – (A + C)

(b)

in relation to a Loan in any currency other than Pounds Sterling:


E x 0.01		per cent. per annum.
300

Where:

is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.

is the percentage rate of interest (excluding the Applicable Rate and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in Section 2.13(c)) payable for the relevant Interest Period on the Loan.

is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

is the percentage rate per annum payable by the Bank of England to the Administrative Agent on interest bearing Special Deposits.

is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Administrative Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Administrative Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.

5.	For the purposes of this Schedule:

(a)

“Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b)

“Facility Office” means the office or offices notified by a Lender to the Administrative Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement.

(c)

“Fees Rules” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

(d)

“Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate);

(e)

“Participating Member State” means any member state of the European Union that adopts or has adopted euro as its lawful currency in accordance with legislation of the European Union relating to economic and monetary union.

(f)

“Reference Banks” means, in relation to Mandatory Cost, the principal London offices of JPMorgan Chase Bank, National Association.

(g)

“Tariff Base” has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

(h)

“Unpaid Sum” means any sum due and payable but unpaid by any Borrower under the Loan Documents.

In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.

If requested by the Administrative Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Administrative Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.

8.	Each Lender shall supply any information required by the Administrative Agent for the purpose of calculating its Associated Costs Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

(i)

the jurisdiction of its Facility Office; and

(j)

any other information that the Administrative Agent may reasonably require for such purpose.

Each Lender shall promptly notify the Administrative Agent of any change to the information provided by it pursuant to this paragraph.

The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E above shall be determined by the Administrative Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the Administrative Agent to the contrary, each Lender’s obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.

10.

The Administrative Agent shall have no liability to any person if such determination results in an Associated Costs Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.

11.	The Administrative Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Associated Costs Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8 above.

12.	Any determination by the Administrative Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Associated Costs Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all parties hereto.

13.

The Administrative Agent may from time to time, after consultation with the Company and the relevant Lenders, determine and notify to all parties hereto any amendments which are required to be made to this Schedule 2.2 in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all parties hereto.

EX-10.(I).A.(5) 3 dex10ia5.htm CREDIT AND SECURITY AGREEMENT Credit and Security Agreement

Exhibit 10(i)A(5)

CREDIT AND SECURITY AGREEMENT

DATED AS OF OCTOBER 19, 2007

AMONG

ACUITY ENTERPRISE INC., AS BORROWER,

ACUITY SPECIALTY PRODUCTS, INC., AS SERVICER,

VARIABLE FUNDING CAPITAL COMPANY,

THE LIQUIDITY BANKS FROM TIME TO TIME PARTY HERETO

AND

WACHOVIA BANK, NATIONAL ASSOCIATION, AS AGENT

SCHEDULE B

DOCUMENTS TO BE DELIVERED TO THE AGENT

ON OR PRIOR TO THE INITIAL PURCHASE

Parties.


VFCC =		Variable Funding Capital Company LLC
Wachovia =		Wachovia Bank, National Association
Zep =		Zep, Inc.
ASP =		Acuity Specialty Products, Inc.
AEI =		Acuity Enterprise, Inc.

II.	Closing Documents.

1.	Amendment to Amended and Restated Receivables Sale and Contribution Agreement between ASP and AEI.

2.	Credit and Security Agreement among AEI, ASP as Servicer, VFCC and Wachovia.

3.	Performance Undertaking by ZEP in favor of AEI.

4.	Fee Letter between Agent and AEI.

5. A certificate of the [Assistant] Secretary of each of ABI, ASP and AEI (collectively, the “Companies”) certifying:

(a) A copy of the Resolutions of its Board of Directors authorizing its execution, delivery and performance of the Transaction Documents to which it is a party;

(b) A copy of its certificate/articles of incorporation (also certified by the Secretary of State of its State of Incorporation on or within thirty (30) days prior to closing)[, as amended and/or restated through the closing date];

(d) A copy of a good standing certificate issued by the Secretaries of State of (i) its state of incorporation, and (ii), if different, that state where it maintains its principal place of business; and

(e) The names, titles and signatures of its officers authorized to execute the Transaction Documents.

6.	Pre-filing state and federal tax lien, judgment lien and UCC lien searches in the following locations against the Borrower:

UCC Lien Search Jurisdictions: Delaware

Federal and State Tax Lien and Judgment Lien Jurisdictions: Delaware, Georgia and Fulton County (Georgia)

7.	UCC Financing Statement

8.	A favorable opinion of in-house counsel to Zep as to certain matters.

9.	A favorable opinion of Kilpatrick Stockton as to certain *corporate* matters.

10.	A favorable opinion of Kilpatrick Stockton as to certain *UCC* matters.

11.	[Reserved] [ELIGIBLE LIQUIDITY AGREEMENT NOTICE]

12.	Liquidity Agreement by and between VFCC and Wachovia.

TABLE OF CONTENTS


		Page
ARTICLE I. THE ADVANCES		1

Section 1.1	Credit Facility	1
Section 1.2	Increases	2
Section 1.3	Decreases	2
Section 1.4	Deemed Collections; Borrowing Base	3
Section 1.5	Payment Requirements	4
Section 1.6	Ratable Loans; Funding Mechanics; Liquidity Fundings	4

ARTICLE II. PAYMENTS AND COLLECTIONS		5

Section 2.1	Payments	5
Section 2.2	Collections Prior to Amortization; Repayment of Certain Demand Advances	5
Section 2.3	Repayment of Demand Advances on the Amortization Date; Collections Following Amortization	6
Section 2.4	Payment Rescission	7

ARTICLE III. VFCC FUNDING		7

Section 3.1	CP Costs	7
Section 3.2	Calculation of CP Costs	7
Section 3.3	CP Costs Payments	7
Section 3.4	Default Rate	7

ARTICLE IV. LIQUIDITY BANK FUNDING		7

Section 4.1	Liquidity Bank Funding	7
Section 4.2	Interest Payments	8
Section 4.3	Selection and Continuation of Interest Periods	8
Section 4.4	Liquidity Bank Interest Rates	8
Section 4.5	Suspension of the LIBO Rate	8
Section 4.6	Default Rate	9

ARTICLE V. REPRESENTATIONS AND WARRANTIES		9

Section 5.1	Representations and Warranties of the Loan Parties	9
Section 5.2	Liquidity Bank Representations and Warranties	12

ARTICLE VI. CONDITIONS OF ADVANCES		13

Section 6.1	Conditions Precedent to Initial Advance	13
Section 6.2	Conditions Precedent to All Advances	13

ARTICLE VII. COVENANTS		13

Section 7.1	Affirmative Covenants of the Loan Parties	13
Section 7.2	Negative Covenants of the Loan Parties	21

ARTICLE VIII. ADMINISTRATION AND COLLECTION		23

Section 8.1	Designation of Servicer	23
Section 8.2	Duties of Servicer	23
Section 8.3	Collection Notices	25
Section 8.4	Responsibilities of Borrower	25
Section 8.5	Monthly Reports	25

iii


Section 8.6	Servicing Fee	25

ARTICLE IX. AMORTIZATION EVENTS		25

Section 9.1	Amortization Events	25
Section 9.2	Remedies	27

ARTICLE X. INDEMNIFICATION		28

Section 10.1	Indemnities by the Loan Parties	28
Section 10.2	Increased Cost and Reduced Return	30
Section 10.3	Other Costs and Expenses	31
Section 10.4	Allocations	31

ARTICLE XI. THE AGENT		32

Section 11.1	Authorization and Action	32
Section 11.2	Delegation of Duties	32
Section 11.3	Exculpatory Provisions	32
Section 11.4	Reliance by Agent	33
Section 11.5	Non-Reliance on Agent and Other Lenders	33
Section 11.6	Reimbursement and Indemnification	34
Section 11.7	Agent in its Individual Capacity	34
Section 11.8	Successor Agent	34

ARTICLE XII. ASSIGNMENTS; PARTICIPATIONS		34

Section 12.1	Assignments	34
Section 12.2	Participations	36

ARTICLE XIII. SECURITY INTEREST		36

Section 13.1	Grant of Security Interest	36
Section 13.2	Termination after Final Payout Date	36

ARTICLE XIV. MISCELLANEOUS		36

Section 14.1	Waivers and Amendments	36
Section 14.2	Notices	37
Section 14.3	Ratable Payments	38
Section 14.4	Protection of Agent’s Security Interest	38
Section 14.5	Confidentiality	39
Section 14.6	Bankruptcy Petition	40
Section 14.7	Limitation of Liability	40
Section 14.8	CHOICE OF LAW	40
Section 14.9	CONSENT TO JURISDICTION	40
Section 14.10	WAIVER OF JURY TRIAL	41
Section 14.11	Integration; Binding Effect; Survival of Terms	41
Section 14.12	Counterparts; Severability; Section References	41
Section 14.13	Wachovia Roles	42
Section 14.14	Interest	42
Section 14.15	Source of Funds — ERISA	43

EXHIBITS AND SCHEDULES


Exhibit I		Definitions

Exhibit II		Form of Borrowing Notice

Exhibit III		Places of Business of the Loan Parties; Locations of Records; Federal Employer and Organizational Identification Number(s); Prior Names

Exhibit IV		Names of Collection Banks; Collection Accounts

Exhibit V		Form of Compliance Certificate

Exhibit VI		Form of Collection Account Agreement

Exhibit VII		Form of Assignment Agreement

Exhibit VIII		Form of Monthly Report

Exhibit IX		Form of Performance Undertaking

Schedule A		Commitments

Schedule B		Closing Documents

AMENDED AND RESTATED CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT, dated as of October 19, 2007 is entered into by and among:

(a) Acuity Enterprise, Inc. (“AEI”), a Delaware corporation (the “Borrower”),

(b) Acuity Specialty Products, Inc., a Georgia corporation (“ASP”), as initial Servicer (the Servicer, together with the Borrower, the “Loan Parties” and each, a “Loan Party”),

(c) The entities listed on Schedule A to this Agreement (together with any of their respective successors and assigns hereunder, the “Liquidity Banks”),

(d) Variable Funding Capital Company LLC, a Delaware limited liability company (“VFCC”), and

(e) Wachovia Bank, National Association, as agent for the Lenders hereunder or any successor agent hereunder (together with its successors and assigns hereunder, the “Agent”).

Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in

Exhibit I.

PRELIMINARY STATEMENTS

The Borrower desires to borrow from the Lenders from time to time.

VFCC may, in its absolute and sole discretion, make Advances to the Borrower from time to time.

In the event that VFCC declines to make any Advance, the Liquidity Banks shall, at the request of the Borrower, make Advances from time to time.

Wachovia Bank, National Association has been requested and is willing to act as Agent on behalf of VFCC and the Liquidity Banks in accordance with the terms hereof.

ARTICLE I.

THE ADVANCES

Section 1.1 Credit Facility.

(a) Upon the terms and subject to the conditions hereof, from time to time prior to the Facility Termination Date:

(i) The Borrower may, at its option, request Advances from the Lenders in an aggregate principal amount at any one time outstanding not to exceed the Borrowing

Base and provided that the aggregate principal amount of the Advances outstanding at any one time shall not exceed the Aggregate Commitment; and

(ii) VFCC may, at its option, make the requested Advance, or if VFCC shall decline to make any Advance, except as otherwise provided in Section 1.2, the Liquidity Banks severally agree to make Loans in an aggregate principal amount equal to the requested Advance.

Each of the Advances, and all other Obligations, shall be secured by the Collateral as provided in Article XIII. It is the intent of VFCC to fund all Advances by the issuance of Commercial Paper.

(b) The Borrower may, at its option, upon at least 5 Business Days’ notice to the Agent, terminate in whole or reduce in part, ratably among the Liquidity Banks, the unused portion of the Aggregate Commitment; provided that each partial reduction of the Aggregate Commitment shall be in an amount equal to $5,000,000 (or a larger integral multiple of $1,000,000 if in excess thereof) and shall reduce the Commitments of the Liquidity Banks ratably in accordance with their respective Pro Rata Shares.

(c) On the date hereof, all loans outstanding to the Borrower under the Existing Agreement shall be refinanced with the initial Loans under this Agreement except that no Broken Funding Costs shall be payable as a result of such refinancing.

Section 1.2 Increases. The Borrower (or the Servicer on its behalf) shall provide the Agent with at least two (2) Business Days’ prior notice in a form set forth as Exhibit II hereto of each requested Advance (each, a “Borrowing Notice”). Each Borrowing Notice shall be subject to Section 6.2 hereof and, except as set forth below, shall be irrevocable and shall specify the aggregate principal amount requested by the Borrower (which shall not be less than $1,000,000 or a larger integral multiple of $100,000) and the Borrowing Date (which, in the case of any Advance after the initial Advance hereunder, shall only be on a Settlement Date) and, in the case of an Advance to be funded by the Liquidity Banks, the requested Interest Rate and Interest Period. Following receipt of a Borrowing Notice, the Agent will determine whether VFCC agrees to make each requested Advance. If VFCC declines to make a proposed Advance, the Borrower may cancel the Borrowing Notice or, in the absence of such a cancellation, the requested Advance will be made by the Liquidity Banks. On the date of each Advance, upon satisfaction of the applicable conditions precedent set forth in Article VI, VFCC or the Liquidity Banks, as applicable, shall wire transfer to the Borrower’s account specified in the applicable Borrowing Notice, in immediately available funds, no later than 2:00 p.m. (New York time), an aggregate amount equal to (i) in the case of VFCC, the principal amount of the requested Advances or (ii) in the case of a Liquidity Bank, such Liquidity Bank’s Pro Rata Share of the principal amount of the requested Advances.

Section 1.3 Decreases. Except as provided in Section 1.4, the Borrower shall provide the Agent with prior written notice in conformity with the Required Notice Period (a “Reduction Notice”) of any proposed reduction of the aggregate principal balance of the Advances outstanding. Such Reduction Notice shall designate (i) the date (the “Proposed Reduction Date”) upon which any such principal reduction shall occur (which date shall give effect to the applicable Required Notice Period), and (ii) the principal amount owing from the Borrower to be

reduced which shall be applied ratably to the Borrower’s Loans from VFCC and the Liquidity Banks in accordance with the amount of principal (if any) owing to VFCC, on the one hand, and the amount of principal (if any) owing to the Liquidity Banks (ratably, based on their respective Pro Rata Shares), on the other hand (the “Aggregate Reduction”). Only one (1) Reduction Notice shall be outstanding at any time.

Section 1.4 Deemed Collections; Borrowing Base.

(a) If on any day:

(i) the Outstanding Balance of any Receivable is reduced as a result of any defective or rejected goods or services, any cash discount or any other adjustment by Originator or any Affiliate thereof, or as a result of any tariff or other governmental or regulatory action, or

(ii) the Outstanding Balance of any Receivable is reduced or canceled as a result of a setoff in respect of any claim by the Obligor thereof (whether such claim arises out of the same or a related or an unrelated transaction), or

(iii) the Outstanding Balance of any Receivable is reduced on account of the obligation of Originator or any Affiliate thereof to pay to the related Obligor any rebate or refund, or

(iv) the Outstanding Balance of any Receivable is less than the amount included in calculating the Net Pool Balance for purposes of any Monthly Report (for any reason other than such Receivable becoming a Defaulted Receivable), or

(v) any of the representations or warranties of the Borrower set forth in Section 5.1(i), (j), (q), (r), (s) or (t) were not true when made with respect to any Receivable,

then, on such day, the Borrower shall be deemed to have received a Collection of such Receivable (A) in the case of clauses (i)-(iv) above, in the amount of such reduction or cancellation or the difference between the actual Outstanding Balance and the amount included in calculating such Net Pool Balance, as applicable; and (B) in the case of clause (v) above, in the amount of the Outstanding Balance of such Receivable and, effective as of the date on which the next succeeding Monthly Report is required to be delivered, the Borrowing Base of the Borrower shall be reduced by the amount of such Deemed Collection.

(b) The Borrower shall ensure that the aggregate principal balance of the Advances outstanding at no time exceeds the Borrowing Base and that the Aggregate Principal outstanding at no time exceeds the Aggregate Commitment. If at any time the aggregate principal balance of the Advances outstanding to the Borrower exceeds the Borrowing Base, the Borrower agrees pay to the Agent not later than the next succeeding Settlement Date an amount to be applied to reduce such outstanding principal balance (as allocated by the Agent), such that after giving effect to such payment the aggregate principal balance of the Advances outstanding is less than or equal to the Borrowing Base. If at any time the Aggregate Principal exceeds the Aggregate Commitment, the Borrower agrees to pay to the Agent not later than the next

succeeding Settlement Date an amount to be applied to reduce Aggregate Principal (as allocated by the Agent), such that after giving effect to such payment, the Aggregate Principal is less than or equal to the Aggregate Commitment.

Section 1.5 Payment Requirements. All amounts to be paid or deposited by any Loan Party pursuant to any provision of this Agreement shall be paid or deposited in accordance with the terms hereof no later than 12:00 noon (New York time) on the day when due in immediately available funds, and if not received before 12:00 noon (New York time) shall be deemed to be received on the next succeeding Business Day. If such amounts are payable to a Lender, they shall be paid to the Agent’s Account, for the account of such Lender, until otherwise notified by the Agent. Upon notice to the Borrower, the Agent may debit the Borrower’s accounts for all amounts due and payable hereunder. All computations of CP Costs, Interest, per annum fees calculated as part of any CP Costs, per annum fees hereunder and per annum fees under the Fee Letter shall be made on the basis of a year of 360 days for the actual number of days elapsed. If any amount hereunder shall be payable on a day which is not a Business Day, such amount shall be payable on the next succeeding Business Day.

Section 1.6 Ratable Loans; Funding Mechanics; Liquidity Fundings.

(a) Each Advance hereunder shall consist of one or more Loans made by VFCC and/or the Liquidity Banks.

(b) Each Lender funding any Loan shall wire transfer the principal amount of its Loan to the Agent in immediately available funds not later than 12:00 noon (New York City time) on the applicable Borrowing Date and, subject to its receipt of such Loan proceeds, the Agent shall wire transfer such funds to the Borrower’s account specified in the applicable Borrowing Request not later than 2:00 p.m. (New York City time) on such Borrowing Date.

(c) While it is the intent of VFCC to fund each requested Advance through the issuance of its Commercial Paper, the parties acknowledge that if VFCC is unable, or determines in good faith that it is undesirable, to issue Commercial Paper to fund all or any portion of its Loans, or is unable to repay such Commercial Paper upon the maturity thereof, VFCC may put all or any portion of its Loans to the Liquidity Banks at any time pursuant to the Liquidity Agreement to finance or refinance the necessary portion of its Loans through a Liquidity Funding to the extent available. The Liquidity Fundings may be Alternate Base Rate Loans or LIBO Rate Loans, or a combination thereof, selected by the Borrower in accordance with Article IV. Regardless of whether a Liquidity Funding constitutes the direct funding of a Loan, an assignment of a Loan made by VFCC or the sale of one or more participations in a Loan made by VFCC, each Liquidity Bank participating in a Liquidity Funding shall have the rights of a “Lender” hereunder with the same force and effect as if it had directly made a Loan to the Borrower in the amount of its Liquidity Funding.

(d) Nothing herein shall be deemed to commit VFCC to make Loans.

ARTICLE II.

PAYMENTS AND COLLECTIONS

Section 2.1 Payments. The Borrower hereby promises to pay:

(a) the Aggregate Principal on and after the Facility Termination Date as and when Collections are received;

(b) the fees set forth in the Fee Letter on the dates specified therein;

(d) all accrued and unpaid Interest on the LIBO Rate Loans on the last day of each Interest Period applicable thereto;

(e) all accrued and unpaid CP Costs on the CP Rate Loans on each Settlement Date; and

(f) all Broken Funding Costs and Indemnified Amounts upon demand.

Section 2.2 Collections Prior to Amortization; Repayment of Certain Demand Advances. Without limiting recourse to the Borrower for the Obligations under Section 2.1:

(a) On each Settlement Date prior to the Amortization Date, the Servicer shall deposit to the Agent’s Account, for distribution to the Lenders, a portion of the Collections received by the Servicer during the preceding Settlement Period (after deduction of the accrued and unpaid Servicing Fee for such Settlement Period) equal to the sum of the following amounts for application to the Obligations in the order specified:

first, ratably to the payment of all accrued and unpaid CP Costs, Interest and Broken Funding Costs (if any) that are then due and owing,

second, ratably to the payment of all accrued and unpaid fees under the Fee Letter (if any) that are then due and owing,

third, if required under Section 1.3 or 1.4, to the ratable reduction of Aggregate Principal, and

fourth, for the ratable payment of all other unpaid Obligations, if any, that are then due and owing.

The balance, if any, shall be paid to the Borrower or otherwise in accordance with the Borrower’s instructions. Collections applied to the payment of Obligations shall be distributed in accordance with the aforementioned provisions, and, giving effect to each of the priorities set forth above in this Section 2.2(a), shall be shared ratably (within each priority) among the Agent and the Lenders in accordance with the amount of such Obligations owing to each of them in respect of each such priority.

(b) If the Collections are insufficient to pay the Servicing Fee and the Obligations specified above on any Settlement Date, the Borrower shall make demand upon ASP for repayment of any outstanding Demand Advances in an aggregate amount equal to the lesser of (i) the amount of such shortfall in Collections, and (ii) the aggregate outstanding principal balance of the Demand Advances, together with all accrued and unpaid interest thereon, and ASP hereby agrees to pay the amount demanded of it to the Agent’s Account on such Settlement Date.

Section 2.3 Repayment of Demand Advances on the Amortization Date; Collections Following Amortization.

(a) On the Amortization Date, ASP hereby agrees to repay the aggregate outstanding principal balance of all Demand Advances made to it, together with all accrued and unpaid interest thereon, to the Agent’s Account, without demand or notice of any kind, all of which are hereby expressly waived by ASP.

(b) Without limiting recourse to the Borrower for the Obligations under Section 2.1, on the Amortization Date and on each day thereafter, the Servicer shall set aside and hold in trust for the Secured Parties, all Collections received by the Servicer on such day. On and after the Amortization Date, the Servicer shall, on each Settlement Date and on each other Business Day specified by the Agent (after deduction of the accrued and unpaid Servicing Fee as of such date): (i) remit to the Agent’s Account the amounts set aside pursuant to the preceding two sentences, and (ii) apply such amounts to reduce the Obligations as follows:

first, to the reimbursement of the Agent’s actual and reasonable costs of collection and enforcement of this Agreement,

second, ratably to the payment of all accrued and unpaid CP Costs, Interest and Broken Funding Costs,

third, ratably to the payment of all accrued and unpaid fees under the Fee Letter,

fourth, to the ratable reduction of Aggregate Principal, and

fifth, for the ratable payment of all other unpaid Obligations.

After the Obligations have been indefeasibly reduced to zero, all Collections shall be paid to the Borrower or otherwise in accordance with the Borrower’s instructions. Collections applied to the payment of Obligations shall be distributed in accordance with the aforementioned provisions, and, giving effect to each of the priorities set forth above in this Section 2.3(b), shall be shared ratably (within each priority) among the Agent and the Lenders in accordance with the amount of such Obligations owing to each of them in respect of each such priority.

Section 2.4 Payment Rescission. No payment of any of the Obligations shall be considered paid or applied hereunder to the extent that, at any time, all or any portion of such payment or application is rescinded by application of law or judicial authority, or must otherwise be returned or refunded for any reason. The Borrower shall remain obligated for the amount of any payment or application so rescinded, returned or refunded, and shall promptly pay to the Agent (for application to the Person or Persons who suffered such rescission, return or refund) the full amount thereof, plus Interest on such amount at the Default Rate from the date of any such rescission, return or refunding.

ARTICLE III.

VFCC FUNDING

Section 3.1 CP Costs. The Borrower agrees to pay CP Costs with respect to the principal balance of each of VFCC’s Loans from time to time outstanding. Each Loan of VFCC that is funded substantially with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis, based upon the percentage share that the principal in respect of such Loan represents in relation to all assets held by VFCC and funded substantially with related Pooled Commercial Paper.

Section 3.2 Calculation of CP Costs. Not later than the 3^rd Business Day immediately preceding each Monthly Reporting Date, VFCC shall calculate the aggregate amount of CP Costs applicable to its CP Rate Loans for the Calculation Period then most recently ended and shall notify the Borrower of such aggregate amount.

Section 3.3 CP Costs Payments. On each Settlement Date, the Borrower agrees to pay to the Agent (for the benefit of VFCC) an aggregate amount equal to all accrued and unpaid CP Costs in respect of the principal associated with all CP Rate Loans for the Calculation Period then most recently ended in accordance with Article II.

Section 3.4 Default Rate. From and after the occurrence and during the continuation of an Amortization Event, all Loans of VFCC shall accrue Interest at the Default Rate and shall cease to be CP Rate Loans.

ARTICLE IV.

LIQUIDITY BANK FUNDING

Section 4.1 Liquidity Bank Funding. Prior to the occurrence of an Amortization Event, the outstanding principal balance of each Liquidity Funding shall accrue interest for each day during its Interest Period at either the LIBO Rate or the Alternate Base Rate in accordance with the terms and conditions hereof. Until the Borrower gives notice to the Agent of another Interest Rate in accordance with Section 4.4, the initial Interest Rate for any Loan transferred to the Liquidity Banks by VFCC pursuant to the Liquidity Agreement shall be the Alternate Base Rate (unless the Default Rate is then applicable). If the Liquidity Banks acquire by assignment from VFCC any Loan pursuant to the Liquidity Agreement, each Loan so assigned shall each be deemed to have an Interest Period commencing on the date of any such assignment.

Section 4.2 Interest Payments. On the Settlement Date for each Liquidity Funding, the Borrower agrees to pay to the Agent (for the benefit of the Liquidity Banks) an aggregate amount equal to the accrued and unpaid Interest for the entire Interest Period of each such Liquidity Funding in accordance with Article II.

Section 4.3 Selection and Continuation of Interest Periods.

(a) With consultation from (and approval by) the Agent (which approval shall not be unreasonably withheld or delayed), the Borrower shall from time to time request Interest Periods for the Liquidity Fundings, provided that if at any time any Liquidity Funding is outstanding, the Borrower shall always request Interest Periods such that at least one Interest Period shall end on the date specified in clause (A) of the definition of Settlement Date.

