Exhibit 10.1

Execution

CREDIT AGREEMENT

by and among

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent,

WELLS FARGO CAPITAL FINANCE, LLC,

as Sole Lead Arranger and Sole Lead Bookrunner,

THE LENDERS THAT ARE PARTIES HERETO

as the Lenders,

K•SWISS INC.,

K-SWISS SALES CORP.,

K-SWISS DIRECT INC.,

as Borrowers,

K-SWISS PACIFIC INC.,

ROYAL ELASTICS INC.,

ROYAL ELASTICS, LLC,

K-SWISS NS INC.,

as Guarantors

Dated as of April 25, 2012

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TABLE OF CONTENTS

 

              Page  

1.

       DEFINITIONS AND CONSTRUCTION      1       1.1.  

Definitions

     1       1.2.  

Accounting Terms

     1       1.3.  

Code

     1       1.4.  

Construction

     2       1.5.  

Time References

     2       1.6.  

Schedules and Exhibits

     3   

2.

  

    LOANS AND TERMS OF PAYMENT

     3       2.1.  

Revolving Loans

     3       2.2.  

[Reserved]

     4       2.3.  

Borrowing Procedures and Settlements

     4       2.4.  

Payments; Reductions of Commitments; Prepayments

     11       2.5.  

Promise to Pay

     14       2.6.  

Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations

     15       2.7.  

Crediting Payments

     16       2.8.  

Designated Account

     16       2.9.  

Maintenance of Loan Account; Statements of Obligations

     17       2.10.  

Fees

     17       2.11.  

Letters of Credit

     18       2.12.  

Interest Rate Election

     24       2.13.  

Capital Requirements

     26       2.14.  

Joint and Several Liability of Borrowers

     28   

3.

  

    CONDITIONS; TERM OF AGREEMENT

     30       3.1.  

Conditions Precedent to the Initial Extension of Credit

     30       3.2.  

Conditions Precedent to all Extensions of Credit

     30       3.3.  

Maturity

     31       3.4.  

Effect of Maturity

     31       3.5.  

Early Termination by Borrowers

     31       3.6.  

Conditions Subsequent

     31   

4.

  

    REPRESENTATIONS AND WARRANTIES

     31       4.1.  

Due Organization and Qualification; Subsidiaries

     31       4.2.  

Due Authorization; No Conflict

     32       4.3.  

Governmental Consents

     33       4.4.  

Binding Obligations; Perfected Liens

     33       4.5.  

Title to Assets; No Encumbrances

     33       4.6.  

Litigation

     33       4.7.  

Compliance with Laws

     34       4.8.  

No Material Adverse Effect

     34       4.9.  

Solvency

     34       4.10.  

Employee Benefits

     34       4.11.  

Environmental Condition

     34       4.12.  

Complete Disclosure

     35       4.13.  

Patriot Act

     35       4.14.  

Indebtedness

     35   

 

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     4.15.   Payment of Taxes    35      4.16.  

Margin Stock

     36       4.17.  

Governmental Regulation

     36       4.18.  

OFAC

     36       4.19.  

Employee and Labor Matters

     36       4.20.  

[Reserved.]

     36       4.21.  

Leases

     37       4.22.  

Eligible Accounts

     37       4.23.  

Eligible Inventory

     37       4.24.  

Location of Inventory

     37       4.25.  

Inventory Records

     37   

5.

  

    AFFIRMATIVE COVENANTS

     37       5.1.  

Financial Statements, Reports, Certificates

     37       5.2.  

Reporting

     37       5.3.  

Existence

     38       5.4.  

Maintenance of Properties

     38       5.5.  

Taxes

     38       5.6.  

Insurance

     38       5.7.  

Inspection

     39       5.8.  

Compliance with Laws

     39       5.9.  

Environmental

     39       5.10.  

Disclosure Updates

     39       5.11.  

Formation of Subsidiaries

     40       5.12.  

Further Assurances

     40       5.13.  

Lender Meetings

     41       5.14.  

Location of Inventory

     41       5.15.  

Compliance with ERISA and the IRC

     41   

6.

  

    NEGATIVE COVENANTS

     41       6.1.  

Indebtedness

     41       6.2.  

Liens

     41       6.3.  

Restrictions on Fundamental Changes

     41       6.4.  

Disposal of Assets

     42       6.5.  

Nature of Business

     42       6.6.  

Prepayments and Amendments

     42       6.7.  

Restricted Payments

     43       6.8.  

Accounting Methods

     43       6.9.  

Investments

     43       6.10.  

Transactions with Affiliates

     43       6.11.  

Use of Proceeds

     44       6.12.  

Limitation on Issuance of Equity Interests

     44   

7.

  

    FINANCIAL COVENANTS

     44   

8.

  

    EVENTS OF DEFAULT

     45       8.1.  

Payments

     45       8.2.  

Covenants

     45       8.3.  

Judgments

     46       8.4.  

Voluntary Bankruptcy, etc.

     46       8.5.  

Involuntary Bankruptcy, etc.

     46   

 

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     8.6.   Default Under Other Agreements    46      8.7.  

Representations, etc.

     46       8.8.  

Guaranty

     47       8.9.  

Security Documents

     47       8.10.  

Loan Documents

     47       8.11.  

Change of Control

     47       8.12.  

ERISA

     47   

9.

       RIGHTS AND REMEDIES      47       9.1.  

Rights and Remedies

     47       9.2.  

Remedies Cumulative

     48    10.        WAIVERS; INDEMNIFICATION      48       10.1.  

Demand; Protest; etc.

     48       10.2.  

The Lender Group’s Liability for Collateral

     48       10.3.  

Indemnification

     48    11.        NOTICES      49   

12.

       CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE PROVISION
     50   

13.

       ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS      53       13.1.  

Assignments and Participations

     53       13.2.  

Successors

     56   

14.

       AMENDMENTS; WAIVERS      57       14.1.  

Amendments and Waivers

     57       14.2.  

Replacement of Certain Lenders

     58       14.3.  

No Waivers; Cumulative Remedies

     59   

15.

       AGENT; THE LENDER GROUP      59       15.1.  

Appointment and Authorization of Agent

     59       15.2.  

Delegation of Duties

     60       15.3.  

Liability of Agent

     60       15.4.  

Reliance by Agent

     60       15.5.  

Notice of Default or Event of Default

     61       15.6.  

Credit Decision

     61       15.7.  

Costs and Expenses; Indemnification

     62       15.8.  

Agent in Individual Capacity

     62       15.9.  

Successor Agent

     63       15.10.  

Lender in Individual Capacity

     63       15.11.  

Collateral Matters

     63       15.12.  

Restrictions on Actions by Lenders; Sharing of Payments

     65       15.13.  

Agency for Perfection

     65       15.14.  

Payments by Agent to the Lenders

     65       15.15.  

Concerning the Collateral and Related Loan Documents

     66       15.16.  

Field Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information

     66       15.17.  

Several Obligations; No Liability

     67       15.18.  

Lead Arrangers, Book Runners, Co-Syndication Agents, and Co-Documentation Agents

     67   

16.

       WITHHOLDING TAXES      67   

 

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  16.1.  

Payments

     67      16.2.  

Exemptions

     68      16.3.  

Reductions

     69      16.4.  

Refunds

     70    17.       GENERAL PROVISIONS      70      17.1.  

Effectiveness

     70      17.2.  

Section Headings

     70      17.3.  

Interpretation

     70      17.4.  

Severability of Provisions

     70      17.5.  

Bank