(b) The Borrower or the Agent, upon notice to and consent by the other received at least three (3) Business Days prior to the end of an Interest Period (the “Terminating Tranche”) for any Liquidity Funding, may, effective on the last day of the Terminating Tranche: (i) divide any such Liquidity Funding into multiple Liquidity Fundings, (ii) combine any such Liquidity Funding with one or more other Liquidity Fundings that have a Terminating Tranche ending on the same day as such Terminating Tranche or (iii) combine any such Liquidity Funding with a new Liquidity Funding to be made by the Liquidity Banks on the day such Terminating Tranche ends.

Section 4.4 Liquidity Bank Interest Rates. The Borrower may select the LIBO Rate or the Alternate Base Rate for each Liquidity Funding. The Borrower shall by 12:00 noon (New York time): (i) at least three (3) Business Days prior to the expiration of any Terminating Tranche with respect to which the LIBO Rate is being requested as a new Interest Rate and (ii) at least one (1) Business Day prior to the expiration of any Terminating Tranche with respect to which the Alternate Base Rate is being requested as a new Interest Rate, give the Agent irrevocable notice of the new Interest Rate for the Liquidity Funding associated with such Terminating Tranche. Until the Borrower gives notice to the Agent of another Interest Rate, the initial Interest Rate for any Loan transferred to the Liquidity Banks pursuant to the Liquidity Agreement shall be the Alternate Base Rate (unless the Default Rate is then applicable).

Section 4.5 Suspension of the LIBO Rate

(a) If any Liquidity Bank notifies the Agent that it has reasonably determined that funding its Pro Rata Share of the Liquidity Fundings at a LIBO Rate would violate any applicable law, rule, regulation, or directive of any governmental or regulatory authority, whether or not having the force of law, or that (i) deposits of a type and maturity appropriate to match fund its Liquidity Funding at such LIBO Rate are not available or (ii) such LIBO Rate does not accurately reflect the cost of acquiring or maintaining a Liquidity Funding at such LIBO Rate, then the Agent shall suspend the availability of such LIBO Rate and require the Borrower to select the Alternate Base Rate for any Liquidity Funding accruing Interest at such LIBO Rate.

(b) If less than all of the Liquidity Banks give a notice to the Agent pursuant to Section 4.5(a), each Liquidity Bank which gave such a notice shall be obliged, at the request of the Borrower, VFCC or the Agent, to assign all of its rights and obligations hereunder to (i)

another Liquidity Bank or (ii) another funding entity nominated by the Borrower or the Agent that is an Eligible Assignee willing to participate in this Agreement through the Liquidity Termination Date in the place of such notifying Liquidity Bank; provided that (i) the notifying Liquidity Bank receives payment in full, pursuant to an Assignment Agreement, of all Obligations owing to it (whether due or accrued), and (ii) the replacement Liquidity Bank otherwise satisfies the requirements of Section 12.1(b).

Section 4.6 Default Rate. From and after the occurrence and during the continuation of an Amortization Event, all Liquidity Fundings shall accrue Interest at the Default Rate.

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

Section 5.1 Representations and Warranties of the Loan Parties. Each Loan Party hereby represents and warrants to the Agent and the Lenders, as to itself, as of the date hereof and except for such representations or warranties that are limited to a certain date or period, as of the date of each Advance and as of each Settlement Date that:

(a) Existence and Power. Such Loan Party is a corporation duly organized, validly existing and in good standing under the laws of the state indicated in the preamble to this Agreement, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary, and where the failure to qualify would have or could reasonably be expected to cause a Material Adverse Effect, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.

(b) Power and Authority; Due Authorization, Execution and Delivery. The execution, delivery and performance by such Loan Party of the Transaction Documents to which it is a party (i) are within such Loan Party’s corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of or filing with, any governmental body, agency or official, (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of such Loan Party or of any agreement, judgment, injunction, order, decree or other instrument binding upon such Loan Party or any of its Subsidiaries, and (v) do not result in the creation or imposition of any Adverse Claim on any asset of such Loan Party (except as created hereunder). This Agreement and each other Transaction Document to which such Loan Party is a party has been duly executed and delivered by such Loan Party.

(d) Governmental Authorization. Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Loan Party of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder.

(e) Actions, Suits. There is no action, suit or proceeding pending, or to the knowledge of such Loan Party overtly threatened in writing, against or affecting such Loan Party or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which has had or is likely to have a Material Adverse Effect.

(f) Binding Effect. This Agreement constitutes and, when executed and delivered in accordance with this Agreement, each other Transaction Document to which such Loan Party is a party, will constitute valid and binding obligations of such Loan Party enforceable in accordance with their respective terms, provided that the enforceability hereof and thereof is subject in each case to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

(g) Accuracy of Information. All information heretofore furnished by such Loan Party to the Agent or any of the Lenders for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by such Loan Party to the Agent or any of the Lenders will be, true and accurate in every material respect or based on reasonable estimates on the date as of which such information is stated or certified. Such Loan Party has disclosed to the Agent in writing any and all facts known to its Executive Officers which would have or reasonably would be expected to cause a Material Adverse Effect.

(h) Use of Proceeds. The Borrower is not engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock, and no part of the proceeds of any Advance will be used to purchase or carry any Margin Stock (except to the extent expressly permitted under the proviso to Section 7.1(i)(L)) or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, or be used for any purpose which violates, or which is inconsistent with, the provisions of Regulation T, U or X.

(i) Good Title. The Borrower (i) is the legal and beneficial owner of the Receivables and (ii) is the legal and beneficial owner of the Related Security with respect thereto or possesses a valid and perfected security interest therein, in each case, free and clear of any Adverse Claim, except for Permitted Encumbrances. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Borrower’s ownership interest in each such Receivable, its Collections and the Related Security and the Agent’s security interest therein.

(j) Perfection. This Agreement, together with the filing of the financing statements contemplated hereby, is effective to create in favor of the Agent, for the benefit of the Lenders, a valid and perfected security interest in all of the Borrower’s right, title and interest in and to each Receivable pledged by it existing and hereafter arising, together with all Collections and Related Security with respect thereto, in each case, free and clear of any Adverse Claim, except for Permitted Encumbrances.

(k) Places of Business and Locations of Records. The principal places of business and chief executive office of each Loan Party and the offices where it keeps all of its

Records are located at the address(es) listed on Exhibit III or such other locations of which the Agent has been notified in accordance with Section 7.2(a) in jurisdictions where all action required by Section 7.2(a) has been taken and completed. The Borrower’s Federal Employer Identification Number and Organization Identification Number is correctly set forth on Exhibit III.

(l) Collections. The conditions and requirements set forth in Section 7.1(j) have at all times been satisfied and duly performed. The names and addresses of all Collection Banks, together with the account numbers of the Collection Accounts at each Collection Bank and the post office box number of each Lock-Box, are listed on Exhibit IV. The Borrower has not granted any Person, other than the Agent under Section 8.3 hereof and the Collection Account Agreements dominion and control of any Lock-Box or Collection Account, or the right to take dominion and control of any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event.

(m) Material Adverse Effect. During the period May 31, 2007 through and including the date of this Agreement, in the good faith judgment of the Executive Officers, no event has occurred that has had or could reasonably be expected to have a Material Adverse Effect.

(n) Names. The name in which the Borrower has executed this Agreement is identical to the name of Borrower as indicated on the public record of its state of organization which shows Borrower to have been organized. In the past five (5) years, the Borrower has not used any corporate names, trade names or assumed names other than the name in which it has executed this Agreement and as listed on Exhibit III.

(o) Not an Investment Company. The Borrower is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or any successor statute.

(p) Compliance with Law. The Borrower has complied in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Receivable, together with the Contract related thereto, does not contravene any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), and no part of such Contract is in violation of any such law, rule or regulation, except where such contravention or violation could not reasonably be expected to have a Material Adverse Effect.

(q) Compliance with Credit and Collection Policy. The Borrower has complied in all material respects with the Credit and Collection Policy with regard to each Receivable and the related Contract, and has not made any material change to such Credit and Collection Policy, except such material change as to which the Agent has been notified in accordance with Section 7.1(a).

(r) Enforceability of Contracts. Each Contract with respect to each Receivable is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

(s) Accounting. The manner in which the Borrower accounts for the transactions contemplated by the Receivables Sale Agreement does not jeopardize the characterization of the transactions contemplated therein as being true sales.

(t) Eligible Receivables. Each Receivable reflected in any Monthly Report as an Eligible Receivable was an Eligible Receivable on the date of such Monthly Report.

(u) Borrowing Limitations. Immediately after giving effect to each Advance and each settlement on any Settlement Date hereunder, the aggregate principal balance of the Advances outstanding is less than or equal to the Borrowing Base, and the Aggregate Principal outstanding is less than or equal to the Aggregate Commitment.

Section 5.2 Liquidity Bank Representations and Warranties. Each Liquidity Bank hereby represents and warrants to the Agent, VFCC and the Loan Parties that:

(a) Existence and Power. Such Liquidity Bank is a banking association duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has all organizational power to perform its obligations hereunder and under the Liquidity Agreement.

(b) No Conflict. The execution and delivery by such Liquidity Bank of this Agreement and the Liquidity Agreement and the performance of its obligations hereunder and thereunder are within its corporate powers, have been duly authorized by all necessary corporate action, do not contravene or violate (i) its certificate or articles of incorporation or association or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on its assets. This Agreement and the Liquidity Agreement have been duly authorized, executed and delivered by such Liquidity Bank.

(c) Governmental Authorization. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Liquidity Bank of this Agreement or the Liquidity Agreement and the performance of its obligations hereunder or thereunder.

(d) Binding Effect. Each of this Agreement and the Liquidity Agreement constitutes the legal, valid and binding obligation of such Liquidity Bank enforceable against such Liquidity Bank in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors’ rights generally and by general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law).

ARTICLE VI.

CONDITIONS OF ADVANCES

Section 6.1 Conditions Precedent to Initial Advance. The initial Advance under this Agreement is subject to the conditions precedent that (a) the Agent shall have received on or before the date of such Advance those documents listed on Schedule A to the Receivables Sale Agreement and those documents listed on Schedule B to this Agreement, and (b) the Agent shall have received all fees and expenses required to be paid on such date pursuant to the terms of this Agreement and the Fee Letter.

Section 6.2 Conditions Precedent to All Advances. Each Advance and each rollover or continuation of any Advance shall be subject to the further conditions precedent that (a) the Servicer shall have delivered to the Agent on or prior to the date thereof, in form and substance satisfactory to the Agent, all Monthly Reports as and when due under Section 8.5; (b) the Facility Termination Date shall not have occurred; (c) the Agent shall have received such other approvals, opinions or documents as it may reasonably request; and (d) on the date thereof, the following statements shall be true (and acceptance of the proceeds of such Advance shall be deemed a representation and warranty by the Borrower that such statements are then true):

(i) the representations and warranties set forth in Section 5.1 are true and correct in all material respects on and as of the date of such Advance (or such Settlement Date, as the case may be) as though made on and as of such date;

(ii) no event has occurred and is continuing, or would result from such Advance (or the continuation thereof), that will constitute an Amortization Event, and no event has occurred and is continuing, or would result from such Advance (or the continuation thereof), that would constitute an Unmatured Amortization Event; and

(iii) after giving effect to such Advance (or the continuation thereof), the aggregate principal balance of the Advances outstanding to will not exceed the Borrowing Base and the Aggregate Principal outstanding is less than or equal to the Aggregate Commitment.

ARTICLE VII.

COVENANTS

Section 7.1 Affirmative Covenants of the Loan Parties. Until the Final Payout Date, each Loan Party hereby covenants, as to itself, as set forth below:

(a) Financial Reporting. Such Loan Party will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish or cause to be furnished to the Agent:

(i) Annual Reporting. As soon as available and in any event within 90 days (or such longer period as may be the subject of an extension granted by the Securities and Exchange Commission) after the end of each Fiscal Year, (A) a consolidated balance sheet of the Performance Guarantor and its Consolidated Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, stockholders’ equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous fiscal year, all certified by Ernst & Young, LLP or other independent public accountants of nationally recognized standing, with such certification to be free of exceptions and qualifications not acceptable to the Agent, and (B) an unaudited balance sheet and income statement for the Borrower for such Fiscal Year, certified in a manner acceptable to the Agent by the Borrower’s chief financial officer.

(ii) Quarterly Reporting. As soon as available and in any event within 45 days (or such longer period as may be the subject of an extension granted by the Securities and Exchange Commission) after the end of each of the first 3 Fiscal Quarters of each Fiscal Year, (A) a consolidated balance sheet of the Performance Guarantor and its Consolidated Subsidiaries as of the end of such Fiscal Quarter and the related statement of income and statement of cash flows for the portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter and the corresponding portion of the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation, GAAP and consistency by the chief financial officer or the chief accounting officer of the Performance Guarantor, and (B) an unaudited balance sheet and income statement for the Borrower for such Fiscal Quarter, certified in a manner acceptable to the Agent by the Borrower’s chief financial officer.

(iii) Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit V signed by an Authorized Officer of the Performance Guarantor and dated the date of such annual financial statement or such quarterly financial statement, as the case may be.

(iv) Shareholders Statements and Reports. Promptly upon the mailing thereof to the shareholders of the Performance Guarantor generally, copies of all financial statements, reports and proxy statements so mailed.

(v) S.E.C. Filings. Promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports which the Performance Guarantor shall have filed with the Securities and Exchange Commission.

(vi) Copies of Notices. Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other communication under or in connection with any Transaction Document from any Person other than the Agent or VFCC, copies of the same.

(vii) Change in Credit and Collection Policy. At least thirty (30) days prior to the effectiveness of any material change in or material amendment to the Credit and Collection Policy, a copy of the Credit and Collection Policy then in effect and a notice (A) indicating such change or amendment, and (B) if such proposed change or amendment would be reasonably likely to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables, requesting the Agent’s consent thereto.

(viii) Other Information. Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or operations, financial or otherwise, of such Loan Party as the Agent may from time to time reasonably request in order to protect the interests of the Agent, for the benefit of VFCC, under or as contemplated by this Agreement.

(b) Notices. Such Loan Party will notify the Agent in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto:

(i) Amortization Events or Unmatured Amortization Events. Within one (1) Business Day after any Responsible Officer learns thereof, the occurrence of each Amortization Event and each Unmatured Amortization Event, by a statement of an Authorized Officer of such Loan Party.

(ii) Termination Events or Unmatured Termination Events. Within one (1) Business Day after any Responsible Officer learns thereof, the occurrence of each Termination Event and each Unmatured Termination Event, by a statement of an Authorized Officer of ASP.

(iii) Defaults Under Other Agreements. Within one (1) Business Day after any Responsible Officer learns thereof, the occurrence of a default or an event of default under any other financing arrangement pursuant to which any Loan Party is a debtor or an obligor which relates to debt in excess of $25,000,000.

(iv) ERISA Events. If and when any member of the Controlled Group (i) gives or is required to give notice to the PBGC of any “reportable event” (as defined in Section 4043 of ERISA) with respect to any Plan which could reasonably be expected to constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, a copy of such notice; provided, however, that each of the foregoing notices shall not be required to be given unless the reportable event, withdrawal liability, plan termination or trustee appointment involved could reasonably be expected to give rise to a liability of more than $1,000,000 on the part of the Performance Guarantor or any of its Subsidiaries.

(v) Termination Date. Within one (1) Business Day after any Responsible Officer learns thereof, the occurrence of the “Termination Date” under and as defined in the Receivables Sale Agreement.

(vi) Notices under Receivables Sale Agreement. Copies of all notices delivered under the Receivables Sale Agreement.

(i) Such Loan Party will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Such Loan Party will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted, except (A) where the failure to so preserve and maintain or qualify could not reasonably be expected to have a Material Adverse Effect, and (B) to the extent permitted under Section 7.1(c)(ii) below.

(ii) Notwithstanding anything herein or in any of the other Transaction Documents to the contrary:

(A) ASP or the Parent may merge or consolidate with any other Person provided that (1) the surviving corporation is the Parent or a wholly-owned Subsidiary of the Parent, (2) the survivor executes and delivers such Uniform Commercial Code financing statements and other documents as the Administrative Agent may reasonably request in order to maintain the perfection of the interests conveyed under the Transaction Documents and (3) no Amortization Event or Unmatured Amortization Event has occurred and is continued after giving effect to such transaction, and

(B) ASP may merge or consolidate with the Parent provided that (1) the Parent is the corporation surviving such merger, (2) the Parent executes and delivers such Uniform Commercial Code financing statements and other documents as the Administrative Agent may reasonably request in order to maintain the perfection of the interests conveyed under the Transaction Documents and (3) no Amortization Event or Unmatured Amortization Event has occurred and is continued after giving effect to such transaction.

(d) Audits. Such Loan Party will furnish to the Agent from time to time such information with respect to it and the Receivables as the Agent may reasonably request. Such Loan Party will, at the sole cost of such Loan Party from time to time upon prior written request of the Agent given (unless an Amortization Event shall have occurred and be continuing) not less than three (3) Business Days prior to a requested visit, permit the Agent, or its agents or representatives (and shall cause each Originator to permit the Agent or its agents or representatives) during normal business hours: (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Person relating to the Collateral,

including, without limitation, the related Contracts, and (ii) to visit the offices and properties of such Person for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to such Person’s financial condition or the Collateral or any Person’s performance under any of the Transaction Documents or any Person’s performance under the Contracts and, in each case, with any of the officers or employees of the Borrower or the Servicer having knowledge of such matters (each of the foregoing examinations and visits, a “Review”); provided, however, that, so long as no Amortization Event has occurred and is continuing, (A) the Loan Parties shall only be responsible for the costs and expenses of one (1) Review in any one calendar year, and (B) the Agent will not request more than four (4) Reviews in any one calendar year. To the extent that Agent, in the course of any Review, obtains possession of any Proprietary Information pertaining to any Loan Party or any of its Affiliates, Agent shall handle such information in accordance with the requirements of Section 14.5 hereof.

(e) Keeping and Marking of Records and Books.

(i) The Servicer will (and will cause each Originator to) maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the immediate identification of each new Receivable and all Collections of and adjustments to each existing Receivable). The Servicer will (and will cause each Originator to) give the Agent notice of any material change in the administrative and operating procedures referred to in the previous sentence.

(ii) Such Loan Party will (and will cause each Originator to): (A) on or prior to the date hereof, mark its master data processing records and other books and records relating to the Receivables with a legend, acceptable to the Agent, describing the Agent’s security interest in the Collateral and (B) upon the request of the Agent following the occurrence and during the continuance of an Amortization Event: (x) mark each Contract with a legend describing the Agent’s security interest and (y) deliver to the Agent all Contracts (including, without limitation, all multiple originals of any such Contract constituting an instrument, a certificated security or chattel paper) relating to the Receivables.

(f) Compliance with Contracts and Credit and Collection Policy. Such Loan Party will (and will cause each Originator to) timely and fully (i) perform and comply in all material respects with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and (ii) comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract.

(g) Performance and Enforcement of Receivables Sale Agreement. The Borrower will, and will require each Originator to, perform each of their respective obligations and undertakings under and pursuant to the Receivables Sale Agreement, will purchase Receivables thereunder in strict compliance with the terms of the Receivables Sale Agreement and will vigorously enforce the rights and remedies accorded to the Borrower under the

Receivables Sale Agreement. The Borrower will take all actions to perfect and enforce its rights and interests (and the rights and interests of the Agent, as the Borrower’s assignee) under the Receivables Sale Agreement as the Agent may from time to time reasonably request, including, without limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the Receivables Sale Agreement.

(h) Ownership. The Borrower will (or will cause the applicable Originator to) take all necessary action to (i) vest legal and equitable title to the Collateral purchased under the Receivables Sale Agreement irrevocably in the Borrower, free and clear of any Adverse Claims (other than Permitted Encumbrances) including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Borrower’s interest in such Collateral and such other action to perfect, protect or more fully evidence the interest of the Borrower therein as the Agent may reasonably request), and (ii) establish and maintain, in favor of the Agent, for the benefit of the Secured Parties, a valid and perfected first priority security interest in all Collateral, free and clear of any Adverse Claims (other than Permitted Encumbrances), including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Agent’s (for the benefit of the Secured Parties) security interest in the Collateral and such other action to perfect, protect or more fully evidence the interest of the Agent for the benefit of the Secured Parties as the Agent may reasonably request.

(i) Reliance. The Borrower acknowledges that the Agent and VFCC are entering into the transactions contemplated by this Agreement in reliance upon the Borrower’s identity as a legal entity that is separate from the Originator. Therefore, from and after the date of execution and delivery of this Agreement, the Borrower shall take all reasonable steps, including, without limitation, all steps that the Agent or VFCC may from time to time reasonably request, to maintain the Borrower’s identity as a separate legal entity and to make it manifest to third parties that the Borrower is an entity with assets and liabilities distinct from those of the Originator and any Affiliates thereof (other than the Borrower) and not just a division of the Originator or any such Affiliate. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, the Borrower will:

(A) conduct its own business in its own name;

(B) compensate all employees, consultants and agents directly, from the Borrower’s own funds, for services provided to the Borrower by such employees, consultants and agents and, to the extent any employee, consultant or agent of the Borrower is also an employee, consultant or agent of Originator or any Affiliate thereof, allocate the compensation of such employee, consultant or agent between the Borrower and the Originator or such Affiliate, as applicable, on a basis that reflects the services rendered to the Borrower and the Originator or such Affiliate, as applicable;

(C) clearly identify its offices (by signage or otherwise) as its offices and, if such office is located in the offices of Originator, the Borrower shall lease such office at a fair market rent;

(D) have a separate telephone number, which will be answered only in its name and separate stationery and checks in its own name;

(E) conduct all transactions with each Originator strictly on an arm’s-length basis, allocate all overhead expenses (including, without limitation, telephone and other utility charges) for items shared between the Borrower and the Originator on the basis of actual use to the extent practicable and, to the extent such allocation is not practicable, on a basis reasonably related to actual use;

(F) at all times have a Board of Directors consisting of three members, at least one member of which is an Independent Director;

(G) observe all corporate formalities as a distinct entity, and ensure that all corporate actions relating to (A) the selection, maintenance or replacement of the Independent Director, (B) the dissolution or liquidation of the Borrower or (C) the initiation of, participation in, acquiescence in or consent to any bankruptcy, insolvency, reorganization or similar proceeding involving the Borrower, are duly authorized by unanimous vote of its Board of Directors (including the Independent Director);

(H) maintain the Borrower’s books and records separate from those of each Originator and any Affiliate thereof and otherwise readily identifiable as its own assets rather than assets of Originator or any Affiliate thereof;

(I) prepare its financial statements separately from those of each Originator and insure that any consolidated financial statements of Originator or any Affiliate thereof that include the Borrower and that are filed with the Securities and Exchange Commission or any other governmental agency have notes clearly stating that the Borrower is a separate corporate entity and that its assets will be available first and foremost to satisfy the claims of the creditors of the Borrower;

(J) except as herein specifically otherwise provided, maintain the funds or other assets of the Borrower separate from, and not commingled with, those of Originator or any Affiliate thereof and only maintain bank accounts or other depository accounts to which the Borrower alone is the account party, into which the Borrower alone makes deposits and from which the Borrower alone (or the Agent hereunder) has the power to make withdrawals;

(K) pay all of the Borrower’s operating expenses from the Borrower’s own assets (except for certain payments by Originator or other Persons pursuant to allocation arrangements that comply with the requirements of this Section 7.1(i));

(L) operate its business and activities such that: it does not engage in any business or activity of any kind, or enter into any transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking, other than the transactions contemplated and authorized by this Agreement and the Receivables Sale Agreement; and does not create, incur, guarantee, assume or suffer to exist any indebtedness or other liabilities, whether direct or contingent, other than (1) as a result of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business,

(2) the incurrence of obligations under this Agreement, (3) the incurrence of obligations, as expressly contemplated in the Receivables Sale Agreement, to make payment to the applicable Originator thereunder for the purchase of Receivables from the Originator under the Receivables Sale Agreement, and (4) the incurrence of operating expenses in the ordinary course of business of the type otherwise contemplated by this Agreement;

(M) maintain its corporate charter in conformity with this Agreement, such that it does not amend, restate, supplement or otherwise modify its Certificate of Incorporation or By-Laws in any respect that would materially impair its ability to comply with the terms or provisions of any of the Transaction Documents, including, without limitation, Section 7.1(i) of this Agreement;

(N) maintain the effectiveness of, and continue to perform under the Receivables Sale Agreement, such that it does not amend, restate, supplement, cancel, terminate or otherwise modify the Receivables Sale Agreement or give any consent, waiver, directive or approval thereunder or waive any default, action, omission or breach under the Receivables Sale Agreement or otherwise grant any indulgence thereunder, without (in each case) the prior written consent of the Agent;

(O) maintain its corporate separateness such that it does not merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions, and except as otherwise contemplated herein) all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets of, any Person, nor at any time create, have, acquire, maintain or hold any interest in any Subsidiary.

(P) maintain at all times the Required Capital Amount (as defined in the Receivables Sale Agreement) and refrain from making any dividend, distribution, redemption of capital stock or payment of any subordinated indebtedness which would cause the Required Capital Amount to cease to be so maintained; and

(Q) take such other actions as are necessary on its part to ensure that the facts and assumptions set forth in the opinion issued by Kilpatrick Stockton LLP, as counsel for the Borrower, in connection with the closing or initial Advance under this Agreement and relating to substantive consolidation issues, and in the certificates accompanying such opinion, remain true and correct in all material respects at all times.

(j) Collections. Such Loan Party will cause (1) all proceeds from all Lock-Boxes to be directly deposited by a Collection Bank into a Collection Account and (2) each Lock-Box and Collection Account to be subject at all times to a Collection Account Agreement that is in full force and effect. In the event any payments relating to the Collateral are remitted directly to the Borrower or any Affiliate of the Borrower, the Borrower will remit (or will cause all such payments to be remitted) directly to a Collection Bank and deposited into a Collection Account within two (2) Business Days following receipt thereof, and, at all times prior to such remittance, the Borrower will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of the Agent and VFCC. The Borrower will maintain exclusive ownership, dominion and control (subject to the terms of this Agreement) of each Lock-Box and

Collection Account into which Collections on the Receivables pledged by it are deposited and shall not grant the right to take dominion and control of any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event to any Person, except to the Agent as contemplated by this Agreement.

(k) Taxes. Such Loan Party will file all material tax returns and reports required by law to be filed by it and will promptly pay all material taxes and governmental charges at any time owing, except any such taxes which are not yet delinquent or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. The Borrower will pay when due any taxes payable in connection with the Receivables pledged by it, exclusive of taxes on or measured by income or gross receipts of the Agent or VFCC.

(l) Payment to Applicable Originator. With respect to any Receivable purchased by the Borrower from Originator, such sale shall be effected under, and in strict compliance with the terms of, the Receivables Sale Agreement, including, without limitation, the terms relating to the amount and timing of payments to be made to the Originator in respect of the purchase price for such Receivable.

Section 7.2 Negative Covenants of the Loan Parties. Until the Final Payout Date, each Loan Party hereby covenants, as to itself, that:

(a) Name Change, Offices and Records. Such Loan Party will not change its name, identity or structure (within the meaning of any applicable enactment of the UCC), relocate its chief executive office at any time while the location of its chief executive office is relevant to perfection of the Agent’s security interest, for the benefit of the Secured Parties, in the Receivables, Related Security and Collections, or change any office where Records are kept unless it shall have: (i) given the Agent at least ten (10) days’ prior written notice thereof and (ii) delivered to the Agent all financing statements, instruments and other documents reasonably requested by the Agent in connection with such change or relocation.

(b) Change in Payment Instructions to Obligors. Except as may be required by the Agent pursuant to Section 8.2(b), such Loan Party will not add or terminate any bank as a Collection Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Collection Account, unless the Agent shall have received, at least ten (10) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Collection Bank or a Collection Account or Lock-Box, an executed Collection Account Agreement with respect to the new Collection Account or Lock-Box; provided, however, that the Servicer may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Collection Account.

(c) Modifications to Contracts and Credit and Collection Policy. Such Loan Party will not, and will not permit Originator to, make any material change to the Credit and Collection Policy that could adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables. Except as provided in Section 8.2(d), the Servicer will not, and will not permit Originator to, extend, amend or otherwise modify the terms of any Receivable or any Contract related thereto other than in accordance with the Credit and Collection Policy.

(d) Sales, Liens. The Borrower will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon (including, without limitation, the filing of any financing statement) or with respect to, any of the Collateral, or assign any right to receive income with respect thereto (other than Permitted Encumbrances), and the Borrower will defend the right, title and interest of the Secured Parties in, to and under any of the foregoing property, against all claims of third parties claiming through or under the Borrower or Originator (other than Permitted Encumbrances). The Borrower will not create or suffer to exist any mortgage, pledge, security interest, encumbrance, lien, charge or other similar arrangement on any of its inventory.

(e) Use of Proceeds. The Borrower will not use the proceeds of the Advances for any purpose other than (i) paying for Receivables and Related Security under and in accordance with the Receivables Sale Agreement, (ii) making Demand Advances to the Originator at any time prior to the Facility Termination Date while the Originator is acting as a Servicer and no Amortization Event or Unmatured Amortization Event exists and is continuing, (iii) paying its ordinary and necessary operating expenses when and as due, (iv) making Restricted Junior Payments to the extent permitted under this Agreement.

(f) Termination Date Determination. The Borrower will not designate the Termination Date (as defined in the Receivables Sale Agreement), or send any written notice to the applicable Originator in respect thereof, without the prior written consent of the Agent, except with respect to the occurrence of such Termination Date arising pursuant to Section 5.1(d) of the Receivables Sale Agreement.

(g) Restricted Junior Payments. The Borrower will not make any Restricted Junior Payment if after giving effect thereto, the Borrower’s Net Worth (as defined in the Receivables Sale Agreement) would be less than the Required Capital Amount (as defined in the Receivables Sale Agreement).

(h) Borrower Indebtedness. The Borrower will not incur or permit to exist any Indebtedness or liability on account of deposits except: (i) the Obligations, and (ii) other current accounts payable arising in the ordinary course of business and not overdue.

(i) Prohibition on Additional Negative Pledges. No Loan Party will enter into or assume any agreement (other than this Agreement, the other Transaction Documents and the Acuity Credit Agreements) prohibiting the creation or assumption of any Adverse Claim upon the Collateral except as contemplated by the Transaction Documents, or otherwise prohibiting or restricting any transaction contemplated hereby or by the other Transaction Documents.

ARTICLE VIII.

ADMINISTRATION AND COLLECTION

Section 8.1 Designation of Servicer.

(a) The servicing, administration and collection of the Receivables shall be conducted by such Person (the “Servicer”) so designated from time to time in accordance with this Section 8.1. ASP is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms of this Agreement. The Agent may at any time following the occurrence of an Amortization Event designate as Servicer any Person to succeed ASP or any successor Servicer provided that the Rating Agency Condition is satisfied.

(b) Without the prior written consent of the Agent and the Required Liquidity Banks, ASP shall not be permitted to delegate any of its duties or responsibilities as Servicer to any Person other than, with respect to certain Defaulted Receivables, outside collection agencies in accordance with its customary practices.

(c) Notwithstanding any delegation pursuant to the foregoing subsection (b): (i) ASP shall be and remain primarily liable to the Agent and the Lenders for the full and prompt performance of all duties and responsibilities of the Servicer hereunder and (ii) the Agent and the Lenders shall be entitled to deal exclusively with ASP in matters relating to the discharge by the Servicer of its duties and responsibilities hereunder. The Agent and the Lenders shall not be required to give notice, demand or other communication to any Person other than ASP and the Borrower in order for communication to the Servicer and its sub-servicer or other delegate with respect thereto to be accomplished. ASP, at all times that it is the Servicer, shall be responsible for providing any sub-servicer or other delegate of the Servicer with any notice given to the Servicer under this Agreement.

Section 8.2 Duties of Servicer.

(a) ASP, as Servicer (or its successor) shall take or cause to be taken all such actions as may be necessary or advisable to collect each Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy.

(b) The Servicer will instruct all Obligors to pay all Collections directly to a Lock-Box or Collection Account. The Servicer shall effect a Collection Account Agreement substantially in the form of Exhibit VI with each bank party to a Collection Account at any time. In the case of any remittances received in any Lock-Box or Collection Account that shall have been identified, to the satisfaction of the Servicer, to not constitute Collections or other proceeds of the Receivables or the Related Security, the Servicer shall promptly remit such items to the Person identified to it as being the owner of such remittances. From and after the date the Agent delivers to any Collection Bank a Collection Notice pursuant to Section 8.3, the Agent may request that the Servicer, and the Servicer thereupon promptly shall instruct all Obligors with respect to the Receivables, to remit all payments thereon to a new depositary account specified by the Agent and, at all times thereafter, the Borrower and the Servicer shall not deposit or

otherwise credit, and shall not permit any other Person to deposit or otherwise credit to such new depositary account any cash or payment item other than Collections.

(c) The Servicer shall administer the Collections in accordance with the procedures described herein and in Article II. The Servicer shall set aside and hold in trust for the account of the Borrower and the Lenders their respective shares of the Collections in accordance with Article II. The Servicer shall, upon the request of the Agent, segregate, in a manner acceptable to the Agent, all cash, checks and other instruments received by it from time to time constituting Collections from the general funds of the Servicer or the Borrower prior to the remittance thereof in accordance with Article II. If the Servicer shall be required to segregate Collections pursuant to the preceding sentence, the Servicer shall segregate and deposit with a bank designated by the Agent such allocable share of Collections of Receivables set aside for the Lenders on the first Business Day following receipt by the Servicer of such Collections, duly endorsed or with duly executed instruments of transfer.

(d) The Servicer may, in accordance with the Credit and Collection Policy, extend the maturity of any Receivable for which the Servicer is responsible or adjust the Outstanding Balance of any such Receivable as the Servicer determines to be appropriate to maximize Collections thereof; provided, however, that such extension or adjustment shall not alter the status of such Receivable as a Delinquent Receivable or Defaulted Receivable or limit the rights of the Agent or the Lenders under this Agreement. Notwithstanding anything to the contrary contained herein, from and after the occurrence of an Amortization Event, the Agent shall have the absolute and unlimited right to direct the applicable Servicer to commence or settle any legal action with respect to any Receivable or to foreclose upon or repossess any Related Security; provided that (i) in lieu of commencing any such action or taking other enforcement action, the Servicer may, at its option, elect to pay to the Agent an amount equal to the Outstanding Balance of such Receivable and (ii) no Servicer shall, unless indemnified to its satisfaction by the Lenders, be obligated to commence or take any legal action that is in contravention of applicable law or regulation, or to settle any action that would entail an admission by any Servicer, Borrower or Originator of legal wrongdoing or culpability or require the payment of damages by Originator or Servicer to any third party.

(e) The Servicer shall hold in trust for the Borrower and the Lenders all Records that (i) evidence or relate to the Receivables, the related Contracts and Related Security or (ii) are otherwise necessary or desirable to collect the Receivables and shall, as soon as practicable upon demand of the Agent at any time when an Amortization Event exists, deliver or make available to the Agent all such Records, at a place selected by the Agent. The Servicer shall, as soon as practicable following receipt thereof turn over to the Borrower any cash collections or other cash proceeds received with respect to Indebtedness not constituting Receivables. The Servicer shall, from time to time at the request of any Lender, furnish to the Lenders (promptly after any such request) a calculation of the amounts set aside for the Lenders pursuant to Article II.

(f) Any payment by an Obligor in respect of any indebtedness owed by it to Originator or the Borrower shall, except as otherwise specified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the Agent, be applied as a Collection of any Receivable of such Obligor (starting with the oldest such Receivable) to the

extent of any amounts then due and payable thereunder before being applied to any other receivable or other obligation of such Obligor.

Section 8.3 Collection Notices. The Agent is authorized at any time after the occurrence and during the continuance of an Amortization Event to date and to deliver to the Collection Banks the Collection Notices. The Borrower hereby transfers to the Agent for the benefit of the Lenders, effective when the Agent delivers such notice, the exclusive ownership and control of each Lock-Box and the Collection Accounts. In case any authorized signatory of the Borrower whose signature appears on a Collection Account Agreement shall cease to have such authority before the delivery of such notice, such Collection Notice shall nevertheless be valid as if such authority had remained in force. The Borrower hereby authorizes the Agent, and agrees that the Agent shall be entitled (i) at any time after delivery of the Collection Notices, to endorse the Borrower’s name on checks and other instruments representing Collections, (ii) at any time after the occurrence and during the continuance of an Amortization Event, to enforce the Receivables, the related Contracts and the Related Security, and (iii) at any time after the occurrence and during the continuance of an Amortization Event, to take such action as shall be necessary or desirable to cause all cash, checks and other instruments constituting Collections of Receivables to come into the possession of the Agent rather than Borrower.

Section 8.4 Responsibilities of Borrower. Anything herein to the contrary notwithstanding, the exercise by the Agent and the Lenders of their rights hereunder shall not release the Servicer, the Originator or the Borrower from any of its duties or obligations with respect to any Receivables or under the related Contracts. The Lenders shall have no obligation or liability with respect to any Receivables or related Contracts, nor shall any of them be obligated to perform the obligations of the Borrower or Originator.

Section 8.5 Monthly Reports. The Servicer shall prepare and forward to the Agent (i) on each Monthly Reporting Date, a Monthly Report and an electronic file of the data contained therein and (ii) at such times as the Agent shall request, a listing by Obligor of all Receivables together with an aging of such Receivables; provided, however, that if an Amortization Event shall exist and be continuing, the Agent may request a Monthly Report be prepared and forwarded to the Agent more frequently than monthly.

Section 8.6 Servicing Fee. As compensation for the Servicer’s servicing activities on their behalf, the Borrower hereby agrees to pay the Servicer the Servicing Fee in arrears on each Settlement Date. Notwithstanding the fact that Sections 2.2 and 2.3 authorize the Servicer to deduct the Servicing Fee from Collections, the Borrower is and shall remain the Persons ultimately responsible for paying the Servicing Fee and other costs of servicing the Receivables.

ARTICLE IX.

AMORTIZATION EVENTS

Section 9.1 Amortization Events. The occurrence of any one or more of the following events shall constitute an Amortization Event:

(a) Any Loan Party or Performance Guarantor shall fail to make any payment or deposit required to be made by it under the Transaction Documents when due and, for any such payment or deposit which is not in respect of principal, such failure continues for two (2) consecutive Business Days.

(b) Any representation, warranty, certification or statement made by Performance Guarantor or any Loan Party in any Transaction Document to which it is a party or in any other document delivered pursuant thereto shall prove to have been incorrect in any material respect when made or deemed made (it being understood and agreed that any error or omission which results in the aggregate principal balance of the Advances outstanding exceeding the Borrowing Base or the Aggregate Principal outstanding to exceed the Aggregate Commitment shall per se constitute a material error).

(c) Any Loan Party or Performance Guarantor shall fail to perform or observe any covenant contained in Section 7.1(b), 7.1(j), 7.2 or 8.5 when due.

(d) Any Loan Party or Performance Guarantor shall fail to perform or observe any other term, covenant or agreement hereunder or any other Transaction Document (other than a term, covenant or agreement covered by another clause of this Section 9.1) to which it is a party and such failure shall continue for and such failure shall not have been cured within 30 days after the earlier to occur of (i) written notice thereof has been given by such Loan Party or Performance Guarantor to Agent or (ii) an Executive Officer of such Loan Party or Performance Guarantor otherwise becomes aware of any such failure; provided, however, that, except in the case of a failure to perform or observe Section 7.1(a)(vii), such cure period shall be extended for a period of time, not to exceed an additional 30 days, reasonably sufficient to permit such Loan Party or Performance Guarantor to cure such failure if such failure cannot be cured within the initial 30-day period but reasonably could be expected to be capable of cure within such additional 30 days, such Loan Party or Performance Guarantor has commenced efforts to cure such failure during the initial 30-day period and such Loan Party or Performance Guarantor is diligently pursuing such cure.

(e) Failure of the Borrower to pay any Debt (other than the Obligations) when due or the default by the Borrower in the performance of any term, provision or condition contained in any agreement under which any such Debt was created or is governed, the effect of which is to cause, or to permit the holder or holders of such Debt to cause, such Debt to become due prior to its stated maturity; or any such Debt of the Borrower shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof.

(f) An Event of Bankruptcy shall occur with respect to Parent or any of its Material Subsidiaries.

(g) As at the end of any Calculation Period:

(i) the three-month rolling average Delinquency Ratio shall exceed 4.50%,

(ii) the three-month rolling average Default Ratio shall exceed 3.75%, or

(iii) the three-month rolling average Dilution Ratio shall exceed 8.00%.

(h) A Change of Control shall occur.

(i) One or more final judgments for the payment of money in an aggregate amount of $11,600 or more shall be entered against Borrower.

(j) The occurrence of any “Termination Event” or of the “Termination Date” (as each of the foregoing is defined in the Receivables Sale Agreements).

(k) This Agreement shall terminate in whole or in part (except in accordance with its terms), or shall cease to be effective or to be the legally valid, binding and enforceable obligation of Borrower, or any Obligor shall directly or indirectly contest in any manner such effectiveness, validity, binding nature or enforceability, or the Agent for the benefit of VFCC shall cease to have a valid and perfected first priority (except for Permitted Encumbrances) security interest in the Collateral.

(l) The Internal Revenue Service shall commence enforcement of any federal tax lien under Section 6323 of the Tax Code against any of the Collateral, or the PBGC shall commence enforcement any lien under Section 4068 of ERISA against any of the Collateral.

(m) Any event shall occur which materially and adversely impairs (i) the ability of the Originators to originate Receivables of a credit quality that is at least equal to the credit quality of the Receivables sold or contributed to the Borrower on the date of this Agreement or (ii) the legality, validity or enforceability of this Agreement or any other Transaction Document, (iii) the Agent’s security interest, for the benefit of the Secured Parties, in the Receivables generally or in any significant portion of the Receivables, the Related Security or the Collections with respect thereto.

(n) On any Settlement Date, after giving effect to the turnover of Collections by the Servicer on such date and the application thereof to the Obligations in accordance with this Agreement, the aggregate principal balance of the Advances outstanding to the Borrower shall exceed the Borrowing Base or the Aggregate Principal shall exceed the Aggregate Commitment.

(o) Either of the Performance Undertakings shall cease to be effective or to be the legally valid, binding and enforceable obligation of Performance Guarantor, or Performance Guarantor shall directly or indirectly contest in any manner such effectiveness, validity, binding nature or enforceability of its obligations thereunder.

Section 9.2 Remedies. Upon the occurrence and during the continuation of an Amortization Event, the Agent may, or upon the direction of the Required Liquidity Banks shall, upon notice to the Borrower and the Servicer, take any of the following actions: (i) replace each Person then acting as a Servicer (ii) declare the Amortization Date to have occurred, whereupon

the Aggregate Commitment shall immediately terminate and the Amortization Date shall forthwith occur, all without demand, protest or further notice of any kind, all of which are hereby expressly waived by each Loan Party; provided, however, that upon the occurrence of an Event of Bankruptcy with respect to any Loan Party, the Amortization Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each Loan Party, (iii) deliver the Collection Notices to the Collection Banks, (iv) exercise all rights and remedies of a secured party upon default under the UCC and other applicable laws, and (v) notify Obligors of the Agent’s security interest in the Receivables and other Collateral. The aforementioned rights and remedies shall be without limitation, and shall be in addition to all other rights and remedies of the Agent and the Lenders otherwise available under any other provision of this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative.

ARTICLE X.

INDEMNIFICATION

Section 10.1 Indemnities by the Loan Parties. Without limiting any other rights that the Agent or any Lender may have hereunder or under applicable law, (A) the Borrower hereby agrees to indemnify (and pay upon demand to) the Agent, VFCC, each of the Liquidity Banks and each of the respective assigns, officers, directors, agents and employees of the foregoing (each, an “Indemnified Party”) from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including actual and reasonable attorneys’ fees (which attorneys may be employees of the Agent or such Lender) and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts”) awarded against or actually incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by a Lender of an interest in the Receivables, and (B) the Servicer hereby agrees to indemnify (and pay upon demand to) each Indemnified Party for Indemnified Amounts awarded against or incurred by any of them arising out of the Servicer’s activities as Servicer hereunder excluding, however, in all of the foregoing instances under the preceding clauses (A) and (B):

(a) Indemnified Amounts to the extent a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted from gross negligence or willful misconduct on the part of any Indemnified Party seeking indemnification or by reason of such Indemnified Party’s breach of its obligations hereunder or other legal duty;

(b) Indemnified Amounts to the extent the same includes losses in respect of Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or

(c) taxes imposed by the jurisdiction in which such Indemnified Party’s principal executive office is located (including, without limitation, in the case of the Agent or VFCC, the States of North Carolina and Georgia), on or measured by the overall net income of such Indemnified Party to the extent that the computation of such taxes is

consistent with the characterization for income tax purposes of the acquisition by the Lenders of Loans as a loan or loans by the Lenders to the Borrower secured by the Receivables, the Related Security, the Collection Accounts and the Collections;

provided, however, that nothing contained in this sentence shall limit the liability of any Loan Party or limit the recourse of the Lenders to any Loan Party for amounts otherwise specifically provided to be paid by such Loan Party under the terms of this Agreement. Without limiting the generality of the foregoing indemnification, the Borrower shall indemnify the Agent and the Lenders for Indemnified Amounts (including, without limitation, losses in respect of uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse to the Borrower or the Servicer) relating to or resulting from:

(i) any representation or warranty made by any Loan Party or Originator (or any officers of any such Person) under or in connection with this Agreement, any other Transaction Document or any other information or report delivered by any such Person pursuant hereto or thereto, which shall have been false or incorrect when made or deemed made;

(ii) the failure by the Borrower, Servicer or Originator to comply with any applicable law, rule or regulation with respect to any Receivable or Contract related thereto, or the nonconformity of any Receivable or Contract included therein with any such applicable law, rule or regulation or any failure of Originator to keep or perform any of its obligations, express or implied, with respect to any Contract;

(iii) any failure of the Borrower, Servicer or Originator to perform its duties, covenants or other obligations in accordance with the provisions of this Agreement or any other Transaction Document;

(iv) any products liability, personal injury or damage suit, or other similar claim arising out of or in connection with merchandise, insurance or services that are the subject of any Contract or any Receivable;

(v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services;

(vi) the commingling of Collections of Receivables at any time with other funds;

(vii) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the transactions contemplated hereby, the use of the proceeds of any Advance, the Collateral or any other investigation, litigation or proceeding relating to the Borrower, Servicer or Originator in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby;

(viii) any inability to litigate any claim against any Obligor in respect of any Receivable as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding;

(ix) any Amortization Event;

(x) any failure of the Borrower to acquire and maintain legal and equitable title to, and ownership of any of the Collateral from the applicable Originator, free and clear of any Adverse Claim (other than as created hereunder); or any failure of the Borrower to give reasonably equivalent value to the applicable Originator under the applicable Receivables Sale Agreement in consideration of the transfer by the Originator of any Receivable, or any attempt by any Person to void such transfer under statutory provisions or common law or equitable action;

(xi) any failure to vest and maintain vested in the Agent for the benefit of the Lenders, or to transfer to the Agent for the benefit of the Secured Parties, a valid first priority perfected security interests in the Collateral, free and clear of any Adverse Claim (except as created by the Transaction Documents);

(xii) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Collateral, and the proceeds thereof, whether at the time of any Advance or at any subsequent time;

(xiii) any action or omission by any Loan Party which reduces or impairs the rights of the Agent or the Lenders with respect to any Collateral or the value of any Collateral (for any reason other than the application of Collections thereto or charge-off of any Receivable as uncollectible);

(xiv) any attempt by any Person to void any Advance or the Agent’s security interest in the Collateral under statutory provisions or common law or equitable action; and

(xv) the failure of any Receivable included in the calculation of the Net Pool Balance as an Eligible Receivable to be an Eligible Receivable at the time so included.

Section 10.2 Increased Cost and Reduced Return.

(a) If after the date hereof, any Funding Source shall be charged any fee, expense or increased cost on account of any Regulatory Change: (i) that subjects any Funding Source to any charge or withholding on or with respect to any Funding Agreement or a Funding Source’s obligations under a Funding Agreement, or on or with respect to the Receivables, or changes the basis of taxation of payments to any Funding Source of any amounts payable under any Funding Agreement (except for changes in the rate of tax on the overall net income of a Funding Source or taxes excluded by Section 10.1) or (ii) that imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of a Funding Source, or credit extended by a Funding Source pursuant to a Funding Agreement or (iii) that imposes any other condition the

result of which is to increase the cost to a Funding Source of performing its obligations under a Funding Agreement, or to reduce the rate of return on a Funding Source’s capital as a consequence of its obligations under a Funding Agreement, or to reduce the amount of any sum received or receivable by a Funding Source under a Funding Agreement or to require any payment calculated by reference to the amount of interests or loans held or interest received by it, then, upon written demand by the Agent no later than ninety (90) days after the adoption of such Regulatory Change, the Borrower agrees to pay to the Agent, for the benefit of the relevant Funding Source, such amounts charged to such Funding Source or such amounts to otherwise compensate such Funding Source for such increased cost or such reduction. In the event that the Agent fails to give the Borrower notice within the ninety (90) day time limitation prescribed above, the Borrower shall have no obligation to pay such claim for compensation hereunder. The Borrower shall have no obligation to pay any amount with respect to claims accruing under this Section 10.2(a) prior to the 90th day preceding written demand therefor from Agent.

(b) The Agent and each Funding Source agrees, if requested by the Borrower, it will use reasonable efforts (subject to the overall policy considerations of such Funding Source) to designate an alternate lending office with respect to Loans affected by any of the matters or circumstances prescribed in Section 10.2(a) hereof in order to reduce the liability of the Borrower or avoid the results provided thereunder, so long as such designation is not disadvantageous to such Funding Source as determined by such Funding Source, which determination, if made in good faith, shall be conclusive and binding on all parties hereto. Nothing in this Section 10.2(b) shall affect or postpone any of the obligation of the Borrower hereunder or any right of any Funding Source hereunder

Section 10.3 Other Costs and Expenses. The Borrower agrees to pay to the Agent and VFCC on demand all reasonable costs and out-of-pocket expenses actually incurred in connection with the preparation, execution, delivery and administration of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder, including without limitation, the cost of VFCC’s auditors auditing the books, records and procedures of the Borrower, reasonable fees and out-of-pocket expenses of legal counsel for VFCC and the Agent (which such counsel may be employees of VFCC or the Agent) with respect thereto and with respect to advising VFCC and the Agent as to their respective rights and remedies under this Agreement. The Borrower agrees to pay to the Agent on demand any and all reasonable costs and expenses of the Agent and the Lenders, if any, including reasonable counsel fees and expenses, actually incurred in connection with the amendment, waiver or enforcement of this Agreement and the other documents delivered hereunder and in connection with any restructuring or workout of this Agreement or such documents, or the administration of this Agreement following an Amortization Event. The Borrower agrees to reimburse VFCC on demand for all other reasonable costs and expenses actually incurred by VFCC (“Other Costs”), including, without limitation, the cost of auditing VFCC’s books by certified public accountants, the cost of rating the Commercial Paper by independent financial rating agencies, and the reasonable fees and out-of-pocket expenses of counsel for VFCC or any counsel for any shareholder of VFCC with respect to advising VFCC or such shareholder as to matters relating to VFCC’s operations.

Section 10.4 Allocations. VFCC shall allocate the liability for (a) increased costs covered by Section 10.2 arising under Funding Agreements that are not specifically related

solely to this Agreement (“Shared Increased Costs”) and (b) Other Costs among the Borrower and other Persons with whom VFCC has entered into agreements to purchase interests in or finance receivables and other financial assets (“Other Customers”). If any Other Costs are attributable to the Borrower and not attributable to any Other Customer or any Shared Increased Costs are attributable to the facility evidenced by this Agreement and not to any Other Customers’ facilities, the Borrower shall be solely liable for such Other Costs or Shared Increased Costs. However, if Other Costs or Shared Increased Costs are attributable to Other Customers and their facilities but not attributable to Borrower or the facility evidenced hereby, such Other Customer shall be solely liable for such Other Costs or Shared Increased Costs, as the case may be. All allocations to be made pursuant to the foregoing provisions of this Article X shall be made by VFCC in its sole discretion and shall be binding on the Borrower and the Servicer.

ARTICLE XI.

THE AGENT

Section 11.1 Authorization and Action. Each Lender hereby designates and appoints Wachovia to act as its agent under the Transaction Documents and under the Liquidity Agreement, and authorizes the Agent to take such actions as agent on its behalf and to exercise such powers as are delegated to the Agent by the terms of the Liquidity Agreement or the Transaction Documents, together with such powers as are reasonably incidental thereto. The Agent shall not have any duties or responsibilities, except those expressly set forth in the Liquidity Agreement or in any Transaction Document, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Agent shall be read into the Liquidity Agreement or any Transaction Document or otherwise exist for the Agent. In performing its functions and duties under the Liquidity Agreement and the Transaction Documents, the Agent shall act solely as agent for the Lenders and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for any Loan Party or any of such Loan Party’s successors or assigns. The Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to the Liquidity Agreement or any Transaction Document or applicable law. The appointment and authority of the Agent hereunder shall terminate upon the indefeasible payment in full of all Obligations. Each Lender hereby authorizes the Agent to execute each of the UCC financing statements, each Collection Account Agreement on behalf of such Lender (the terms of which shall be binding on such Lender).

Section 11.2 Delegation of Duties. The Agent may execute any of its duties under the Liquidity Agreement and each Transaction Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

Section 11.3 Exculpatory Provisions. Neither the Agent nor any of its directors, officers, agents or employees shall be (i) liable for any action lawfully taken or omitted to be taken by it or them under or in connection with the Liquidity Agreement or any Transaction Document (except for its, their or such Person’s own gross negligence or willful misconduct), or

(ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party contained in the Liquidity Agreement, any Transaction Document or any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, any Transaction Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Liquidity Agreement or any Transaction Document or any other document furnished in connection therewith, or for any failure of any Loan Party to perform its obligations under any Transaction Document, or for the satisfaction of any condition specified in Article VI, or for the perfection, priority, condition, value or sufficiency of any collateral pledged in connection herewith. The Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, any Transaction Document, or to inspect the properties, books or records of the Loan Parties. The Agent shall not be deemed to have knowledge of any Amortization Event or Unmatured Amortization Event unless the Agent has received notice from a Loan Party or a Lender.

Section 11.4 Reliance by Agent. The Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent shall in all cases be fully justified in failing or refusing to take any action under the Liquidity Agreement or any Transaction Document unless it shall first receive such advice or concurrence of VFCC or the Required Liquidity Banks or all of the Lenders, as applicable, as it deems appropriate and it shall first be indemnified to its satisfaction by the Lenders, provided that unless and until the Agent shall have received such advice, the Agent may take or refrain from taking any action, as the Agent shall deem advisable and in the best interests of the Lenders. The Agent shall in all cases be fully protected in acting, or in refraining from acting, in accordance with a request of VFCC or the Required Liquidity Banks or all of the Lenders, as applicable, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.

Section 11.5 Non-Reliance on Agent and Other Lenders. Each Lender expressly acknowledges that neither the Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including, without limitation, any review of the affairs of any Loan Party, shall be deemed to constitute any representation or warranty by the Agent. Each Lender represents and warrants to the Agent that it has and will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Borrower and made its own decision to enter into the Liquidity Agreement, the Transaction Documents and all other documents related thereto.

Section 11.6 Reimbursement and Indemnification. The Liquidity Banks agree to reimburse and indemnify the Agent and its officers, directors, employees, representatives and agents ratably according to their Pro Rata Shares, to the extent not paid or reimbursed by the Loan Parties (i) for any amounts for which the Agent, acting in its capacity as Agent, is entitled to reimbursement by the Loan Parties hereunder and (ii) for any other expenses incurred by the Agent, in its capacity as Agent and acting on behalf of the Lenders, in connection with the administration and enforcement of the Liquidity Agreement and the Transaction Documents.

Section 11.7 Agent in its Individual Capacity. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower or any Affiliate of the Borrower as though the Agent were not the Agent hereunder. With respect to the making of Loans pursuant to this Agreement, the Agent shall have the same rights and powers under the Liquidity Agreement and this Agreement in its individual capacity as any Lender and may exercise the same as though it were not the Agent, and the terms “Liquidity Bank,” “Lender,” “Liquidity Banks” and “Lenders” shall include the Agent in its individual capacity.

Section 11.8 Successor Agent. The Agent, upon five (5) days’ notice to the Loan Parties and the Lenders, may voluntarily resign and may be removed at any time, with or without cause, by the Required Liquidity Banks; provided, however, that Wachovia shall not voluntarily resign as the Agent so long as any of the Liquidity Commitments remain in effect or VFCC has any outstanding Loans. If the Agent (other than Wachovia) shall voluntarily resign or be removed as Agent under this Agreement, then the Required Liquidity Banks during such five-day period shall appoint, with the consent of the Borrower from among the remaining Liquidity Banks, a successor Agent, whereupon such successor Agent shall succeed to the rights, powers and duties of the Agent and the term “Agent” shall mean such successor agent, effective upon its appointment, and the former Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. Upon resignation or replacement of any Agent in accordance with this Section 11.8, the retiring Agent shall execute such UCC-3 assignments and amendments, and assignments and amendments of the Liquidity Agreement and the Transaction Documents, as may be necessary to give effect to its replacement by a successor Agent. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Article XI and Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.

ARTICLE XII.

ASSIGNMENTS; PARTICIPATIONS

Section 12.1 Assignments.

(a) Each of the Agent, the Loan Parties and the Liquidity Banks hereby agrees and consents to the complete or partial assignment by VFCC of all or any portion of its rights under, interest in, title to and obligations under this Agreement to the Liquidity Banks pursuant to the Liquidity Agreement.

(b) Any Liquidity Bank may at any time and from time to time assign to one or more Eligible Assignees (each, a “Purchasing Liquidity Bank”) all or any part of its rights and obligations under this Agreement pursuant to an assignment agreement substantially in the form set forth in Exhibit VII hereto (an “Assignment Agreement”) executed by such Purchasing Liquidity Bank and such selling Liquidity Bank; provided, however, that any assignment of a Liquidity Bank’s rights and obligations hereunder shall include a pro rata assignment of its rights and obligations under the Liquidity Agreement. The consent of VFCC (and, if no Amortization Event then exists, the Borrower, which consent shall not be unreasonably withheld or delayed) shall be required prior to the effectiveness of any such assignment. Each assignee of a Liquidity Bank must (i) be an Eligible Assignee and (ii) agree to deliver to the Agent, promptly following any request therefor by the Agent or VFCC, an enforceability opinion in form and substance satisfactory to the Agent and VFCC. Upon delivery of an executed Assignment Agreement to the Agent, such selling Liquidity Bank shall be released from its obligations hereunder and under the Liquidity Agreement to the extent of such assignment. Thereafter the Purchasing Liquidity Bank shall for all purposes be a Liquidity Bank party to this Agreement and the Liquidity Agreement and shall have all the rights and obligations of a Liquidity Bank hereunder and thereunder to the same extent as if it were an original party hereto and thereto and no further consent or action by the Borrower, the Lenders or the Agent shall be required. The Agent shall give the Borrower and the Servicer prior notice of each assignment made under this Section.

(c) Each of the Liquidity Banks agrees that in the event that it shall suffer a Downgrading Event, such Downgraded Liquidity Bank shall be obliged to notify the Agent, the Borrower and the Servicer thereof and shall be obliged, at the request of VFCC or the Agent, to (i) collateralize its Commitment and its Liquidity Commitment in a manner acceptable to the Agent, or (ii) assign all of its rights and obligations hereunder and under the Liquidity Agreement to an Eligible Assignee nominated by the Agent or a Loan Party and acceptable to VFCC (and, if no Amortization Event then exists, the Borrower, which consent shall not be unreasonably withheld or delayed) and willing to participate in this Agreement and the Liquidity Agreement through the Liquidity Termination Date in the place of such Downgraded Liquidity Bank; provided that the Downgraded Liquidity Bank receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such Liquidity Bank’s Pro Rata Share of the Obligations owing to the Liquidity Banks.

(d) No Loan Party may assign any of its rights or obligations under this Agreement without the prior written consent of the Agent and each of the Lenders and without satisfying the Rating Agency Condition.

Section 12.2 Participations. Any Liquidity Bank may, in the ordinary course of its business at any time sell to one or more Persons (each, a “Participant”) participating interests in its Pro Rata Share of the Aggregate Commitment, its Loans, its Liquidity Commitment or any other interest of such Liquidity Bank hereunder or under the Liquidity Agreement. Notwithstanding any such sale by a Liquidity Bank of a participating interest to a Participant, such Liquidity Bank’s rights and obligations under this Agreement and the Liquidity Agreement shall remain unchanged, such Liquidity Bank shall remain solely responsible for the performance of its obligations hereunder and under the Liquidity Agreement, and the Loan Parties, VFCC and the Agent shall continue to deal solely and directly with such Liquidity Bank in connection with such Liquidity Bank’s rights and obligations under this Agreement and the Liquidity Agreement. Each Liquidity Bank agrees that any agreement between such Liquidity Bank and any such Participant in respect of such participating interest shall not restrict such Liquidity Bank’s right to agree to any amendment, supplement, waiver or modification to this Agreement, except for any amendment, supplement, waiver or modification described in Section 14.1(b)(i).

ARTICLE XIII.

SECURITY INTEREST

Section 13.1 Grant of Security Interest. To secure the due and punctual payment of the Obligations, whether now or hereafter existing, due or to become due, direct or indirect, or absolute or contingent, including, without limitation, all Indemnified Amounts, in each case pro rata according to the respective amounts thereof, the Borrower hereby grants to the Agent, for the benefit of the Secured Parties, a security interest in, all of the Borrower’s right, title and interest, whether now owned and existing or hereafter arising in and to all of the Receivables, the Related Security, the Collections and all proceeds of the foregoing (collectively, the “Collateral”).

Section 13.2 Termination after Final Payout Date. Each of the Secured Parties hereby authorizes the Agent, and the Agent hereby agrees, promptly after the Final Payout Date to deliver to the Borrower authorization to file such UCC termination statements as may be necessary to terminate the Agent’s security interest in and Lien upon the Collateral, all at Borrower’s expense. Upon the Final Payout Date, all right, title and interest of the Agent and the other Secured Parties in and to the Collateral shall terminate.

ARTICLE XIV.

MISCELLANEOUS

Section 14.1 Waivers and Amendments.

(a) No failure or delay on the part of the Agent or any Lender in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement shall be effective only in the specific instance and for the specific purpose for which given.

(b) No provision of this Agreement may be amended, supplemented, modified or waived except in writing in accordance with the provisions of this Section 14.1(b). VFCC, the Borrower and the Agent, at the direction of the Required Liquidity Banks, may enter into written modifications or waivers of any provisions of this Agreement, provided, however, that no such modification or waiver shall:

(i) without the consent of each affected Lender, (A) extend the Liquidity Termination Date or the date of any payment or deposit of Collections by the Borrower or the Servicer, (B) reduce the rate or extend the time of payment of Interest or any CP Costs (or any component of Interest or CP Costs), (C) reduce any fee payable to the Agent for the benefit of the Lenders, (D) except pursuant to Article XII hereof, change the amount of the principal of any Lender, any Liquidity Bank’s Pro Rata Share or any Liquidity Bank’s Commitment, (E) amend, modify or waive any provision of the definition of Required Liquidity Banks or this Section 14.1(b), (F) consent to or permit the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement, (G) change the definition of “Eligible Receivable,” “Loss Reserve,” “Dilution Reserve,” “Yield Reserve,” “Servicing Reserve,” “Servicing Fee Rate,” “Required Reserve” or “Required Reserve Factor Floor” or (H) amend or modify any defined term (or any defined term used directly or indirectly in such defined term) used in clauses (A) through (G) above in a manner that would circumvent the intention of the restrictions set forth in such clauses; or

(ii) without the written consent of the then Agent, amend, modify or waive any provision of this Agreement if the effect thereof is to affect the rights or duties of such Agent,

and any material amendment, waiver or other modification of this Agreement shall require satisfaction of the Rating Agency Condition. Notwithstanding the foregoing, (i) without the consent of the Liquidity Banks, but with the consent of the Borrower, the Agent may amend this Agreement solely to add additional Persons as Liquidity Banks hereunder and (ii) the Agent, the Required Liquidity Banks and VFCC may enter into amendments to modify any of the terms or provisions of Article XI, Article XII, Section 14.13 or any other provision of this Agreement without the consent of the Borrower, provided that such amendment has no negative impact upon the Borrower. Any modification or waiver made in accordance with this Section 14.1 shall apply to each of the Lenders equally and shall be binding upon the Borrower, the Servicer, the Lenders and the Agent.

Section 14.2 Notices. Except as provided in this Section 14.2, all communications and notices provided for hereunder shall be in writing (including bank wire, telecopy or electronic facsimile transmission or similar writing) and shall be given to the other parties hereto at their respective addresses or telecopy numbers set forth on the signature pages hereof or at such other address or telecopy number as such Person may hereafter specify for the purpose of notice to each of the other parties hereto. Each such notice or other communication shall be effective (i) if given by telecopy, upon the receipt thereof, (ii) if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or (iii) if

given by any other means, when received at the address specified in this Section 14.2. The Borrower hereby authorizes the Agent to effect Advances and Interest Period and Interest Rate selections based on telephonic notices made by any Person whom the Agent in good faith believes to be acting on behalf of the Borrower. The Borrower agrees to deliver promptly to the Agent a written confirmation of each telephonic notice signed by an authorized officer of the Borrower; provided, however, the absence of such confirmation shall not affect the validity of such notice. If the written confirmation differs from the action taken by the Agent, the records of the Agent shall govern absent manifest error.

Section 14.3 Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it with respect to any portion of the Obligations owing to such Lender (other than payments received pursuant to Section 10.2 or 10.3) in a greater proportion than that received by any other Lender entitled to receive a ratable share of such Obligations, such Lender agrees, promptly upon demand, to purchase for cash without recourse or warranty a portion of such Obligations held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of such Obligations; provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

Section 14.4 Protection of Agent’s Security Interest.

(a) The Borrower agrees that from time to time, at its expense, it will promptly deliver and, as applicable, authorize the filing of all instruments and documents, and take all actions, that may be necessary or desirable, or that the Agent may reasonably request, to perfect, protect or more fully evidence the Agent’s security interest in the Collateral, or to enable the Agent or the Lenders to exercise and enforce their rights and remedies hereunder. At any time after the occurrence and during the continuation of an Amortization Event, the Agent may, or the Agent may direct the Borrower and/or Servicer to, notify the Obligors of Receivables, at the Borrower’s expense, of the security interests of the Agent on behalf of the Lenders under this Agreement and may also direct that payments of all amounts due or that become due under any or all Receivables be made directly to the Agent or its designee. The Borrower or Servicer (as applicable) shall, at any Lender’s request, withhold the identity of such Lender in any such notification.

(b) If any Loan Party fails to perform any of its obligations hereunder, the Agent or any Lender may (but shall not be required to) perform, or cause performance of, such obligations, and the Agent’s or such Lender’s actual and reasonable costs and expenses incurred in connection therewith shall be payable by the Borrower as provided in Section 10.3. Each Loan Party irrevocably authorizes the Agent at any time and from time to time in the sole discretion of the Agent, and appoints the Agent as its attorney-in-fact, to act on behalf of such Loan Party (i) to execute on behalf of the Borrower as debtor (if execution is required) and to file financing statements necessary or desirable in the Agent’s reasonable opinion to perfect and to maintain the perfection and priority of the interest of the Lenders in the Receivables (including, without limitation, financing statements naming the Borrower as debtor that describe the collateral as “all assets whether now existing or hereafter arising” or “all personal property now owned or hereafter acquired” or words of similar effect) and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables

as a financing statement in such offices as the Agent in its reasonable opinion deems necessary or desirable to perfect and to maintain the perfection and priority of the Agent’s security interest in the Collateral, for the benefit of the Secured Parties. This appointment is coupled with an interest and is irrevocable.

Section 14.5 Confidentiality.

(a) Each Loan Party and each Lender shall maintain and shall cause each of its employees, officers and Affiliates to maintain the confidentiality of the Fee Letter and the other confidential or proprietary information with respect to the Agent and VFCC and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that such Loan Party and such Lender and its officers and employees may disclose such information to such Loan Party’s and such Lender’s external consultants, accountants and attorneys and as required by any applicable law, rule or regulation or order of any judicial or administrative proceeding or to enforce its rights under the Transaction Documents.

(b) Unless otherwise agreed to in writing by the Parent, each Lender and the Agent hereby agrees to keep all Proprietary Information confidential and not to disclose or reveal any Proprietary Information to any Person other than its (or its Affiliates’) directors, officers, employees, agents, attorneys, auditors, advisors, consultants or other representatives who reasonably require such information in connection with their activities concerning this Agreement or the transactions contemplated hereby and to actual or potential Participants or Purchasing Liquidity Banks, and then only upon a confidential basis in any such case; provided, however, that Proprietary Information may be disclosed: (i) to the Agent or any other Lender, (ii) to any provider of credit or liquidity enhancement to VFCC (each, an “Enhancer”), (iii) to the extent reasonably required in connection with any litigation to which the Agent, any Lender, any Enhancer or their respective Affiliates may be a party, (iv) to the extent reasonably required in connection with the exercise of any remedy hereunder, (v) as required by law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law), (vi) to bank regulatory authorities or other governmental authorities, (vii) to any rating agency that rates the commercial paper or other debt securities of any Lender or any Enhancer, (viii) to any commercial paper dealer of any Lender or Enhancer which has agreed in writing to be bound by the provisions of this Section 14.5, and (ix) to any directors, officers, employees, agents, attorneys, auditors, advisors, consultants or other representatives of the entities described in subsections (i), (ii) , (vi), (vii) or (viii) above who reasonably require such information in connection with their activities concerning this Agreement or the transactions contemplated hereby (but only upon a confidential basis).

Section 14.6 Bankruptcy Petition. The Borrower, the Servicer, the Agent and each Liquidity Bank hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of VFCC, it will not institute against, or join any other Person in instituting against, VFCC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.

Section 14.7 Limitation of Liability. Except with respect to any claim arising out of the willful misconduct or gross negligence of VFCC, the Agent or any Liquidity Bank, no claim may be made by any Loan Party or any other Person against VFCC, the Agent or any Liquidity Bank or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith; and each Loan Party hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Notwithstanding any other provision of this Agreement, the obligations of Borrower hereunder shall be payable solely from Collections, other proceeds of Receivables and Related Security and the other Assets of Borrower, and following realization of such Collections, other proceeds of Receivables and Related Security and the other Assets of Borrower, any claims of any Purchaser or Agent hereunder shall be extinguished.

Section 14.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF (EXCEPT IN THE CASE OF THE OTHER TRANSACTION DOCUMENTS, TO THE EXTENT OTHERWISE EXPRESSLY STATED THEREIN) AND EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE OWNERSHIP INTERESTS OF THE BORROWER OR THE SECURITY INTERESTS OF THE AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, IN ANY OF THE COLLATERAL IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF GEORGIA.

Section 14.9 CONSENT TO JURISDICTION. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR GEORGIA STATE COURT SITTING IN FULTON COUNTY, GEORGIA, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT, AND EACH SUCH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY LOAN PARTY AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE

AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH LOAN PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN FULTON COUNTY, GEORGIA.

Section 14.10 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY LOAN PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.

Section 14.11 Integration; Binding Effect; Survival of Terms.

(a) This Agreement and each other Transaction Document contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings, including without limitation the Existing Agreement.

(b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy). This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until terminated in accordance with its terms; provided, however, that the rights and remedies with respect to (i) any breach of any representation and warranty made by any Loan Party pursuant to Article V, (ii) the indemnification and payment provisions of Article X, and Sections 14.5, 14.6 and 14.7 shall be continuing and shall survive any termination of this Agreement.

Section 14.12 Counterparts; Severability; Section References. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of a signature page to this Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise expressly indicated, all references herein to “Article,” “Section,” “Schedule” or “Exhibit” shall mean articles and sections of, and schedules and exhibits to, this Agreement.

Section 14.13 Wachovia Roles. Each of the Liquidity Banks acknowledges that Wachovia acts, or may in the future act: (i) as administrative agent for VFCC or any Liquidity Bank, (ii) as an issuing and paying agent for the Commercial Paper, (iii) to provide credit or liquidity enhancement for the timely payment for the Commercial Paper, and/or (iv) to provide other services from time to time for VFCC or any Liquidity Bank (collectively, the “Wachovia Roles”). Without limiting the generality of this Section 14.13, each Liquidity Bank hereby acknowledges and consents to any and all Wachovia Roles and agrees that in connection with any Wachovia Role, Wachovia may take, or refrain from taking, any action that it, in its discretion, deems appropriate, including, without limitation, in its role as administrative agent for VFCC, and the giving of notice of a mandatory purchase pursuant to the Liquidity Agreement.

Section 14.14 Interest. In no event shall the amount of interest, and all charges, amounts or fees contracted for, charged or collected pursuant to this Agreement or the other Transaction Documents and deemed to be interest under applicable law (collectively, “Interest Amounts” ) exceed the highest rate of interest allowed by applicable law (the “Maximum Rate”), and in the event any such payment is inadvertently received by VFCC or any Liquidity Bank, then the excess sum (the “Excess”) shall be credited as a payment of principal, unless the relevant Borrower shall notify the applicable recipient in writing that it elects to have the Excess returned forthwith. It is the express intent hereof that the Borrower not pay and VFCC and the Liquidity Banks not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under applicable law. The right to accelerate maturity of any of the Loans does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and the Agent and the Liquidity Banks do not intend to collect any unearned interest in the event of any such acceleration. All monies paid to the Agent or the Liquidity Banks hereunder or under any of the other Transaction Documents, whether at maturity or by prepayment, shall be subject to rebate of unearned interest as and to the extent required by applicable law. By the execution of this Agreement, the Borrower covenants, to the fullest extent permitted by law, that (i) the credit or return of any Excess shall constitute the acceptance by the Borrower of such Excess, and (ii) the Borrower shall not seek or pursue any other remedy, legal or equitable, against the Agent or any Liquidity Bank, based in whole or in part upon contracting for charging or receiving any Interest Amounts in excess of the Maximum Rate. For the purpose of determining whether or not any Excess has been contracted for, charged or received by the Agent or any Liquidity Bank, all interest at any time contracted for, charged or received from the Borrower in connection with this Agreement or any of the other Transaction Documents shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of the Commitments. The Borrower, the Agent and each Lender shall, to the maximum extent permitted under applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as Interest Amounts and (ii) exclude voluntary prepayments and the effects thereof. The provisions of this Section shall be deemed to be incorporated into each of the other Transaction Documents (whether or not any provision of this Section is referred to therein). All such Transaction Documents and communications relating to any Interest Amounts owed by the Borrower and all figures set forth therein shall, for the sole purpose of computing the extent of the obligations hereunder and under the other Transaction Documents be automatically recomputed by the Borrower, and by any court considering the same, to give effect to the adjustments or credits required by this Section.

Section 14.15 Source of Funds — ERISA. Each of VFCC and the Liquidity Banks hereby severally (and not jointly) represents to the Borrower that no part of the funds to be used by it to fund the Loans hereunder from time to time constitutes (i) assets allocated to any separate account maintained by it in which any employee benefit plan (or its related trust) has any interest nor (ii) any other assets of any employee benefit plan. As used in this Section, the terms “employee benefit plan” and “separate account” shall have the respective meanings assigned to such terms in Section 3 of ERISA.

<signature pages follow>

IN WITNESS WHEREOF, the parties hereto have caused this Credit and Security Agreement to be executed and delivered by their duly authorized officers as of the date hereof.


ACUITY ENTERPRISE, INC.

By:		/s/ Kenyon W. Murphy
Name:		Kenyon W. Murphy
Title:		Executive Vice President

Address:

Acuity Enterprise, Inc.

4401 Northside Parkway, Suite 700

Atlanta, Georgia 30327-3093

Attention: General Counsel

Phone: (404) 352-1680

Fax: (404) 367-4082


ACUITY SPECIALTY PRODUCTS, INC., AS A SERVICER

By:
Name:
Title:

Address:

Acuity Specialty Products, Inc.

4401 Northside Parkway, Suite 700

Atlanta, Georgia 30327-3093

Attention: General Counsel

Phone: (404)352-1680

Fax: (404) 367-4082

IN WITNESS WHEREOF, the parties hereto have caused this Credit and Security Agreement to be executed and delivered by their duly authorized officers as of the date hereof.


ACUITY ENTERPRISE, INC.

By:
Name:
Title:

Address:

Acuity Enterprise, Inc.

4401 North Parkway, Suite 700

Atlanta, Georgia 30327-3093

Attention: General Counsel

Phone: (404) 352-1680

Fax: (404) 367-4082


ACUITY SPECIALTY PRODUCTS, INC., AS A SERVICER

By:		/s/ Mark R. Bachmann
Name:		Mark R. Bachmann
Title:		EVP & CFO

Address:

Acuity Specialty Products, Inc.

4401 Northside Parkway, Suite 700

Atlanta, Georgia 30327-3093

Attention: Treasurer

Phone: (404) 352-1680

Fax: (404) 367-4082

[Signature Page to Credit and Security Agreement – Chemicals]


VARIABLE FUNDING CAPITAL COMPANY LLC
BY: WACHOVIA CAPlTAL MARKETS, LLC, ITS ATTORNEY-IN-FACT

By:		/s/ Douglas R. Wilson, Sr.
		Name: Douglas R. Wilson, Sr
		Title: Director

Address:

Variable Funding Capital Company LLC

c/o Wachovia Bank, National Association

301 S. College St.,

FLR TRW 10 NC0610

Charlotte, NC 28288-0610

Attention: Douglas R. Wilson, Sr.

Phone: (704)374-2520

Fax: (704)383-9579

With a copy to:

Variable Funding Capital Company LLC

c/o AMACAR Group, L.L.C.

6525 Morrison Blvd., Suite 318

Charlotte, North Carolina 28211

Attention: Douglas K. Johnson

Phone: (704)365-0569

Fax: (704)365-1362

WACHOVIA BANK, NATIONAL ASSOCIATION, as a Liquidity Bank and as Agent



By:		/s/ Michael J. Landry
Name:		Michael J. Landry
Title:		Vice President

Address:

Wachovia Bank, National Association

171 17th Street, N.W., 4th Floor

Mail-stop GA4524

Atlanta, GA 30363

Attention: Michael Landry

Phone: (404)214-6388

Fax: (404)214-5481

[Signature Page to Credit and Security Agreement – Chemicals]

EXHIBIT I

DEFINITIONS

Capitalized terms used and not otherwise defined herein shall have the meanings attributed thereto in the Receivables Sale Agreement (hereinafter defined).

In addition, as used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Acuity Credit Agreements” means that certain (i) 5-Year Revolving Credit Agreement, dated as of April 2, 2004, among Acuity Brands, Inc., a Delaware corporation (its successor now known as Old ABI, LLC, a Georgia limited liability company), the other borrowers party thereto, Bank One, NA (Main Office Chicago), as Administrative Agent, and Wachovia Bank, National Association, as Syndication Agent, LaSalle Bank National Association and Key Bank National Association, as Co-Documentation Agents, the lenders party thereto as amended, supplemented and modified (as so amended, supplemented and modified, the “Existing Bank Credit Agreement”), and (ii) that certain 5-Year Revolving Credit Agreement to be entered into on or after the date hereof among Performance Guarantor, the other borrowers party thereto, JP Morgan Chase Bank, National Association as Administrative Agent and the other lenders party thereto, pursuant to which all or a portion of the credit facilities provided under the Existing Bank Credit Agreement will be replaced or refinanced, as the same may be amended, restated or replaced from time to time.

“Adjusted Dilution Ratio” means, at any time, the rolling average of the Dilution Ratio for the 12 Calculation Periods then most recently ended.

“Advance” means a borrowing hereunder consisting of the aggregate amount of the several Loans made on the same Borrowing Date.

“Adverse Claim” means a lien, security interest, charge or encumbrance, or other right or claim in, of or on any Person’s assets or properties in favor of any other Person.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person or any Subsidiary of such Person. A Person shall be deemed to control another Person if the controlling Person owns 20% or more of any class of voting securities of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.

“Agent” has the meaning set forth in the preamble to this Agreement.

“Agent’s Account” means account #2000010384921 at Wachovia Bank, National Association, ABA #053000219.

“Aggregate Commitment” means, on any date of determination, the aggregate amount of the Liquidity Banks’ Commitments to make Loans hereunder. As of the date hereof, the Aggregate Commitment is $40,000,000.

“Aggregate Principal” means, on any date of determination, the aggregate outstanding principal amount of all Advances (regardless of the Borrower) outstanding on such date.

“Aggregate Reduction” has the meaning specified in Section 1.3.

“Agreement” means this Amended and Restated Credit and Security Agreement, as it may be amended or modified and in effect from time to time.

“Alternate Base Rate” means for any day, the rate per annum equal to the higher as of such day of (i) the Prime Rate, or (ii) one-half of one percent (0.50%) above the Federal Funds Rate. For purposes of determining the Alternate Base Rate for any day, changes in the Prime Rate or the Federal Funds Rate shall be effective on the date of each such change.

“Alternate Base Rate Loan” means a Loan which bears interest at the Alternate Base Rate or the Default Rate.

“Amortization Date” means the earliest to occur of (i) the Business Day immediately prior to the occurrence of an Event of Bankruptcy with respect to any Loan Party, (ii) the Business Day specified in a written notice from the Agent following the occurrence and during the continuation of any other Amortization Event, (iii) the date which is 10 Business Days after the Agent’s receipt of written notice from the Borrower that it wishes to terminate the facility evidenced by this Agreement, and (iv) October 17, 2008.

“Amortization Event” has the meaning specified in Article IX.

“Applicable Margin” means, for each Interest Period applicable to any Loan for which Interest is calculated on the basis of the LIBO Rate, the greater of the following on the first day of such Interest Period:

(a) two times the sum of (i) the Usage Fee plus (ii) the Program Fee; or

(b) the margin then applicable to borrowings under the Acuity Credit Agreements at a London interbank offered rate or Eurodollar rate, as the case may be (and if more than one such margin is then applicable, the greater of the two applicable margins).

“Assignment Agreement” has the meaning set forth in Section 12.1(b).

“Authorized Officer” means, with respect to any Person, its president, corporate controller, treasurer, vice president of finance or chief financial officer.

“Borrower” has the meaning set forth in the preamble to this Agreement.

“Borrowing Base” means, on any date of determination, the Net Pool Balance as of the last day of the period covered by the most recent Monthly Report, minus the Required Reserve as of the last day of the period covered by the most recent Monthly Report, and minus Deemed Collections that have occurred since the most recent Cut-Off Date to the extent that such Deemed Collections exceed the Dilution Reserve, and minus the FX Reserve.

“Borrowing Date” means a Business Day on which an Advance is made hereunder.

“Borrowing Notice” has the meaning set forth in Section 1.2.

“Broken Funding Costs” means for any CP Rate Loan or LIBO Rate Loan which: (a) in the case of a CP Rate Loan, has its principal reduced without compliance by the Borrower with the notice requirements hereunder, (b) in the case of a CP Rate Loan or a LIBO Rate Loan, does not become subject to an Aggregate Reduction following the delivery of any Reduction Notice, (c) in the case of a CP Rate Loan, is assigned under the Liquidity Agreement, or (d) in the case of a LIBO Rate Loan, is terminated or reduced prior to the last day of its Interest Period, an amount equal to the excess, if any, of (i) the CP Costs or Interest (as applicable) that would have accrued during the remainder of the Interest Periods or the tranche periods for Commercial Paper determined by the Agent to relate to such Loan (as applicable) subsequent to the date of such reduction, assignment or termination (or in respect of clause (b) above, the date such Aggregate Reduction was designated to occur pursuant to the Reduction Notice) of the principal of such Loan if such reduction, assignment or termination had not occurred or such Reduction Notice had not been delivered, over (ii) the sum of (x) to the extent all or a portion of such principal is allocated to another Loan, the amount of CP Costs or Interest actually accrued during the remainder of such period on such principal for the new Loan, and (y) to the extent such principal is not allocated to another Loan, the income, if any, actually received during the remainder of such period by the holder of such Loan from investing the portion of such principal not so allocated. In the event that the amount referred to in clause (B) exceeds the amount referred to in clause (A), the relevant Lender or Lenders agree to pay to the Borrower the amount of such excess. All Broken Funding Costs shall be due and payable hereunder upon demand.

“Business Day” means any day on which banks are not authorized or required to close in New York, New York or Atlanta, Georgia, and The Depository Trust Company of New York is open for business, and, if the applicable Business Day relates to any computation or payment to be made with respect to the LIBO Rate, any day on which dealings in dollar deposits are carried on in the London interbank market.

“Calculation Period” means a Fiscal Month.

“Capital Leases” means leases which are required to be capitalized in accordance with GAAP.

“Change of Control” means (a) a “Change of Control” under and as defined in the Receivables Sale Agreement shall occur, or (b) the Originator ceases to own 100% of the outstanding shares of voting stock of the Borrower.

“Collateral” has the meaning set forth in Section 13.1.

“Collection Account” means each concentration account, depositary account, lock-box account or similar account in which any Collections are collected or deposited and which is listed on Exhibit IV.

“Collection Account Agreement” means an agreement among one or both Originators, the Borrower, the Agent and a Collection Bank with respect to a Lock-Box and/or Collection Account, in a form reasonably acceptable to the Loan Parties and the Agent.

“Collection Bank” means, at any time, any of the banks holding one or more Collection Accounts.

“Collection Notice” means a notice, in substantially the form of Annex A to Exhibit VI, from the Agent to a Collection Bank.

“Collections” means, with respect to any Receivable, all cash collections and other cash proceeds in respect of such Receivable, including, without limitation, all Finance Charges or other related amounts accruing in respect thereof and all cash proceeds of Related Security with respect to such Receivable.

“Commercial Paper” means promissory notes of VFCC issued by VFCC in the commercial paper market.

“Commitment” means, for each Liquidity Bank, the commitment of such Liquidity Bank to make Loans to the Borrower hereunder in the event the VFCC elects not to fund any Advance in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Liquidity Bank’s name on Schedule A to this Agreement.

“Consolidated Operating Profits” means, for any period, the Operating Profits of the Parent and its Consolidated Subsidiaries.

“Consolidated Subsidiary” means at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Parent in its consolidated financial statements as of such date.

“Contingent Obligation” of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or application for a letter of credit.

“Contract” means, with respect to any Receivable, any and all instruments, agreements, invoices or other writings pursuant to which such Receivable arises or which evidences such Receivable.

“CP Costs” means, for each day, the sum of (i) discount or interest accrued on Pooled Commercial Paper on such day, plus (ii) any and all accrued commissions in respect of placement agents and Commercial Paper dealers, and issuing and paying agent fees incurred, in respect of such Pooled Commercial Paper for such day, plus (iii) other costs associated with funding small or odd-lot amounts with respect to all receivable purchase facilities which are funded by Pooled Commercial Paper for such day, minus (iv) any accrual of income net of expenses received on such day from investment of collections received under all receivable purchase or financing facilities funded substantially with Pooled Commercial Paper, minus (v) any payment received on such day net of expenses in respect of Broken Funding Costs (or similar costs) related to the prepayment of any investment of VFCC pursuant to the terms of any receivable purchase or financing facilities funded substantially with Pooled Commercial Paper. In addition to the foregoing costs, if the Borrower shall request any Advance during any period of time determined by the Agent in its sole discretion to result in incrementally higher CP Costs applicable to such Advance, the principal associated with any such Advance shall, during such period, be deemed to be funded by VFCC in a special pool (which may include capital associated with other receivable purchase or financing facilities) for purposes of determining such additional CP Costs applicable only to such special pool and charged each day during such period against such principal.

“CP Rate Loan” means, for each Loan of VFCC prior to the time, if any, when (i) it is refinanced with a Liquidity Funding pursuant to the Liquidity Agreement, or (ii) the occurrence of an Amortization Event and the commencement of the accrual of Interest thereon at the Default Rate.

“Credit and Collection Policy” means each Originator’s credit and collection policies and practices relating to Contracts and Receivables existing on the date hereof and summarized in the Exhibits to the Receivables Sale Agreement, as modified from time to time in accordance with this Agreement.

“Cut-Off Date” means the last day of a Calculation Period.

“Days Sales Outstanding” means, as of any day, an amount equal to the product of (x) 91, multiplied by (y) the amount obtained by dividing (i) the aggregate outstanding balance of Receivables as of the most recent Cut-Off Date, by (ii) the aggregate amount of Receivables created during the three (3) Calculation Periods including and immediately preceding such Cut-Off Date.

“Deemed Collections” means Collections deemed received by the Borrower under Section 1.4(a).

“Default Horizon Ratio” means, as of any Cut-Off Date, the ratio (expressed as a decimal) computed by dividing (i) the aggregate sales generated by the Originators during the 4 Calculation Periods ending on such Cut-Off Date, by (ii) the Net Pool Balance as of such Cut-off Date.

“Default Rate” means a rate per annum equal to the sum of (i) the Alternate Base Rate plus (ii) 2.00%, changing when and as the Alternate Base Rate changes.

“Default Ratio” means, as of any Cut-Off Date, the ratio (expressed as a percentage) computed by dividing (x) the total amount of Receivables which became Defaulted Receivables during the Calculation Period that includes such Cut-Off Date, by (y) the aggregate amount of Receivables generated by the Originators during the Calculation Period occurring 4 months prior to the Calculation Period ending on such Cut-Off Date.

“Defaulted Receivable” means a Receivable: (i) as to which the Obligor thereof has suffered an Event of Bankruptcy; (ii) which, consistent with the Credit and Collection Policy, would be written off the Borrower’s books as uncollectible; or (iii) as to which any payment, or part thereof, remains unpaid for 91 days or more from the original due date for such payment.

“Delinquency Ratio” means, at any time, a percentage equal to (i) the aggregate Outstanding Balance of all Receivables that were Delinquent Receivables at such time divided by (ii) the aggregate Outstanding Balance of all Receivables at such time.

“Delinquent Receivable” means a Receivable as to which any payment, or part thereof, remains unpaid for 61-90 days from the original due date for such payment.

“Demand Advance” means any advance made by the Borrower to ASP at any time while it is acting as the Servicer, which advance (a) is payable upon demand, (b) is not evidenced by an instrument, a promissory note, chattel paper or a certificated security, (c) bears interest at a market rate determined by the Borrower and Servicer from time to time, (d) is not subordinated to any other Debt or obligation of the Servicer, and (e) may not be offset by ASP against amounts due and owing from the Borrower to it; provided, however, that no Demand Advance may be made after the Facility Termination Date or on any date prior to the Facility Termination Date on which an Amortization Event or an Unmatured Amortization Event exists and is continuing.

“Dilution” means the amount of any reduction or cancellation of the Outstanding Balance of a Receivable as described in Section 1.4(a).

Dilution Horizon Ratio” means, as of any Cut-off Date, a ratio (expressed as a decimal), computed by dividing (i) the sum of (a) the aggregate sales generated by the Originator during the most recent Calculation Period and (b) 0.5 times the aggregate sales generated by the Originator during the second most recent Calculation Period, by (ii) the Net Pool Balance as of such Cut-Off Date.

“Dilution Ratio” means, as of any Cut-Off Date, a ratio (expressed as a percentage), computed by dividing (i) the total amount of decreases in Outstanding Balances due to Dilutions during the Calculation Period ending on such Cut-Off Date, by (ii) the aggregate dollar amount of Receivables generated by the Originators during the Calculation Period ending 1-month prior to the Calculation Period ending on such Cut-Off Date.

“Dilution Reserve” means, for any Calculation Period, the product (expressed as a percentage) of:

(a) the sum of (i) two (2) times the Adjusted Dilution Ratio as of the immediately preceding Cut-Off Date, plus (ii) the Dilution Volatility Component as of the immediately preceding Cut-Off Date, times

(b) the Dilution Horizon Ratio as of the immediately preceding Cut-Off Date.

“Dilution Volatility Component” means the product (expressed as a percentage) of (i) the difference between (a) the highest three (3)-month rolling average Dilution Ratio over the past 12 Calculation Periods and (b) the Adjusted Dilution Ratio, and (ii) a fraction, the numerator of which is equal to the amount calculated in (i)(a) of this definition and the denominator of which is equal to the amount calculated in (i)(b) of this definition.

“Downgraded Liquidity Bank” means a Liquidity Bank which has been the subject of a Downgrading Event.

“Downgrading Event” with respect to any Person means the lowering of the rating with regard to the short-term securities of such Person to below (i) A-1+ by S&P, or (ii) P-1 by Moody’s.

“Eligible Assignee” means a commercial bank having a combined capital and surplus of at least $250,000,000 with a rating of its (or its parent holding company’s) short-term securities equal to or higher than (i) A-1+ by S&P and (ii) P-1 by Moody’s.

“Eligible Receivable” means, at any time, a Receivable:

(i) the Obligor of which (a) if a natural person, is a resident of the United States or Puerto Rico or, if a corporation or other business organization, is organized under the laws of the United States, Puerto Rico or any political subdivision of the United States or Puerto Rico and has its chief executive office in the United States or Puerto Rico; (b) is not an Affiliate of any of the Loan Parties; and (c) is not a government or a governmental subdivision or agency; provided, however, that not more than 1% of total Receivables may be comprised of Receivables owing from Obligors organized under the laws of or resident in Puerto Rico;

(ii) which is not a Defaulted Receivable,

(iii) which is not owing from an Obligor as to which more than 35% of the aggregate Outstanding Balance of all Receivables owing from such Obligor are Defaulted Receivables,

(iv) which was not a Delinquent Receivable on the date on which it was acquired by Borrower from the applicable Originator,

(v) which by its terms is due and payable within 60 days of the original billing date therefor and has not had its payment terms extended more than once (except that up to 5% of the aggregate Outstanding Balance of all Receivables may have terms payable within 61-90 days of the original billing date therefor and

up to 4% of the aggregate Outstanding Balance of all Eligible Receivables may arise from progress billings to The Home Depot, Inc. or one of its Affiliates),

(vi) which is an “account” within the meaning of Article 9 of the UCC of all applicable jurisdictions,

(vii) which is denominated and payable only in (A) United States dollars in the United States, or (B) in the case of Receivables on which The Home Depot, Inc. or one of its Affiliates is the Obligor, Canadian dollars in the United States,

(viii) which arises under a Contract which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor enforceable against such Obligor in accordance with its terms,

(ix) which arises under a Contract which does not contain a confidentiality provision that purports to restrict the ability of VFCC to exercise its rights under this Agreement, including, without limitation, its right to review the Contract,

(x) which arises under a Contract that contains an obligation to pay a specified sum of money, contingent only upon the sale of goods or the provision of services by the applicable Originator,

(xi) which, together with the Contract related thereto, does not contravene any law, rule or regulation applicable thereto (including, without limitation, any law, rule and regulation relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no part of the Contract related thereto is in violation of any such law, rule or regulation,

(xii) which satisfies all applicable requirements of the Credit and Collection Policy,

(xiii) which was generated in the ordinary course of the applicable Originator’s business,

(xiv) which arises solely from the sale of goods or the provision of services to the related Obligor by the applicable Originator, and not by any other Person (in whole or in part),

(xv) which is not subject to any dispute, counterclaim, right of rescission, set-off, counterclaim or any other defense (including defenses arising out of violations of usury laws) of the applicable Obligor against the applicable Originator or any other Adverse Claim, and the Obligor thereon holds no right as against the Originator to cause the Originator to repurchase the goods or merchandise the sale of which shall have given rise to such Receivable (except with respect to sale discounts effected pursuant to the Contract, or defective goods returned in accordance with the terms of the Contract); provided, however, that if such dispute, offset, counterclaim or defense affects only a portion of the

Outstanding Balance of such Receivable, then such Receivable may be deemed an Eligible Receivable to the extent of the portion of such Outstanding Balance which is not so affected, and provided, further, that (A) Receivables of any Obligor which has any accounts payable by the applicable Originator or by a wholly-owned Subsidiary of the Originator (thus giving rise to a potential offset against such Receivables) may be treated as Eligible Receivables to the extent that the Obligor of such Receivables has agreed pursuant to a written agreement in form and substance satisfactory to the Agent, that such Receivables shall not be subject to such offset, and (B) the Agent, in its sole discretion, may chose to allow certain disputed receivables to be counted as Eligible Receivables,

(xvi) as to which the applicable Originator has satisfied and fully performed all obligations on its part with respect to such Receivable required to be fulfilled by it, and no further action is required to be performed by any Person with respect thereto other than payment thereon by the applicable Obligor (excluding (A) warranty obligations for which no claim exists, and (B) progress billings to The Home Depot, Inc. or one of its Affiliates to the extent permitted under clause (v) above),

(xvii) as to which each of the representations and warranties contained in Sections 5.1(g), (i), (j), (q), (r), (s) and (t) is true and correct, and

(xviii) all right, title and interest to and in which has been validly transferred by the applicable Originator directly to Borrower under and in accordance with the Receivables Sale Agreement, and Borrower has good and marketable title thereto free and clear of any Adverse Claim (other than Permitted Encumbrances).

“Event of Bankruptcy” shall be deemed to have occurred with respect to a Person if either:

(a) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or all or substantially all of its assets, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 60 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws or other similar laws now or hereafter in effect; or

(b) such Person shall commence a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee (other than a trustee under a deed of

trust, indenture or similar instrument), custodian, sequestrator (or other similar official) for, such Person or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall be adjudicated insolvent, or admit in writing its inability to pay its debts generally as they become due, or, if a corporation or similar entity, its board of directors shall vote to implement any of the foregoing.

“Executive Officer” means any of the chief executive officer, president, executive vice president or senior vice president of the Parent.

“Facility Termination Date” means the earlier of (i) the Liquidity Termination Date and (ii) the Amortization Date.

“Federal Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as amended and any successor statute thereto.

“Federal Funds Effective Rate” means, for any period, a fluctuating interest rate per annum for each day during such period equal to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the preceding Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S. Government Securities; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:30 a.m. (New York time) for such day on such transactions received by the Agent from three federal funds brokers of recognized standing selected by it.

“Fee Letter” means that certain letter agreement dated as of October 19, 2007 between the Borrower and the Agent, as it may be amended, restated or otherwise modified and in effect from time to time.

“Final Payout Date” means the date on which all Obligations have been paid in full and the Aggregate Commitment has been terminated.

“Finance Charges” means, with respect to a Contract, any finance, interest, late payment charges or similar charges owing by an Obligor pursuant to such Contract.

“Fiscal Month” means any fiscal month of the Performance Guarantor.

“Fiscal Quarter” means any fiscal quarter of the Performance Guarantor.

“Fiscal Year” means any fiscal year of the Performance Guarantor.

“Funding Agreement” means (i) this Agreement, (ii) the Liquidity Agreement and (iii) any other agreement or instrument executed by any Funding Source with or for the benefit of VFCC.

“Funding Source” means (i) any Liquidity Bank or (ii) any insurance company, bank or other funding entity providing liquidity, credit enhancement or back-up purchase support or facilities to VFCC.

“FX Reserve” means, at any time, an amount equal to 10% of the aggregate Outstanding Balance of all Eligible Receivables on which The Home Depot, Inc. or one of its Affiliates is the Obligor that are denominated in Canadian dollars.

“GAAP” means generally accepted accounting principles in effect in the United States of America as of the date of this Agreement.

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

“Indebtedness” of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under Capital Leases, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker’s acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations of such Person to reimburse any bank or other Person in respect of amounts paid or to be paid under a letter of credit or similar instrument, (viii) all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person, and (ix) all Indebtedness of others Guaranteed by such Person.

“Independent Director” shall mean a member of the Board of Directors of the Borrower who is not at such time, and has not been at any time during the preceding five (5) years: (A) a director, officer, employee or affiliate of Performance Guarantor, Originator or any of their respective Subsidiaries or Affiliates (other than the Borrower), or (B) the beneficial owner (at the time of such individual’s appointment as an Independent Director or at any time thereafter while serving as an Independent Director) of any of the outstanding common shares of the Borrower, Originator, or any of their respective Subsidiaries or Affiliates, having general voting rights (excepting immaterial beneficial interests in mutual funds or similar managed investment accounts which in no case shall exceed 5% of any class of such shares).

“Initial Cutoff Date” means the Business Day immediately prior to the date hereof.

“Interest” means for each respective Interest Period relating to Loans of the Liquidity Banks, an amount equal to the product of the applicable Interest Rate for each Loan multiplied by the principal of such Loan for each day elapsed during such Interest Period, annualized on a 360 day basis.

“Interest Period” means, with respect to any Loan held by a Liquidity Bank:

(a) if Interest for such Loan is calculated on the basis of the LIBO Rate, a period of one, two, three or six months, or such other period as may be mutually agreeable to the Agent and the Borrower, commencing on a Business Day selected by the Borrower or the Agent pursuant to this Agreement. Such Interest Period shall end on the day in the applicable succeeding calendar month which corresponds numerically to the beginning day of such Interest Period, provided, however, that if there is no such numerically corresponding day in such succeeding month, such Interest Period shall end on the last Business Day of such succeeding month; or

(b) if Interest for such Loan is calculated on the basis of the Alternate Base Rate, a period commencing on a Business Day selected by the Borrower and agreed to by the Agent, provided that no such period shall exceed one month.

If any Interest Period would end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that in the case of Interest Periods corresponding to the LIBO Rate, if such next succeeding Business Day falls in a new month, such Interest Period shall end on the immediately preceding Business Day. In the case of any Interest Period for any Loan which commences before the Amortization Date and would otherwise end on a date occurring after the Amortization Date, such Interest Period shall end on the Amortization Date. The duration of each Interest Period which commences after the Amortization Date shall be of such duration as selected by the Agent.

“Interest Rate” means, with respect to each Loan of the Liquidity Banks, the LIBO Rate, the Alternate Base Rate or the Default Rate, as applicable.

“Interest Reserve” means, for any Calculation Period, the product (expressed as a percentage) of (i) 1.5 times (ii) the Alternate Base Rate as of the immediately preceding Cut-Off Date times (iii) a fraction the numerator of which is the highest Days Sales Outstanding for the most recent 12 Calculation Periods and the denominator of which is 360.

“Lender” means VFCC and each Liquidity Bank.

“LIBO Rate” means, for any Interest Period, the rate per annum determined on the basis of the offered rate for deposits in U.S. dollars of amounts equal or comparable to the principal amount of the related Loan offered for a term comparable to such Interest Period, which rates appear on a Bloomberg L.P. terminal, displayed under the address “US0001M <Index> Q <Go>” effective as of 11:00 A.M., London time, two Business Days prior to the first day of such Interest Period, provided that if no such offered rates appear on such page, the LIBO Rate for such Interest Period will be the arithmetic average (rounded upwards, if necessary, to the next higher 1/100th of 1%) of rates quoted by not less than two major banks in New York, New York, selected by the Agent, at approximately 10:00 a.m.(New York time), two

Business Days prior to the first day of such Interest Period, for deposits in U.S. dollars offered by leading European banks for a period comparable to such Interest Period in an amount comparable to the principal amount of such Loan, divided by (b) one minus the maximum aggregate reserve requirement (including all basic, supplemental, marginal or other reserves) which is imposed against the Agent in respect of Eurocurrency liabilities, as defined in Regulation D of the Board of Governors of the Federal Reserve System as in effect from time to time (expressed as a decimal), applicable to such Interest Period plus (ii) the Applicable Margin per annum. The LIBO Rate shall be rounded, if necessary, to the next higher 1/16 of 1%.

“LIBO Rate Loan” means a Loan which bears interest at the LIBO Rate.

“Lien” shall mean any lien, charge, claim, security interest, mortgage or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever.

“Liquidity Agreement” means that certain Liquidity Asset Purchase Agreement, dated as of October 19, 2007 by and among VFCC, the Agent and the banks from time to time party thereto, as the same may be amended, restated and/or otherwise modified from time to time in accordance with the terms thereof.

“Liquidity Banks” has the meaning set forth in the preamble in this Agreement.

“Liquidity Commitment” means, as to each Liquidity Bank, its commitment under the Liquidity Agreement (which shall equal 102% of its Commitment hereunder).

“Liquidity Funding” means (a) a purchase made by any Liquidity Bank pursuant to its Liquidity Commitment of all or any portion of, or any undivided interest in, a VFCC Loan, or (b) any Loan made by a Liquidity Bank in lieu of VFCC pursuant to Section 1.1.

“Liquidity Termination Date” means the earlier to occur of the following:

(a) the date on which the Liquidity Banks’ Liquidity Commitments expire, cease to be available to VFCC or otherwise cease to be in full force and effect; or

(b) the date on which a Downgrading Event with respect to a Liquidity Bank shall have occurred and been continuing for not less than 30 days, and either (i) the Downgraded Liquidity Bank shall not have been replaced by an Eligible Assignee pursuant to the Liquidity Agreement, or (ii) the Liquidity Commitment of such Downgraded Liquidity Bank shall not have been funded or collateralized in such a manner that will avoid a reduction in or withdrawal of the credit rating applied to the Commercial Paper to which such Liquidity Agreement applies by any of the rating agencies then rating such Commercial Paper.

“Loan” means any loan made by a Lender pursuant to this Agreement (including, without limitation, any Liquidity Funding). Each Loan shall either be a CP Rate Loan, an Alternate Base Rate Loan or a Eurodollar Rate Loan, selected in accordance with the terms of this Agreement. For purposes of determining compliance with the Borrowing Bases, each Loan shall be deemed to be made to the Borrower that receives the proceeds thereof even though the Borrower shall be liable for the repayment thereof.

“Loan Parties” has the meaning set forth in the preamble to this Agreement.

“Lock-Box” means each locked postal box with respect to which a bank who has executed a Collection Account Agreement has been granted exclusive access for the purpose of retrieving and processing payments made on the Receivables and which is listed on Exhibit IV.

“Loss Reserve” means, for any Calculation Period, the product (expressed as a percentage) of (a) 2.00, times (b) the highest three-month rolling average Default Ratio during the 12 Calculation Periods ending on the immediately preceding Cut-Off Date, times (c) the Default Horizon Ratio as of the immediately preceding Cut-Off Date.

“Margin Stock” means “margin stock” as defined in Regulations T, U or X.

“Material Adverse Effect” means a material adverse effect on (i) the financial condition or operations of the Parent and its Subsidiaries taken as a whole, (ii) the ability of any Loan Party to perform its obligations under this Agreement or the Performance Guarantor to perform its obligations under the Performance Undertaking, (iii) the legality, validity or enforceability of this Agreement or any other Transaction Document, (iv) the Agent’s security interest, for the benefit of the Secured Parties, in the Receivables generally or in any significant portion of the Receivables, the Related Security or the Collections with respect thereto, or (v) the collectibility of the Receivables generally or of any significant portion of the Receivables.

“Material Subsidiary” means (i) each of the Borrower and ASP and (ii) each other Consolidated Subsidiary, now existing or hereinafter established or acquired, that at any time prior to the payment in full of all Aggregate Unpaids under this Agreement either (x) has or acquires total assets in excess of 10% of Consolidated Total Assets at the end of the most recent Fiscal Quarter, or (y) contributed more than 10% of Consolidated Operating Profits for the 4 most recent Fiscal Quarters then ended (or, with respect to any Subsidiary which existed during the entire 4 Fiscal Quarter period but was acquired by the Parent during such period, which would have contributed more than 10% of Consolidated Operating Profits for such period had it been a Subsidiary for the entire period, as determined on a pro forma basis in accordance with GAAP).

“Monthly Report” means a report, in substantially the form of Exhibit VIII hereto (appropriately completed), furnished by the Servicer to the Agent pursuant to Section 8.5.

“Monthly Reporting Date” means the 15^th Business Day of each month after the date of this Agreement or such other days of each month as the Agent shall request in connection with Section 8.5 hereof.

“Moody’s” means Moody’s Investors Service, Inc.

“Net Pool Balance” means, at any time, the aggregate Outstanding Balance of all Eligible Receivables at such time reduced by the aggregate amount by which the Outstanding Balance of all Eligible Receivables of each Obligor and its Affiliates exceeds the Obligor Concentration Limit for such Obligor.

“Obligations” means, at any time, any and all obligations of either of the Loan Parties to any of the Secured Parties arising under or in connection with the Transaction Documents, whether now existing or hereafter arising, due or accrued, absolute or contingent, including, without limitation, obligations in respect of Aggregate Principal, CP Costs, Interest, fees under the Fee Letter, Broken Funding Costs and Indemnified Amounts.

“Obligor” means a Person obligated to make payments pursuant to a Contract.

“Obligor Concentration Limit” means, at any time, in relation to the aggregate Outstanding Balance of Receivables owed by any single Obligor and its Affiliates (if any), the applicable concentration limit shall be determined as follows for Obligors who have short term unsecured debt ratings currently assigned to them by S&P and Moody’s (or in the absence thereof, the equivalent long term unsecured senior debt ratings), the applicable concentration limit shall be determined according to the following table:


S&P Rating	Moody’s Rating	Allowable % of Eligible Receivables
A-1+	P-1	10%
A-1	P-1	8%
A-2	P-2	6%
A-3	P-3	5%
Below A-3 or Not Rated by either S&P or Moody’s	Below P-3 or Not Rated by either S&P or Moody’s	5%

; provided, however, that (a) if any Obligor has a split rating, the applicable rating will be the lower of the two, (b) if any Obligor is not rated by either S&P or Moody’s, the applicable Obligor Concentration Limit shall be the one set forth in the last line of the table above, and (c) subject to satisfaction of the Rating Agency Condition and/or an increase in the percentage set forth in clause (a)(i) of the definition of “Required Reserve,” upon Borrower’s request from time to time, the Agent may agree to a higher percentage of Eligible Receivables for a particular Obligor and its Affiliates (each such higher percentage, a “Special Concentration Limit”), it being understood that any Special Concentration Limit may be cancelled by the Agent upon not less than five (5) Business Days’ written notice to the Loan Parties. As of September 28, 2006, the Special Concentration Limit for all Receivables owing from The Home Depot, Inc. and its Affiliates is 25% of aggregate Outstanding Balance of all Eligible Receivables, provided that not more than 2% of the aggregate Outstanding Balance of the Eligible Receivables owing from all such special Obligors are denominated in Canadian dollars.

“Operating Profits” means, as applied to any Person for any period, the sum of (i) net revenues, less (ii) cost of goods and services sold, less (iii) operating expenses (including depreciation and amortization) of such Person for such period, as determined in accordance with GAAP.

“Originator” means ASP in its capacity as seller under the Receivables Sale Agreement.

“Outstanding Balance” of any Receivable at any time means the then outstanding principal balance thereof.

“Participant” has the meaning set forth in Section 12.2.

“Performance Guarantor” means ZEP, Inc., a Delaware corporation (formerly known as Acuity Brands Holdings, Inc.), and its successors and permitted assigns.

“Performance Undertaking” means each Performance Undertaking, dated as of October 19, 2007, by Performance Guarantor in favor of the Borrower, substantially in the form of Exhibit IX, as the same may be amended, restated or otherwise modified from time to time.

“Permitted Encumbrances” shall mean the following: (a) Liens for taxes or assessments or other governmental charges not yet due and payable; and (b) Liens created by the Transaction Documents.

“Person” means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

“Pooled Commercial Paper” means Commercial Paper notes of VFCC subject to any particular pooling arrangement by VFCC, but excluding Commercial Paper issued by VFCC for a tenor and in an amount specifically requested by any Person in connection with any agreement effected by VFCC.

“Prime Rate” means a rate per annum equal to the prime rate of interest announced from time to time by Wachovia (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes.

“Pro Rata Share” means, for each Liquidity Bank, a percentage equal to the Commitment of such Liquidity Bank, divided by the Aggregate Commitment.

“Program Fee” has the meaning set forth in the Fee Letter.

“Proposed Reduction Date” has the meaning set forth in Section 1.3.

“Proprietary Information” means all information about the Performance Guarantor or any of its Subsidiaries which has been furnished to the Agent or any Lender by or on behalf of the Performance Guarantor or any of its Subsidiaries before or after the date hereof or which is obtained by any Lender or the Agent in the course of any Review made pursuant to Section 7.1(d) of the Agreement; provided, however, that the term “Proprietary Information” does not include information which (x) is or becomes publicly available (other than as a result of a breach of Section 14.5 of the Agreement), (y) is possessed by or available to the Agent or any Lender on a non-confidential basis prior to its disclosure to the Agent or such Lender by the Borrower or Subsidiary or (z) becomes available to the Agent or any Lender on a non-confidential

basis from a Person which, to the knowledge of the Agent or such Lender, as the case may be, is not bound by a confidentiality agreement with the Performance Guarantor or any of its Subsidiaries and is not otherwise prohibited from transmitting such information to the Agent or such Lender. In the event the Agent or any Lender is required to disclose any Proprietary Information by virtue of clause (ii) (but only if and to the extent such disclosure has not been sought by the Agent or any Lender, and if neither the Performance Guarantor nor the Borrower is a party to such litigation), (iv) or (v) above, to the extent such Lender or the Agent (as the case may be) determines in good faith that it is permissible by law so to do, it shall promptly notify the Performance Guarantor of same so as to allow the Performance Guarantor or its Subsidiaries to seek a protective order or to take other appropriate action; provided, however, neither any Lender nor the Agent shall be required to delay compliance with any directive to disclose any such information so as to allow the Performance Guarantor or any of Subsidiaries to effect any such action.

“Purchasing Liquidity Bank” has the meaning set forth in Section 12.1(b).

“Rating Agency Condition” means that VFCC has received written notice from S&P and Moody’s that an amendment, a change or a waiver to the Liquidity Agreement, this Agreement or the Receivables Sale Agreement, will not result in a withdrawal or downgrade of the then current ratings on VFCC’s Commercial Paper.

“Receivable” means each “Receivable” under and as defined in the Receivables Sale Agreement in which the Borrower now has or hereafter acquires any interest. Debt and other rights and obligations arising from any one transaction, including, without limitation, indebtedness and other rights and obligations represented by an individual invoice, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other rights and obligations arising from any other transaction; provided further, that any indebtedness, rights or obligations referred to in the immediately preceding sentence shall be a Receivable regardless of whether the account debtor or the Borrower treats such indebtedness, rights or obligations as a separate payment obligation.

“Receivables Sale Agreement” means that certain Amended and Restated Receivables Sale and Contribution Agreement, dated as of September 26, 2007, between ASP and the Borrower, as amended as of October 19, 2007, as the same may be further amended, restated or otherwise modified from time to time.

“Records” means, with respect to any Receivable, all Contracts and other documents, books, records and other information (including, without limitation, computer programs, tapes, disks, punch cards, data processing software and related property and rights) relating to such Receivable, any Related Security therefor and the related Obligor.

“Redeemable Preferred Stock” of any Person means any preferred stock issued by such Person which is at any time prior to the Amortization Date either (i) mandatorily redeemable (by required sinking fund or similar payments or otherwise) or (ii) redeemable at the option of the holder thereof.

“Reduction Notice” has the meaning set forth in Section 1.3.

“Regulation T” means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder.

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder.

“Regulation X” means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder.

“Regulatory Change” means any change after the date of this Agreement in United States (federal, state or municipal) or foreign laws, regulations (including Regulation D) or accounting principles or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks (including the Liquidity Banks) of or under any United States (federal, state or municipal) or foreign laws, regulations (whether or not having the force of law) or accounting principles by any court, governmental or monetary authority, or accounting board or authority (whether or not part of government) charged with the establishment, interpretation or administration thereof. For the avoidance of doubt, any interpretation of Accounting Research Bulletin No. 51 by the Financial Accounting Standards Board shall constitute a Regulatory Change.

“Related Security” means all of (i) the “Related Security” under and as defined in the Receivables Sale Agreement, (ii) the Borrower’s right, title and interest in, to and under the Receivables Sale Agreement, (iii) the Borrower’s right, title and interest in and to the Demand Advances made by it, and (iv) the proceeds of any of the foregoing.

“Required Liquidity Banks” means, at any time, Liquidity Banks with Commitments in excess of 66-2/3% of the Aggregate Commitment.

“Required Notice Period” means the number of days required notice set forth below applicable to the Aggregate Reduction indicated below:


Aggregate Reduction		Required Notice Period
less than 25% of the then-current Aggregate Commitment		2 Business Days
greater than or equal to 25% but less than 50% of the then-current Aggregate Commitment		5 Business Days
greater than or equal to 50% of the then-current Aggregate Commitment		10 Business Days

“Required Reserve” means, on any day during a Calculation Period, the product of (a) the greater of (i) the Required Reserve Factor Floor and (ii) the sum of the Loss Reserve, the Interest Reserve, the Dilution Reserve and the Servicing Reserve, times (b) the Net Pool Balance as of the Cut-Off Date immediately preceding such Calculation Period.

“Required Reserve Factor Floor” means, for any Calculation Period, the sum (expressed as a percentage) of (a) 25% plus (b) the product of the Adjusted Dilution Ratio and the Dilution Horizon Ratio, in each case, as of the immediately preceding Cut-Off Date.

“Responsible Officer” means any Executive Officer as well as any other officer of the Parent who is primarily responsible for the administration of the transactions contemplated by the Transaction Documents.

“Restricted Junior Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of capital stock of the Borrower now or hereafter outstanding, except a dividend payable solely in shares of that class of stock or in any junior class of stock of the Borrower, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of capital stock of the Borrower now or hereafter outstanding, (iii) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of capital stock of the Borrower now or hereafter outstanding, and (iv) any payment of management fees by the Borrower (except for reasonable management fees to Originator or its Affiliates in reimbursement of actual management services performed).

“S&P” means Standard and Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc.

“Secured Parties” means the Indemnified Parties.

“Servicer” means at any time the Person (which may be the Agent) then authorized pursuant to Article VIII to service, administer and collect Receivables.

“Servicing Fee” means, for each day in a Calculation Period:

(a) an amount equal to (i) the Servicing Fee Rate (or, at any time while ASP or one of its Affiliates is the Servicer, such lesser percentage as may be agreed between the Borrower and the Servicer on an arms’ length basis based on then prevailing market terms for similar services), times (ii) the aggregate Outstanding Balance of all Receivables at the close of business on the Cut-Off Date immediately preceding such Calculation Period, times (iii) 1/360; or

(b) on and after the Servicer’s reasonable request made at any time when ASP or one of its Affiliates are no longer acting as Servicer hereunder, an alternative amount specified by the successor Servicer not exceeding (i) 110% of the Servicer’s reasonable costs and expenses of performing its obligations under this Agreement during the

preceding Calculation Period, divided by (ii) the number of days in the current Calculation Period.

“Servicing Fee Rate” means 0.25% per annum (or such higher percentage as the Agent and the Borrower may from time to time agree upon based upon then prevailing market conditions).

“Servicing Reserve” means, for any Calculation Period, the product (expressed as a percentage) of (a) 1.00%, times (b) a fraction, the numerator of which is the highest Days Sales Outstanding for the most recent 12 Calculation Periods and the denominator of which is 360.

“Settlement Date” means (A) the 2^nd Business Day after each Monthly Reporting Date, and (B) the last day of the relevant Interest Period in respect of each Loan of the Liquidity Banks.

“Settlement Period” means (A) in respect of each Loan of VFCC, the immediately preceding Calculation Period, and (B) in respect of each Loan of the Liquidity Banks, the entire Interest Period of such Loan.

“Subsidiary” means, with respect to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person.

“Tax Code” means the Internal Revenue Code of 1986, as the same may be amended from time to time.

“Termination Date” has the meaning set forth in Section 2.2.

“Termination Percentage” has the meaning set forth in Section 2.2.

“Terminating Tranche” has the meaning set forth in Section 4.3(b).

“Transaction Documents” means, collectively, this Agreement, each Borrowing Notice, the Receivables Sale Agreement, each Collection Account Agreement, the Performance Undertakings, the Fee Letter, and all other instruments, documents and agreements executed and delivered in connection herewith.

“UCC” means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction.

“Unmatured Amortization Event” means an event which, with the passage of time or the giving of notice, or both, would constitute an Amortization Event.

“Usage Fee” has the meaning set forth in the Fee Letter.

“VFCC” has the meaning set forth in the preamble to this Agreement.

“Wachovia” means Wachovia Bank, National Association, in its individual capacity and its capacity as agent.

Unless otherwise specified herein, all terms of an accounting character 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 (except for changes concurred in by the Parent’s independent public accountants or otherwise required by a change in GAAP) with the most recent audited consolidated financial statements of the Parent and its Consolidated Subsidiaries delivered to the Agent unless with respect to any such change concurred in by the Parent’s independent public accountants or required by GAAP, in determining compliance with any of the provisions of this Agreement or any of the other Transaction Documents: (i) the Parent shall have objected to determining such compliance on such basis at the time of delivery of such financial statements, or (ii) the Agent shall so object in writing within 30 days after the delivery of such financial statements, in either of which events such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made.

All terms used in Article 9 of the UCC in the State of Georgia, and not specifically defined herein, are used herein as defined in such Article 9.

EXHIBIT II

FORM OF BORROWING NOTICE

ACUITY ENTERPRISE, INC.

BORROWING NOTICE

dated , 20

for Borrowing on , 20

Wachovia Bank, National Association, as Agent

171 17th Street, N.W., 4th Floor

Mail-stop GA4524

Atlanta, GA 30363

Attention: Michael Landry

Phone: (404) 214-6388

Fax: (404) 214-5481

Ladies and Gentlemen:

Reference is made to the Credit and Security Agreement dated as of October 19, 2007 (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”) among Acuity Enterprise, Inc. (the “Borrower”), Acuity Specialty Products, Inc. as initial Servicer, Variable Funding Capital Company LLC, and Wachovia Bank, National Association, individually and as Agent. Capitalized terms defined in the Credit Agreement are used herein with the same meanings.

1. The [Servicer, on behalf of the] Borrower hereby certifies, represents and warrants to the Agent and the Lenders that on and as of the Borrowing Date (as hereinafter defined):

(a) all applicable conditions precedent set forth in Article VI of the Credit Agreement have been satisfied;

(b) each of its representations and warranties contained in Section 5.1 of the Credit Agreement will be true and correct, in all material respects, as if made on and as of the Borrowing Date;

(c) no event will have occurred and is continuing, or would result from the requested Advance, that constitutes an Amortization Event or Unmatured Amortization Event;

(d) the Facility Termination Date has not occurred; and

(e) after giving effect to the Advances requested below, the aggregate principal balance of the Advances outstanding will not exceed the Borrowing Base and the Aggregate Principal outstanding will not exceed the Aggregate Commitment.

2. The [Servicer, on behalf of the] Borrower hereby requests that VFCC (or its Liquidity Banks) make Advances on , 20 (the “Borrowing Date”) as follows:

(a) Aggregate Amount of Advances: $ .

(b) If the Advances are not funded by VFCC, the [Servicer on behalf of the] Borrower requests that the Liquidity Banks make Alternate Base Rate Loans that convert into LIBO Rate Loans with an Interest Period of months on the third Business Day after the Borrowing Date).

Please disburse the proceeds of the Loans as follows:

[Apply $ to payment of principal and interest of existing Loans due on the Borrowing Date]. [Apply $ to payment of fees due on the Borrowing Date]. [Wire transfer $ to account no. at Bank, in [city, state], ABA No. , Reference: , and $ to account no. at Bank, in [city, state], ABA No. , Reference: ].

IN WITNESS WHEREOF, the [Servicer, on behalf of the] Borrower has caused this Borrowing Request to be executed and delivered as of this day of , .


[ACUITY SPECIALTY PRODUCTS, INC., AS SERVICER, on behalf of] ACUITY ENTERPRISE, INC., AS BORROWER

By:
Name:
Title:

EXHIBIT III

PLACES OF BUSINESS OF THE LOAN PARTIES; LOCATIONS OF RECORDS;

FEDERAL EMPLOYER AND ORGANIZATIONAL IDENTIFICATION NUMBER(S);

PRIOR NAMES

Highway 41 North

Emerson, GA 30137

1310 Seaboard Industrial Blvd.

Atlanta, GA 30318

Borrower’s Federal Employee Identification Number: #31-1825290

Borrower’s Organization Identification Number: #3680055

EXHIBIT IV

NAMES OF COLLECTION BANKS; LOCK-BOXES & COLLECTION ACCOUNTS


LOCK-BOX	RELATED COLLECTION ACCOUNT
P.O. Box 945786 Atlanta, GA 30392-5786	Name of Current Account Holder: Account Number: Bank Name: ABA Number: Contact Person: Contact’s Tel: Contact’s Fax:	[Enforcer Products, a division of ASP] Lockbox#945786,DDA#2079900422649 Wachovia Bank, National Association 061000227 Shirley Clements 800-590-7868, Team #401, Ext.240465 866-842-0585

13237 Collections Center Dr. Chicago, IL 60693 P.O. Box 404628 Atlanta, GA 30384-4628 File 50188 Los Angeles, CA 90074-0188 P.O. Box 841508 Dallas, TX 75284-1508 P.O. Box 3338 Boston, MA 02241-3338	Name of Current Account Holder: Account Number: Bank Name: ABA Number: Contact Person: Contact’s Tel: Contact’s Fax:	[Zep Manufacturing, a division of ASP] 3756337286 Bank of America 111000012 Louvenia Parker 404-607-5441 404-532-3404

P.O. Box 12118 Atlanta, GA 30384	Name of Current Account Holder: Account Number: Bank Name: ABA Number: Contact Person: Contact’s Tel: Contact’s Fax:	[Enforcer Products, a division of ASP] Lockbox #12118, DDA #3751911681 Bank of America 111000012 Louvenia Parker 404-607-5441 404-532-3404

EXHIBIT V

FORM OF COMPLIANCE CERTIFICATE

To: Wachovia Bank, National Association, as Agent

This Compliance Certificate is furnished pursuant to that certain Credit and Security Agreement dated as of October 19, 2007 among Acuity Enterprise, Inc. (the “Borrower”), Acuity Specialty Products, Inc. as initial Servicer, Variable Funding Capital Company LLC, and Wachovia Bank, National Association, individually and as Agent (the “Agreement”).

THE UNDERSIGNED HEREBY CERTIFIES IN HIS OR HER REPRESENTATIVE CAPACITY ON BEHALF OF PERFORMANCE GUARANTOR THAT:

1. I am the duly elected of .

2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of Performance Guarantor and its Subsidiaries during the accounting period covered by the attached financial statements.

3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Amortization Event or Unmatured Amortization Event, as each such term is defined under the Agreement, during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate[, except as set forth in paragraph 5 below].

4. Schedule I attached hereto sets forth financial data and computations evidencing the compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct.

[5. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which has taken, is taking, or proposes to take with respect to each such condition or event: ]

The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered by the undersigned in his or her representative capacity on behalf of , all as of , 20__ .




By:
Name:
Title:

SCHEDULE I TO COMPLIANCE CERTIFICATE

A. Schedule of Compliance as of , 200_ with Section of the Agreement. Unless otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement.

This schedule relates to the month ended:

EXHIBIT VI

[intentionally omitted]

EXHIBIT VII

FORM OF ASSIGNMENT AGREEMENT

THIS ASSIGNMENT AGREEMENT (this “Assignment Agreement”) is entered into as of the day of , , by and between (“Assignor”) and (“Assignee”).

PRELIMINARY STATEMENTS

A. This Assignment Agreement is being executed and delivered in accordance with Section 12.1(b) of that certain Credit and Security Agreement dated as of October 19, 2007 by and among Acuity Enterprise, Inc. (the “Borrower”), Acuity Specialty Products, Inc. as initial Servicer, Variable Funding Capital Company LLC, and Wachovia Bank, National Association, as Agent, and the Liquidity Banks party thereto (as amended, modified or restated from time to time, the “Credit and Security Agreement”) and that certain Liquidity Asset Purchase Agreement dated as of October __, 2007 by and among VFCC, the Liquidity Banks from time to time party thereto and Wachovia Bank, National Association, as Agent (as amended, modified or restated from time to time, the “Liquidity Agreement”). Capitalized terms used and not otherwise defined herein are used with the meanings set forth or incorporated by reference in the Credit and Security Agreement.

B. Assignor is a Liquidity Bank party to the Credit and Security Agreement and the Liquidity Agreement, and Assignee wishes to become a Liquidity Bank thereunder; and

C. Assignor is selling and assigning to Assignee an undivided % (the “Transferred Percentage”) interest in all of Assignor’s rights and obligations under the Transaction Documents and the Liquidity Agreement, including, without limitation, Assignor’s Commitment, Assignor’s Liquidity Commitment and (if applicable) Assignor’s Loans to the Borrower as set forth herein.

AGREEMENT

The parties hereto hereby agree as follows:

1. The sale, transfer and assignment effected by this Assignment Agreement shall become effective (the “Effective Date”) two (2) Business Days (or such other date selected by the Agent in its sole discretion) following the date on which a notice substantially in the form of Schedule II to this Assignment Agreement (“Effective Notice”) is delivered by the Agent to VFCC, Borrower, Servicer, Assignor and Assignee. From and after the Effective Date, Assignee shall be a Liquidity Bank party to the Credit and Security Agreement for all purposes thereof as if Assignee were an original party thereto and Assignee agrees to be bound by all of the terms and provisions contained therein.

2. If Assignor has no outstanding principal under the Credit and Security Agreement or the Liquidity Agreement, on the Effective Date, Assignor shall be deemed to have hereby transferred and assigned to Assignee, without recourse, representation or warranty

(except as provided in paragraph 6 below), and the Assignee shall be deemed to have hereby irrevocably taken, received and assumed from Assignor, the Transferred Percentage of Assignor’s Commitment and Liquidity Commitment and all rights and obligations associated therewith under the terms of the Credit and Security Agreement and the Liquidity Agreement, including, without limitation, the Transferred Percentage of Assignor’s future funding obligations under the Credit and Security Agreement and the Liquidity Agreement.

3. If Assignor has any outstanding principal under the Credit and Security Agreement and Liquidity Agreement, at or before 12:00 noon, local time of Assignor, on the Effective Date Assignee shall pay to Assignor, in immediately available funds, an amount equal to the sum of (i) the Transferred Percentage of the outstanding principal of Assignor’s Loans and, without duplication, Assignor’s Percentage Interests (as defined in the Liquidity Agreement) (such amount, being hereinafter referred to as the “Assignee’s Principal”); (ii) all accrued but unpaid (whether or not then due) Interest attributable to Assignee’s Principal; and (iii) accruing but unpaid fees and other costs and expenses payable in respect of Assignee’s Principal for the period commencing upon each date such unpaid amounts commence accruing, to and including the Effective Date (the “Assignee’s Acquisition Cost”); whereupon, Assignor shall be deemed to have sold, transferred and assigned to Assignee, without recourse, representation or warranty (except as provided in paragraph 6 below), and Assignee shall be deemed to have hereby irrevocably taken, received and assumed from Assignor, the Transferred Percentage of Assignor’s Commitment, Liquidity Commitment, Loans (if applicable) and Percentage Interests (if applicable) and all related rights and obligations under the Transaction Documents and the Liquidity Agreement, including, without limitation, the Transferred Percentage of Assignor’s future funding obligations under the Credit and Security Agreement and the Liquidity Agreement.

4. Concurrently with the execution and delivery hereof, Assignor will provide to Assignee copies of all documents requested by Assignee which were delivered to Assignor pursuant to the Credit and Security Agreement or the Liquidity Agreement.

5. Each of the parties to this Assignment Agreement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment Agreement.

6. By executing and delivering this Assignment Agreement, Assignor and Assignee confirm to and agree with each other, the Agent and the Liquidity Banks as follows: (a) other than the representation and warranty that it has not created any Adverse Claim upon any interest being transferred hereunder, Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made by any other Person in or in connection with any of the Transaction Documents or the Liquidity Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of Assignee, the Credit and Security Agreement, the Liquidity Agreement or any other instrument or document furnished pursuant thereto or the perfection, priority, condition, value or sufficiency of any Collateral; (b) Assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any Obligor, any Affiliate of the Borrower or the performance or observance by the Borrower, any Obligor, any Affiliate of the

Borrower of any of their respective obligations under the Transaction Documents or any other instrument or document furnished pursuant thereto or in connection therewith; (c) Assignee confirms that it has received a copy of each of the Transaction Documents and the Liquidity Agreement, and other documents and information as it has requested and deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (d) Assignee will, independently and without reliance upon the Agent, VFCC, Borrower or any other Liquidity Bank or Lender 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 the Transaction Documents and the Liquidity Agreement; (e) Assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Transaction Documents and the Liquidity Agreement as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (f) Assignee agrees that it will perform in accordance with their terms all of the obligations which, by the terms of the Liquidity Agreement, the Credit and Security Agreement and the other Transaction Documents, are required to be performed by it as a Liquidity Bank or, when applicable, as a Lender.

7. Each party hereto represents and warrants to and agrees with the Agent that it is aware of and will comply with the provisions of the Credit and Security Agreement, including, without limitation, Sections 14.5 and 14.6 thereof.

8. Schedule I hereto sets forth the revised Commitment and Liquidity Commitment of Assignor and the Commitment and Liquidity Commitment of Assignee, as well as administrative information with respect to Assignee.

9. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

10. Assignee hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of all senior indebtedness for borrowed money of VFCC, it will not institute against, or join any other Person in instituting against, VFCC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed by their respective duly authorized officers of the date hereof.


[ASSIGNOR]

By:
Title:

[ASSIGNEE]

By:
Title:

SCHEDULE I TO ASSIGNMENT AGREEMENT

LIST OF LENDING OFFICES, ADDRESSES

FOR NOTICES AND COMMITMENT AMOUNTS

Date: ,

Transferred Percentage: %

A-1

A-2

B-1

B-2

C-1

C-2

Assignor

Commitment (prior to giving effect to the Assignment Agreement)

Commitment (after giving effect to the Assignment Agreement)

Outstanding principal (if any)

Ratable Share of Outstanding principal

Liquidity Commitment (prior to giving effect to the Assignment Agreement)

Liquidity Commitment (after giving effect to the Assignment Agreement)

A-1

A-2

B-1

B-2

C-1

C-2

Assignee

Commitment (prior to giving effect to the Assignment Agreement)

Commitment (after giving effect to the Assignment Agreement)

Outstanding principal (if any)

Ratable Share of Outstanding principal

Liquidity Commitment (prior to giving effect to the Assignment Agreement)

Liquidity Commitment (after giving effect to the Assignment Agreement)

Address for Notices

Attention:

Phone:

Fax:

SCHEDULE II TO ASSIGNMENT AGREEMENT

EFFECTIVE NOTICE



TO:				, Assignor



TO:				, Assignee

The undersigned, as Agent under the Credit and Security Agreement dated as of October __, 2007 by and among Acuity Enterprise, Inc., as Borrower and Acuity Specialty Products, Inc., as initial Servicer, Variable Funding Capital Company LLC, Wachovia Bank, National Association, as Agent, and the Liquidity Banks party thereto, hereby acknowledges receipt of executed counterparts of a completed Assignment Agreement dated as of , 200_ between , as Assignor, and , as Assignee. Terms defined in such Assignment Agreement are used herein as therein defined.

1. Pursuant to such Assignment Agreement, you are advised that the Effective Date will be , .

2. Each of the undersigned hereby consents to the Assignment Agreement as required by Section 12.1(b) of the Credit and Security Agreement.

[3. Pursuant to such Assignment Agreement, the Assignee is required to pay $ to Assignor at or before 12:00 noon (local time of Assignor) on the Effective Date in immediately available funds.]


Very truly yours,

WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent

By:
Title:


VARIABLE FUNDING CAPITAL COMPANY LLC
By: Wachovia CAPITAL MARKETS, LLC, ITS ATTORNEY-IN-FACT

By:
Name:
Title:

***[The Borrower hereby consents to the foregoing assignment:


ACUITY ENTERPRISE, INC.

By:
		Name:
		Title:]****

EXHIBIT VIII

FORM OF MONTHLY REPORT

[attached]

Acuity Enterprise Inc Monthly Servicer Report

For the Month Ended:

8/31/07

(Page 1)

($)


Borrowing Base
A/R ROLLFORWARD
Beginning Balance
Add: Sales
Less: Allowances (-)
Add: Gross Debit Adjustments (+)
Less: Bad Debt Write-offs
Less: Collections (-)
Less: Returns & Rebills (-)
Less: Returns (-)
Add: Gross OIR Debits (excluding branch transfers)
Less: Gross OIR Credits (excluding branch transfers)
Less: Gross Credit Adjustments
EOM AR Balance

AGING SCHEDULE		% of Total Aging
	Current	Current Month	1 Month Prior	2 Months Prior
Current
1-30 DPD
31-60 DPD
61-90 DPD
91-120 DPD
121+ Days Past Due
Total Credits in Agings

Total Aging

A/R RECONCILIATIONS
Calculated Ending A/R
Reported Ending A/R
Difference
Calculated Ending A/R
Total Aging
Difference
INELIGIBLES
Defaulted Receivables
Unapplied Cash and Credits in 91-120 DPD bucket
Unapplied Cash and Credits in 121+ DPD bucket
Not Ineligible: Government Receivables
Not Ineligible: Home Depot billed in Canadian $s in the U.S.
Foreign Receivables
Cross Aging Receivables
Intercompany Receivables
Bankrupt
Not Ineligible: Terms > 60 Days
Not Ineligible: >90 day terms
Ineligible Terms
Installment Contracts
Rebate Accrual (Contractual)
Coop Accrual (Contractual)
Cash Discounts (Contractual)
Ineligible Govt Receivables
Total Ineligibles

Eligible Receivables

EXHIBIT IX

[FORM OF] PERFORMANCE UNDERTAKING

THIS PERFORMANCE UNDERTAKING (this “Undertaking”), dated as of October __, 2007, is executed by ZEP, Inc., a Delaware corporation (formerly known as Acuity Brands Holdings, Inc.) (the “Performance Guarantor”) in favor of Acuity Enterprise, Inc., a Delaware corporation (together with its successors and assigns, “Recipient”).

RECITALS

Acuity Specialty Products, Inc., a Delaware corporation (“Originator”), and Recipient are parties to an Second Amended and Restated Receivables Sale and Contribution Agreement, dated as of October 19, 2007 (as amended, restated or otherwise modified from time to time, the “Sale and Contribution Agreement”), pursuant to which Originator, subject to the terms and conditions contained therein, is selling its right, title and interest in its accounts receivable and certain related assets to Recipient.

Recipient intends to finance its purchases under the Sale and Contribution Agreement in part by borrowing under an Amended and Restated Credit and Security Agreement dated as of October 19, 2007 (as the same may from time to time hereafter be amended, supplemented, restated or otherwise modified, the “Credit and Security Agreement” and, together with the Sale and Contribution Agreement, the “Agreements”) among Recipient, as Borrower, Acuity Specialty Products, Inc., as initial servicer (in such capacity, the “Initial Servicer”), Variable Funding Capital Company LLC (“VFCC”), the banks and other financial institutions from time to time party thereto as “Liquidity Banks” (together with VFCC, the “Lenders”) and Wachovia Bank, National Association or any successor agent appointed pursuant to the terms of the Credit and Security Agreement, as agent for the Lenders (in such capacity, the “Agent”).

Performance Guarantor owns, directly or indirectly, one hundred percent (100%) of the capital stock of Originator, the other Initial Servicer and Recipient, and Originator (and accordingly, Performance Guarantor) is expected to receive substantial direct and indirect benefits from its sale and contribution of receivables pursuant to the Sale and Contribution Agreement (which benefits are hereby acknowledged).

As an inducement for Recipient to acquire Originator’s accounts receivable pursuant to the Sale and Contribution Agreement, Performance Guarantor has agreed to guaranty (a) the due and punctual performance by Originator of its obligations under the Sale and Contribution Agreement, and (b) the due and punctual performance by the Initial Servicer of its servicing duties under the Credit and Security Agreement.

5.	Performance Guarantor wishes to guaranty the due and punctual performance by Originator and the Initial Servicer of the aforesaid obligations as provided herein.

AGREEMENT

NOW, THEREFORE, Performance Guarantor hereby agrees as follows:

Section 1. Definitions. Capitalized terms used herein and not defined herein shall the respective meanings assigned thereto in the Agreements. In addition:

“Guaranteed Obligations” means, collectively, (a) all covenants, agreements, terms, conditions and indemnities to be performed and observed by Originator as seller and contributor under the Sale and Contribution Agreement, including, without limitation, the due and punctual payment of all sums which are or may become due and owing by Originator in its capacity as a seller or seller and contributor under the Sale and Contribution Agreement, whether for fees, expenses (including actual and reasonable counsel fees), indemnified amounts or otherwise, whether upon any termination or for any other reason, and (b) all Servicing-Related Obligations.

“Servicing Related Obligations” means all covenants, agreements, terms, conditions and indemnities to be performed and observed by the Initial Servicer in its capacity as such under the Credit and Security Agreement.

Section 2. Guaranty of Performance of Guaranteed Obligations. Performance Guarantor hereby guarantees to Recipient, the full and punctual payment and performance by Originator and the Initial Servicer of their respective Guaranteed Obligations. This Undertaking is an absolute, unconditional and continuing guaranty of the full and punctual performance of all Guaranteed Obligations and is in no way conditioned upon any requirement that Recipient first attempt to collect any amounts owing by Originator or either Initial Servicer, as the case may be, to Recipient, the Agent or VFCC from any other Person or resort to any collateral security, any balance of any deposit account or credit on the books of Recipient, the Agent or VFCC in favor of Originator, the Initial Servicer or any other Person or other means of obtaining payment. Should Originator or the Initial Servicer default in the payment or performance of any of its Guaranteed Obligations, Recipient (or its assigns) may cause the immediate performance by Performance Guarantor of such Guaranteed Obligations and cause any such payment Guaranteed Obligations to become forthwith due and payable to Recipient (or its assigns), without demand or notice of any nature (other than as expressly provided herein), all of which are hereby expressly waived by Performance Guarantor. Notwithstanding the foregoing, this Undertaking is not a guarantee of the payment or collection of any of the Receivables or the Loans, and Performance Guarantor shall not be responsible for any Guaranteed Obligations to the extent the failure to perform such Guaranteed Obligations by Originator or the Initial Servicer results from Receivables being uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; provided that nothing herein shall relieve Originator or the Initial Servicer from performing in full its Guaranteed Obligations under the Agreements or Performance Guarantor of its undertaking hereunder with respect to the full performance of such duties.

Section 3. Performance Guarantor’s Further Agreements to Pay. Performance Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to Recipient (and its assigns), forthwith upon demand in funds immediately available to Recipient, all reasonable costs and expenses (including court costs and reasonable legal expenses) actually

incurred or expended by Recipient in connection with enforcement of the Guaranteed Obligations and/or this Undertaking, together with interest on amounts not paid by Performance Guarantor under this Undertaking within two Business Days after such amounts become due until payment, at a rate of interest (computed for the actual number of days elapsed based on a 360 day year) equal to the Prime Rate plus 2% per annum, such rate of interest changing when and as the Prime Rate changes.

Section 4. Waivers by Performance Guarantor. Performance Guarantor waives notice of acceptance of this Undertaking, notice of any action taken or omitted by Recipient (or its assigns) in reliance on this Undertaking, and any requirement that Recipient (or its assigns) be diligent or prompt in making demands under this Undertaking, giving notice of any Termination Event, Amortization Event, other default or omission by Originator or the Initial Servicer or asserting any other rights of Recipient under this Undertaking. Performance Guarantor warrants that it has adequate means to obtain from Originator and the Initial Servicer, on a continuing basis, information concerning the financial condition of such Person, and that it is not relying on Recipient to provide such information, now or in the future. Performance Guarantor also irrevocably waives all defenses (i) that at any time may be available in respect of the Guaranteed Obligations by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now or hereafter in effect or (ii) that arise under the law of suretyship, including impairment of collateral. Recipient (and its assigns) shall be at liberty, without giving notice to or obtaining the assent of Performance Guarantor and without relieving Performance Guarantor of any liability under this Undertaking, to deal with Originator and the Initial Servicer and with each other party who now is or after the date hereof becomes liable in any manner for any of the Guaranteed Obligations, in such manner as Recipient in its sole discretion deems fit, and to this end Performance Guarantor agrees that the validity and enforceability of this Undertaking, including without limitation, the provisions of Section 7 hereof, shall not be impaired or affected by any of the following: (a) any extension, modification or renewal of, or indulgence with respect to, or substitutions for, the Guaranteed Obligations or any part thereof or any agreement relating thereto at any time; (b) any failure or omission to enforce any right, power or remedy with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto, or any collateral securing the Guaranteed Obligations or any part thereof; (c) any waiver of any right, power or remedy or of any Termination Event, Amortization Event, or default with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto; (d) any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any other obligation of any person or entity with respect to the Guaranteed Obligations or any part thereof; (e) the enforceability or validity of the Guaranteed Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to the Guaranteed Obligations or any part thereof; (f) the application of payments received from any source to the payment of any payment obligations of Originator or the Initial Servicer or any part thereof or amounts which are not covered by this Undertaking even though Recipient (or its assigns) might lawfully have elected to apply such payments to any part or all of the payment obligations of such Person or to amounts which are not covered by this Undertaking; (g) the existence of any claim, setoff or other rights which Performance Guarantor may have at any time against Originator or the Initial Servicer in connection herewith or any unrelated transaction; (h) any assignment or transfer of the Guaranteed Obligations or any part thereof; or (i) any failure on the part of Originator or the Initial Servicer to perform or comply with any term of the Agreements or any other document

executed in connection therewith or delivered thereunder, all whether or not Performance Guarantor shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (a) through (i) of this Section 4.

Section 5. Unenforceability of Guaranteed Obligations Against Originator and Initial Servicer. Notwithstanding (a) any change of ownership of Performance Guarantor, Originator or the Initial Servicer or the insolvency, bankruptcy or any other change in the legal status of Originator or the Initial Servicer; (b) the change in or the imposition of any law, decree, regulation or other governmental act which does or might impair, delay or in any way affect the validity, enforceability or the payment when due of the Guaranteed Obligations (unless the same shall be applicable to the Performance Guarantor); (c) the failure of Originator, the Initial Servicer or Performance Guarantor to maintain in full force, validity or effect or to obtain or renew when required all governmental and other approvals, licenses or consents required in connection with the Guaranteed Obligations or this Undertaking, or to take any other action required in connection with the performance of all obligations pursuant to the Guaranteed Obligations or this Undertaking; or (d) if any of the moneys included in the Guaranteed Obligations have become irrecoverable from Originator or the Initial Servicer for any other reason other than final payment in full of the payment obligations in accordance with their terms or lawful setoff of claims against the Purchasers, this Undertaking shall nevertheless be binding on Performance Guarantor. This Undertaking shall be in addition to any other guaranty or other security for the Guaranteed Obligations, and it shall not be rendered unenforceable by the invalidity of any such other guaranty or security. In the event that acceleration of the time for payment of any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of Originator or the Initial Servicer or for any other reason with respect to Originator or the Initial Servicer, all such amounts then due and owing with respect to the Guaranteed Obligations under the terms of the Agreements, or any other agreement evidencing, securing or otherwise executed in connection with the Guaranteed Obligations, shall be immediately due and payable by Performance Guarantor.

Section 6. Representations and Warranties. Performance Guarantor hereby represents and warrants to Recipient and its assigns that (a) Performance Guarantor is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, and (b) this Undertaking has been duly executed and delivered by Performance Guarantor and constitutes its legally valid and binding obligation, enforceable against Performance Guarantor in accordance with its terms, provided that the enforceability hereof is subject to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

Section 7. Subrogation. Notwithstanding anything to the contrary contained herein, until the Guaranteed Obligations are paid in full Performance Guarantor: (a) will not enforce or otherwise exercise any right of subrogation to any of the rights of Recipient, the Agent or VFCC against Originator or the Initial Servicer, (b) hereby waives all rights of subrogation (whether contractual, under Section 509 of the United States Bankruptcy Code, at law or in equity or otherwise) to the claims of Recipient, the Agent and VFCC against Originator or the Initial Servicer and all contractual, statutory or legal or equitable rights of contribution,

reimbursement, indemnification and similar rights and “claims” (as that term is defined in the United States Bankruptcy Code) which Performance Guarantor might now have or hereafter acquire against Originator or the Initial Servicer that arise from the existence or performance of Performance Guarantor’s obligations hereunder, (c) will not claim any setoff, recoupment or counterclaim against Originator or the Initial Servicer in respect of any liability of Performance Guarantor to the Originator and (d) waives any benefit of and any right to participate in any collateral security which may be held by Beneficiaries, the Agent or VFCC.

Section 8. Termination of Performance Undertaking. Performance Guarantor’s obligations hereunder shall continue in full force and effect until all Obligations are finally paid and satisfied in full and the Credit and Security Agreement is terminated, provided that this Undertaking shall continue to be effective or shall be reinstated, as the case may be, if at any time payment or other satisfaction of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned upon the bankruptcy, insolvency, or reorganization of Originator or the Initial Servicer or otherwise, as though such payment had not been made or other satisfaction occurred, whether or not Recipient (or its assigns) is in possession of this Undertaking. No invalidity, irregularity or unenforceability by reason of the federal bankruptcy code or any insolvency or other similar law, or any law or order of any government or agency thereof purporting to reduce, amend or otherwise affect the Guaranteed Obligations shall impair, affect, be a defense to or claim against the obligations of Performance Guarantor under this Undertaking.

Section 9. Effect of Bankruptcy. This Performance Undertaking shall survive the insolvency of Originator or the Initial Servicer and the commencement of any case or proceeding by or against Originator or the Initial Servicer under the federal bankruptcy code or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes. No automatic stay under the federal bankruptcy code with respect to Originator or the Initial Servicer or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes to which Originator or the Initial Servicer is subject shall postpone the obligations of Performance Guarantor under this Undertaking.

Section 10. Setoff. Regardless of the other means of obtaining payment of any of the Guaranteed Obligations, Recipient (and its assigns) is hereby authorized at any time and from time to time during the existence of any Amortization Event, without notice to Performance Guarantor (any such notice being expressly waived by Performance Guarantor) and to the fullest extent permitted by law, to set off and apply any deposits and other sums against the obligations of Performance Guarantor under this Undertaking then past due for more than two Business Days.

Section 11. Taxes. All payments to be made by Performance Guarantor hereunder shall be made free and clear of any deduction or withholding (except for taxes excluded under Section 10.1 of the Credit and Security Agreement). If Performance Guarantor is required by law to make any deduction or withholding on account of any Taxes or otherwise from any such payment (except for taxes excluded under Section 10.1 of the Credit and Security Agreement), the sum due from it in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, Recipient receive a net sum equal to the sum which they would have received had no deduction or withholding been made.

Section 12. Further Assurances. Performance Guarantor agrees that it will from time to time, at the request of Recipient (or its assigns), provide information relating to the business and affairs of Performance Guarantor as Recipient may reasonably request.

Section 13. Successors and Assigns. This Performance Undertaking shall be binding upon Performance Guarantor, its successors and permitted assigns, and shall inure to the benefit of and be enforceable by Recipient and its successors and assigns. Without limiting the generality of the foregoing sentence, Recipient may pledge or assign, and hereby notifies Performance Guarantor that it has pledged and assigned, this Performance Undertaking to the Agent, for the benefit of the Lenders, as security for the Obligations, and Performance Guarantor hereby acknowledges that the Agent may enforce this Performance Undertaking, on behalf of Recipient and the Lenders, with the same force and effect as though the Agent were the Recipient hereunder. Subject to Section 7.1(c)(ii) of the Credit and Security Agreement, Performance Guarantor may not assign or transfer any of its obligations hereunder without the prior written consent of each of Recipient and the Agent.

Section 14. Amendments and Waivers. No amendment or waiver of any provision of this Undertaking nor consent to any departure by Performance Guarantor therefrom shall be effective unless the same shall be in writing and signed by Recipient, the Agent and Performance Guarantor. No failure on the part of Recipient to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.

Section 15. Notices. All notices and other communications provided for hereunder shall be made in writing and shall be addressed as follows: if to Performance Guarantor, at the address set forth beneath its signature hereto, and if to Recipient, at the addresses set forth beneath its signature to the Credit and Security Agreement, or at such other addresses as each of Performance Guarantor or any Recipient may designate in writing to the other. Each such notice or other communication shall be effective (a) if given by telecopy, upon the receipt thereof, (b) if given by mail, five (5) Business Days after the time such communication is deposited in the mail with first class postage prepaid or (c) if given by any other means, when received at the address specified in this Section 15.

Section 16. GOVERNING LAW. THIS UNDERTAKING SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF GEORGIA.

Section 17. CONSENT TO JURISDICTION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW: (A) EACH OF PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR GEORGIA STATE COURT SITTING IN FULTON COUNTY, GEORGIA IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS UNDERTAKING, THE AGREEMENTS OR

ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH OR DELIVERED THEREUNDER AND (B) EACH OF PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.

Section 18. WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH OF PERFORMANCE GUARANTOR AND RECIPIENT HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS UNDERTAKING, THE AGREEMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH OR DELIVERED THEREUNDER OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER

Section 19. Bankruptcy Petition. Performance Guarantor hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness owed by VFCC, it will not institute against, or join any other Person in instituting against, VFCC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.

Section 20. Miscellaneous. This Undertaking constitutes the entire agreement of Performance Guarantor with respect to the matters set forth herein and supersedes and replaces that certain Performance Undertaking dated as of September 26, 2007, executed by Performance Guarantor in favor of Recipient. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Undertaking shall be in addition to any other guaranty of or collateral security for any of the Guaranteed Obligations. The provisions of this Undertaking are severable, and in any action or proceeding involving any state corporate law, or any state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of Performance Guarantor hereunder would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of Performance Guarantor’s liability under this Undertaking, then, notwithstanding any other provision of this Undertaking to the contrary, the amount of such liability shall, without any further action by Performance Guarantor or Recipient, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding. Any provisions of this Undertaking which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise specified, references herein to “Section” shall mean a reference to sections of this Undertaking.

IN WITNESS WHEREOF, Performance Guarantor has caused this Undertaking to be executed and delivered as of the date first above written.


ZEP, INC., A DELAWARE CORPORATION

By:
Name:
Title:

*Address for Notices:*

4401 Northside Parkway, Suite 700
Atlanta, Georgia 30327-3093

Attention: General Counsel

Fax No.: (404) 367-4082
Telephone No.: (404) 352-1680

SCHEDULE A

COMMITMENTS OF LIQUIDITY BANKS


LIQUIDITY BANK		COMMITMENT
Wachovia Bank, National Association		$40,000,000

EX-14 4 dex14.htm CODE OF ETHICS Code of Ethics

Exhibit 14

Zep Inc.

Code of Ethics and Business Conduct

Adopted October 2007

INTRODUCTION

Zep Inc. (“Zep” or the “Company”) expects all of its employees, directors, and agents to act with the highest ethical standards and comply with all applicable laws. This Code applies to Zep and all of its subsidiaries.

Our Code of Ethics and Business Conduct (the “Code”) explains specific standards of business conduct applicable to people acting on the Company’s behalf. The standards set forth in this Code are designed to protect the integrity of the Company and to ensure compliance with laws and regulations wherever the Company does business. Conduct that violates these standards may result in disciplinary action up to and including termination of employment.

Certain legal requirements addressed in this Code are covered by specific compliance policies and guidelines promulgated by Zep. The Company distributes these policies and guidelines separately to the appropriate directors and employees. These compliance policies and guidelines are also available from the Zep Legal Department upon request or through Zep’s intranet website. In addition to these specific policies and guidelines, the Company publishes various policies, procedures and rules from time to time, and directors and employees are expected to comply with these policies, procedures and rules as well. Further, the Company provides training on a variety of topics. Employees are expected to successfully complete all required training as well. This Code is not intended to create a contract of employment nor alter any applicable employment at will relationship.

PURPOSE

This Code articulates the Company’s expectations for business conduct for its directors and employees at all levels within the organization, including all members of the Board of Directors, the Zep Leadership Team and senior financial officers. It is designed to deter wrongdoing and to promote:

•

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

•

full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission and in other public communications made by the Company;

•

compliance with applicable governmental laws, rules and regulations;

•

the prompt internal reporting of Code violations; and

•

accountability for adherence to this Code.

CONDUCT STANDARDS

Complying with Laws

Zep is committed to conducting our businesses in accordance with the letter and the spirit of the laws in the countries in which we operate. All directors and employees of the Company are responsible for fulfilling this commitment by being knowledgeable about applicable laws, rules and regulations and by steadfastly complying with their legal obligations in the performance of their Company responsibilities. For questions or clarification, directors and employees should consult the Company’s Legal Department or Corporate Compliance Department.

Ensuring a Positive Work Environment

Equal Opportunity for All Employees

Zep is an equal employment opportunity employer. Employment opportunities are available regardless of race, color, sex, religion, national origin, age, disability, veteran status, or other legally protected status. This commitment applies to all aspects of the employment relationship, including recruiting, hiring, training, work assignment, promotion, transfer, termination, and wage and salary administration.

Recognizing equal employment opportunity can only be achieved through demonstrated leadership and aggressive implementation of the Company’s Affirmative Action Plans, which the Company maintains in accordance with applicable law. All employees are expected to make every reasonable effort to carry out their affirmative action responsibilities in spirit as well as letter to assure that equal employment opportunity is available to all. All employees must demonstrate sensitivity to and respect for all other employees and commitment to the Company’s equal employment opportunity and affirmative action objectives.

Freedom from Harassment and Violence-Free Workplace

Zep is committed to providing a positive, productive work environment for all employees. The Company’s policy is to treat all employees fairly and with dignity and respect. Zep will not tolerate any harassment, discrimination or unlawful treatment of employees by anyone, including any supervisor, co-worker, vendor, client, or customer of Zep.

The prohibition against harassment includes harassment for any discriminatory reason, such as sex, race, national origin, disability, age or religion, as well as any other unprofessional and discourteous actions toward employees.

Examples of harassment that will violate this policy and constitute harassing conduct include, but are not limited to: epithets, slurs, quips, negative stereotyping, jokes, pranks and threatening, intimidating or hostile acts related to race, color, religion, national origin, age, disability, or any other protected classification, whether written or graphic, that denigrates or shows hostility or aversion toward an individual or group. Accordingly, derogatory or inappropriate conduct - whether verbal, written, physical, or graphic - for any discriminatory reason will not be tolerated.

Sexual Harassment includes unwelcome or unwanted sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature when:

1. Submission to such conduct is made a term or condition, either explicitly or implicitly, of an individual’s employment.

2. Submission to or rejection of such conduct by an individual is used as a factor in decisions affecting that individual’s employment; or

3. Such conduct has the purpose or effect of substantially interfering with an individual’s work performance or creates an intimidating, hostile, or offensive working environment.

Acts or threats of violence, including inappropriate verbal or physical threats, intimidation, harassment, and/or coercion will not be tolerated. Behavior that threatens the safety of people or property, or has the potential to become violent, should be reported immediately. In addition, firearms (even if licensed and permitted), ammunition, weapons, and explosives are forbidden inside Company facilities, on Company Property, or in Company vehicles. All of the Company’s directors and employees are responsible for helping to enforce this policy and ensuring that the work environment remains pleasant and professional for all who works for or with Zep.

Drug-Free and Alcohol Free Workplace

Zep is committed to providing its employees with a safe work environment that is free from the effects of illegal drugs and alcohol.

The unlawful manufacture, distribution, dispensation, possession, or use, or being under the influence of, illegal drugs or alcohol is prohibited on the job, on Company premises, or wherever Company business is being conducted. Use is also prohibited during rest breaks and during extended work hours. “Illegal drugs” refers to any drugs or controlled substances that are not prescribed by a licensed medical doctor (other than over-the-counter drugs) and prescription or over-the-counter drugs that are used in a manner inconsistent with the instructions of either a licensed medical doctor or the over-the-counter drug.

A Company vice president may authorize the consumption of alcohol at business meetings or for special occasions. The moderate consumption of alcohol at business dinners is allowed so long as any legal requirements are not violated and good judgment is exercised. The Company will always provide transportation after such dinners if there is any question about the employee’s ability to get home safely.

Sound Environmental, Safety, and Health Practices

Zep is committed to an injury-free and illness-free workplace that is operated in an environmentally sound manner in compliance with all relevant laws and regulations that protect worker safety and the environment. Employees should perform work in a safe manner.

Zep strives diligently to avoid any adverse impact to the environment and the communities in which it does business. In furtherance of this standard, the Company’s goal is to eliminate, to the fullest extent practicable, the use of hazardous materials and the generation of solid and hazardous waste in its operations. Zep continuously assesses potential environmental consequences and legal environmental requirements relating to its operations. To ensure compliance, Zep will maintain an effective environmental, health, and safety compliance program.

Engaging in Fair Competition

Antitrust and Competition

Zep will compete vigorously, independently, and fairly in compliance with all applicable antitrust and competition laws. Accordingly, the Company’s employees may not agree with competitors to fix prices, to allocate markets or customers, or to boycott customers or suppliers, and cannot attempt to unfairly monopolize a market, or engage in any other acts that unreasonably restrain competition. Arrangements such as joint ventures, mergers and acquisitions, requirement contracts, and tying arrangements (e.g., arrangements that require a customer to purchase one product or service as a condition to the sale of another product or service) also may raise antitrust concerns. Any issues concerning the appropriateness under the antitrust laws of these or other actions should be discussed with the Zep Legal Department, and any suspected violation of the antitrust laws should be reported to the Zep Legal Department immediately.

Zep employees are required to conduct business in accordance with the foregoing and with the applicable antitrust and trade practice guidelines.

Restrictive Covenants with Third Parties

Zep does not condone activities that seek to gain an unfair competitive advantage. No individual may engage in any activity which violates any valid restrictive covenants entered into by that individual for the benefit of a third party, and no individual may, directly or indirectly, use or disclose any confidential information or trade secrets of a third party that the individual obtained while employed by or associated with such third party.

Government Contracts

Zep is committed to complying with all applicable laws, rules, and regulations relating to government contracting and to the legal and ethical restrictions that apply in dealing with government officials and employees. Zep is committed to ensuring that all its reports, representations, and certifications to government officials and employees are accurate and complete and that any deviations from contract requirements are properly approved by government officials. Everyone at Zep who is engaged in government contracting or subcontracting work is expected to adhere to specific company policies and procedures which reflect the special rules under the Federal Acquisition Regulation, establish standards of conduct for employees, and identify and address the special compliance risks in doing business with the government.

Protecting the Company’s Assets

Financial Reporting

All transactions must be recorded so as to permit preparation of financial statements in conformity with generally accepted accounting principles. No false or misleading entries may be made in the books and records of the Company for any reason, and no employee may engage in any arrangement that results in such a prohibited act.

No undisclosed or unrecorded fund or asset of the Company may be established for any purpose.

No payment on behalf of the Company may be approved without adequate supporting documentation or made with the intention or understanding that any part of such payment is to be used for any purpose other than as described by the documents supporting the payment.

From time to time, the Company may publish written policies on financial reporting, disclosure and compliance to reinforce the financial reporting expectations in this Code. All employees at Zep, including the Company’s senior financial officers and other financial employees, are expected to implement and strictly follow these written policies.

Records Management

Zep’s business functions are dependent on accurate record keeping. The Company is required by law to keep many types of records and documents, including accounting, tax, environmental, health and safety, and other records, for specific periods of time. To accomplish this, Zep may adopt specific guidelines related to record retention. Moreover, from time to time, document holds may be put in place that suspend the record retention guidelines and require retention of documents for indefinite periods of time. In order to make sure that records are properly preserved, employees are expected to read and follow the Company’s applicable document retention guidelines and strictly comply with any document holds. Any questions about records management policies should be directed to Zep’s Legal Department.

Gifts to Third Parties

All employees of Zep should understand that there are legal and ethical issues associated with gifts to and entertainment of customers. Business gifts and entertainment are customarily designed to build goodwill and strong working relationships with customers and other business partners. We do not want, however, to obtain business through improper means. No funds or assets of the Company may be used directly or indirectly for excessive entertainment of, or gifts of significant value to, customers and other commercial parties. All reimbursable entertainment must be identified on expense reports and other documents and are subject to supervisory review, including a determination that expenditures conform to the letter and spirit of this policy. For purposes of this standard, “gifts of significant value” will include money of any amount.

Before entertaining or providing a gift, all employees should first determine whether the customer or other party has policies prohibiting them from accepting gifts or entertainment or limiting the value of gifts or entertainment. These policies must be strictly followed.

Doing Business with the Government

Doing business with federal, state and local governments is not always the same as doing business with private customers or parties. Activities that may be proper in the private sector may be improper or even illegal when done with a government entity. Even paying for modest meals or drinks may not be proper when dealing with government officials. Most government agencies prohibit any entertaining of, or gifts to their employees, and in such cases no entertainment or gifts will be permitted. Any questions about entertaining of, or gifts to, government employees should be directed to Zep’s Legal Department.

Improper or Illegal Payments

Bribes, kickbacks, or other payments to government officials are improper and illegal. You are not permitted to make, authorize, accept or offer any payment, promise or gift that is intended to influence the conduct or decision of a person or entity.

In addition, the Company complies, and intends to continue to comply, fully with the Foreign Corrupt Practices Act (the “FCPA”), which specifically prohibits the offer, promise or payment of anything of value to foreign government officials, including political parties or candidates, for the purpose of obtaining or retaining business for the Company or otherwise securing any improper advantage. The FCPA is enforceable worldwide and covers all Zep operations.

Under the FCPA as well as anti-bribery laws in other countries, Zep, its employees, and its agents are also prohibited from indirectly attempting to influence foreign officials. The Company can not make a payment to a third party (including vendors or agents for Zep) if all or any part of the payment will be given to a prohibited person. Zep may be held liable for such payments if the employee authorizing the expenditure should have known that the payment was eventually going to a prohibited person.

Loans and Political Contributions

No funds or assets of the Company may be used directly or indirectly for: (a) loans to any federal, state, local, or foreign government official or employee or to any entity in which the government official or employee is known to have a material interest; or (b) any contributions to political parties or to candidates for political office. This prohibition also applies to indirect contributions or payments made in any form such as those made through consultants, advisors, suppliers, customers, or other third parties.

Intellectual Property

One of the Company’s most valuable assets is its intellectual property – including inventions, formulations, processes, technical information, designs, software, algorithms, and drawings, as well as – patents, trade secrets, trademarks, service marks, and copyrights. Employees must safeguard the Company’s intellectual property by using it only in ways that are consistent with applicable law and by not allowing third parties to use the Company’s intellectual property without appropriate legal protections approved by the Company’s Legal Department. The Company respects the intellectual property rights of others outside of the Company and expects all other parties to respect its intellectual property. The Company will not permit the unauthorized use of the intellectual property rights of others. Inventions, ideas and works of authorship of employees, which are created by employees in connection with the Company’s business, research, development, design, or manufacturing efforts, are the property of the Company.

The Company’s Confidential Information

The Company’s confidential information is vital to the Company’s success. “Confidential information” is financial, business, or technical information, both oral and written, about the Company, its products, suppliers, or customers that is (a) classified as proprietary, secret, or confidential, or (b) not known to the public or our competitors, and which provides the Company with a competitive advantage. No director or employee may use or disclose any confidential information regarding the Company or its customers, operations, finances, or business dealings, except in connection with the individual’s work for the Company, by express agreement in writing by the appropriate Company representative, or as required by legal process. This policy also applies to any confidential information of third parties of which the individual becomes aware during the course of his or her employment or directorship. Care should be taken not to leave documents containing confidential information visible on desks, not to throw such documents away in a trash can without shredding the documents, and not to discuss confidential information in public places.

Misappropriation of Company Property

Assets of the Company (or third parties doing business with the Company) may not be appropriated for personal use. Similarly, personal expenses may not be charged to or otherwise paid by the Company, except as permitted under approved fringe benefit policies.

Use of Company Software

Unauthorized acquisition, copy, or use of computer software of the Company or any third party is prohibited. Software must be used only in accordance with the terms of its license agreement. Unless otherwise provided in the license, no employee may make or distribute copies of software or documentation for use within or on behalf of the Company or for personal use or for the use of others, including customers and family members. All software used by or on behalf of the Company or on Company-owned computers, including “open source” licensed software, shareware and freeware, must be purchased through the appropriate channels in the Company using approved procedures. Software may not be brought in from any unauthorized source, including downloading from the Internet.

Use of Electronic Devices

Electronic devices that belong to the Company and electronic services provided by the Company must be used for the purpose of conducting the Company’s business. The Internet can be a valuable source of information and research. E-mail may be a useful method of communication with directors, employees, customers, outside vendors, and other businesses. Before selecting e-mail as a means for communication or document transmission, users should consider the need for immediacy, formality, accountability, access, security, and permanence. E-mail differs from other forms of communication. It is immediate and informal, similar to a telephone conversation, yet it is more permanent. It is as irrevocable as a hard-copy document, yet easy to duplicate, alter, and distribute. All computer users are obligated to use these resources responsibly, professionally, ethically, and lawfully. The systems should not be used in any way that may be disruptive to Company operations or violate Company policy or law (for example, to send or receive, view, or download information of a sexual, obscene, or racially objectionable nature). In addition, data, programs, documents, correspondence, and other files stored on or transmitted by these electronic devices are the property of the Company and must be safeguarded with the same diligence as traditional paper documents. While occasional personal use of the Company’s system is permitted as long as such use does not interfere with the individual’s job responsibilities, individuals should be aware that all electronic information (such as e-mail messages stored on the Company’s systems) are the property of the Company, and the Company, at its discretion, reserves the right to access and disclose any electronic information for any purposes, including computer files, messages sent over its e-mail system, or information accessed through its Internet connection. Employees should not expect protection of their personal or business-related e-mail correspondence under privacy laws and regulations.

Return of Company Property upon Termination

All property of the Company, including materials produced by employees and confidential information, must be returned to the Company immediately upon termination of employment.

Non-Public Information

Information is considered “material non-public information” if it is information that an investor would consider important in deciding whether to buy or sell the Company’s stock and that information is not available to the public. To prevent misuse of non-public information, all Zep directors and employees must observe the following standards:

1. Material non-public information must not be disclosed to (a) anyone within the Company except those people who need to know the information in the performance of their job responsibilities, or (b) anyone outside the Company except those people who are being requested to provide products or services to the Company which directly involve that information.

2. No director or employee of the Company may directly or indirectly buy or sell securities of the Company while in possession of material, non-public information about the Company, except as provided in stock sale or purchase plans permitted under applicable laws and approved by Company’s Legal Department. In addition, directors and employees of the Company may not directly or indirectly buy or sell securities of any other publicly traded corporation about which the individual has material, non-public information as a result of his or her position with the Company, including knowledge of business transactions or potential business transactions between the Company and such other corporation.

For additional details about the treatment of material non-public information please see the Company’s Insider Trading Policy, a copy of which is available from the Zep’s Legal Department.

Derogatory or Detrimental Statements

Derogatory or detrimental statements regarding the Company by individuals affiliated with the Company can be harmful to the Company, its business, and employees. Accordingly, all employees should refrain from making, and should not solicit, cause or encourage others to make, any comments or statements regarding the Company or its affiliates or any of the Company’s or its affiliates’ current or former agents, employees, officers, directors, successors or assigns, which are derogatory or detrimental. This restriction includes, but is not limited to statements made on the Internet, and, more specifically, in discussion forums or chat rooms where companies and their prospects are discussed.

Corporate Opportunities

Employees and directors owe a duty to the Company to advance the Company’s legitimate business interests when the opportunity to do so arises. Employees and directors are prohibited from taking for themselves personally opportunities that are discovered through the use of corporate property, information or position for personal gain or competing with the Company.

Sometimes the line between personal and Company benefits is difficult to draw, and sometimes both personal and Company benefits may be derived from certain activities. The only prudent course of conduct for our employees and directors is to make sure that any use of Company assets that is not solely for the benefit of the Company is approved beforehand through the Company’s General Counsel.

Trade Restrictions and Economic Sanctions

To further foreign policy objectives, the United States from time to time imposes trade embargoes and restricts and monitors trade, investment and financial transactions by U.S. persons and companies, including non-U.S. affiliates and persons, with certain countries, organizations, and individuals. U.S. laws and regulations in this area apply to non-US affiliates of Zep and all Zep employees shall comply with applicable trade sanction laws and regulations.

Exporting and Importing

Exporting and importing are part of Zep’s business and Zep is committed to comply with all U.S. and relevant non-U.S. laws and regulations that govern the transportation of Zep products across international borders. Every country (or group of countries such as the E.U.) requires that imported goods go through a customs process. Zep employees must comply with all applicable customs requirements, supplying customs authorities with accurate and truthful information.

Avoiding Conflicts of Interest

A conflict of interest exists when personal interests may interfere with an employee’s ability to exercise his or her judgment objectively or to do his or her job in the best interests of Zep. Employees should take care to avoid conflicts of interest including those described below.

Ownership Interest in Customers, Suppliers or Vendors

Directors and employees must disclose in writing any ownership, control, or beneficial interest they may have in any firm seeking to do business with the Company or any relationship with any person who might benefit from such a transaction. Business transactions where such a material interest or relationship is or reasonably could be expected to be present may only be pursued if a written waiver is first granted in accordance with this Code. Ownership or beneficial interest of less than 1% of the outstanding stock of publicly held companies is excluded from this policy.

Ownership Interest in Competitors

Directors and employees may not hold investments in firms competing directly with the Company, except for investments of less than 1% of the outstanding stock of publicly held companies.

Loans to and from Customers, Suppliers and Competitors

Directors and employees may not borrow from or lend personal funds to customers, suppliers, competing companies, or their affiliates except for arms-length transactions that occur in the normal course of business.

Employment with Customers, Suppliers and Competitors

Acceptance of employment (whether or not for remuneration), compensation, or other financial benefits from a customer, supplier, or competing company while employed by the Company is strictly prohibited.

Other Outside Employment

Holding outside employment (whether or not for remuneration) or investments affecting efficiency or working hours is prohibited unless a written waiver is first granted in accordance with this Code.

Acceptance of Gifts from Suppliers or Vendors

No director or employee in a position of authorizing, selecting, or recommending the goods or services and/or suppliers or vendors to be used by the Company may accept money, excessive entertainment, or gifts of material value (including any amount of cash) from any representative of a supplier or vendor. Offers made to any director or employee by vendors or suppliers that violate this policy must be reported to the Company’s Chief Compliance Officer, or to the Audit Committee for matters relating to directors and executive officers of the Company.

Outside Directorships

No employee may hold a directorship in an outside firm, other than non-profit organizations, without express approval in writing from the Company’s Nominating and Corporate Governance Committee for executive officers and senior financial officers of the Company.

WAIVERS

In certain limited circumstances, the Company in its discretion may grant a written waiver for certain activities, relationships or situations that otherwise would violate or could reasonably be expected to violate this Code. To obtain a waiver, the director or employee must disclose all relevant facts and information concerning the matter in writing either to (1) the Company’s Audit Committee for matters involving a director, corporate officer or a senior financial officer or (2) the Chief Compliance Officer for matters relating to all other corporate employees. Waivers that are not expressly approved in writing shall be deemed to be denied. Waivers for executive officers (including Senior Executive and Financial Officers) or directors of the Company

may be made only by the Audit Committee or the full Board of Directors and shall be promptly disclosed to the Company’s stockholders in accordance with the SEC’s rules and regulations.

RESPONSE TO VIOLATIONS

Questions about Situations

In the event of doubt or uncertainty about the possibility of a situation being in violation of this Code, the question should be directed to the Company’s Chief Compliance Officer at (866) 497-8077. The Company will then determine whether a violation of the Code exists.

Reporting Violations

Each Zep employee is responsible for carrying out this Code. If you feel you have experienced or witnessed any violation of this Code, you are required to report any such violation of the Code promptly. Violations may be reported in one of two ways: (1) to the Company’s Chief Compliance Officer at (866) 497-8077; or (2) anonymously through the Company’s Ethics Hotline by calling, 24 hours a day, 7 days a week as noted below:


Country	Access Code	Hotline Number
North America	Not applicable	(877) 222-9374
Belgium	0-800-100-10	(877) 222-9374
Germany	0800-225-5288	(877) 222-9374
Italy	800-172-444	(877) 222-9374
The Netherlands	0800-022-9111	(877) 222-9374

Reports classified as accounting/audit irregularities, insider trading, improper loans to executives, retaliation against whistleblowers, fraud, kickbacks, falsification of Company records, or conflicts of interest will be referred automatically to the Company’s Audit Committee. Employees will not be disciplined or retaliated against in any way for reporting violations in good faith.

Consequences for Violations

The Company will take prompt and appropriate remedial action in response to violations of the Code. Any employee or director who engages in conduct prohibited by the Code as determined by the Company will be subject to discipline up to and including termination or removal. Additionally, the Company may be required to report certain violations to appropriate government or legal authorities.

DISTRIBUTION OF CODE

Directors and employees of the Company should receive, review and acknowledge this Code annually. The Code also is available generally on the Company’s website at www.zepinc.com as well as by written request, without charge, to the Company’s corporate secretary at 1310 Seaboard Industrial Boulevard, Atlanta, GA 30318.

CERTIFICATION

I have read and affirm my commitment to the standards described in the Zep Inc. Code of Ethics and Business Conduct and the policies and guidelines applicable to my position with the Company described in the Code. I confirm that to my knowledge I am not in violation of any of the provisions of the Code or such policies or guidelines, except as I have noted in my e-mail response. Further, I have no knowledge of any unreported violations of any of such provisions by other directors or employees, whether for their own benefit or for the supposed benefit of the Company, except as I have noted in my e-mail response. If any such issue should develop in the future, I will promptly advise the appropriate company officials.

I acknowledge that my acceptance of the foregoing by e-mail response is evidence of my signature.

Failure to read and/or accept this document in no way relieves directors and employees of the responsibility to comply with the standards set forth in the Zep Inc. Code of Ethics and Business Conduct.

EX-21 5 dex21.htm LIST OF SUBSIDIARIES List of Subsidiaries

Exhibit 21

Zep Inc.

LIST OF SUBSIDIARIES


Subsidiary or Affiliate		State or Other Jurisdiction of Incorporation or Organization

Zep IP Holdings LLC		Georgia

Old ABI, LLC		Delaware

Acuity Specialty Products, Inc.		Georgia
-Acuity Holdings, Inc		Canada
-Acuity Enterprise, Inc.		Delaware
-Zep Europe B.V.		Netherlands
-Zep Belgium S.A.		Belgium
-Zep Italia S.r.l		Italy
-Graham International B.V.		Netherlands
-Zep Benelux B.V.		Netherlands
-Zep Industries B.V.		Netherlands
-Zep Manufacturing B.V.		Netherlands

EX-23 6 dex23.htm CONSENT OF INDEPENDENT AUDITORS Consent of Independent AUditors

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-147157) of Zep Inc. of our report dated November 28, 2007 with respect to the combined financial statements and schedule of Zep Inc. included in this Annual Report (Form 10-K) for the year ended August 31, 2007.

/s/ Ernst & Young LLP

Atlanta, Georgia

November 28, 2007

EX-24 7 dex24.htm POWER OF ATTORNEY Power of Attorney

Exhibit 24

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints John K. Morgan and Mark R. Bachmann, and each of them individually, his true and lawful attorneys-in-fact (with full power of substitution and resubstitution) to act for him in his name, place, and stead in his capacity as a director or officer of Zep Inc., to file a registrant’s annual report on Form 10-K for the fiscal year ended August 31, 2007, and any and all amendments thereto, with any exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact, and each of them individually, full power and authority to do and perform each and every act and thing requisite and necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

/s/ Earnest W. Deavenport, Jr.

Earnest W. Deavenport, Jr.

Dated: November 26, 2007

POWER OF ATTORNEY

/s/ Kenyon W. Murphy

Kenyon W. Murphy

Dated: November 26, 2007

POWER OF ATTORNEY




		/s/ Joseph Squicciarino
		Joseph Squicciarino

Dated: November 26, 2007

POWER OF ATTORNEY




		/s/ Sidney J. Nurkin
		Sidney J. Nurkin

Dated: November 26, 2007

POWER OF ATTORNEY




		/s/ J. Veronica Biggins
		J. Veronica Biggins

Dated: November 26, 2007

EX-31.A 8 dex31a.htm SECTION 302 CEO CERTIFICATION Section 302 CEO Certification

Exhibit 31(a)

I, John K. Morgan, certify that:

1.	I have reviewed this annual report on Form 10-K of Zep Inc.;

Based on my knowledge, this annual 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 officer 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)] for the registrant and 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)

Evaluated the effectiveness of the registrant’s disclosure controls 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

(c)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.	The registrant’s other certifying officer 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 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: November 29, 2007

/s/ John K. Morgan

John K. Morgan

Chairman, President, and Chief Executive

Officer

[A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act has been provided to Zep Inc. and will be retained by Zep Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]

EX-31.B 9 dex31b.htm SECTION 302 CFO CERTIFICATION Section 302 CFO Certification

Exhibit 31(b)

I, Mark R. Bachmann, certify that:

1.	I have reviewed this annual report on Form 10-K of Zep Inc.;

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 officer 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)] for the registrant and have:

(a)

(b)

(c)

5.	The registrant’s other certifying officer 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 registrant’s board of directors (or persons performing the equivalent functions):

(a)

(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: November 29, 2007

/s/ Mark R. Bachmann

Mark R. Bachmann

Executive Vice President and

Chief Financial Officer

EX-32.A 10 dex32a.htm SECTION 906 CEO CERTIFICATION Section 906 CEO Certification

Exhibit 32(a)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Annual Report on Form 10-K of Zep Inc. (the “Corporation”) for the year ended August 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Chairman, President, and Chief Executive Officer of the Corporation, certifies that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ John K. Morgan

John K. Morgan

Chairman, President, and Chief Executive Officer

November 29, 2007

[A signed original of this written statement required by Section 906 has been provided to Zep Inc. and will be retained by Zep Inc. and furnished to the Securities and Exchange Commission or its staff upon request.]

EX-32.B 11 dex32b.htm SECTION 906 CFO CERTIFICATION Section 906 CFO Certification

Exhibit 32(b)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and in connection with the Annual Report on Form 10-K of Zep Inc. (the “Corporation”) for the year ended August 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, the Executive Vice President and Chief Financial Officer of the Corporation, certifies that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Mark R. Bachmann

Mark R. Bachmann

Executive Vice President and

Chief Financial Officer

November 29, 2007

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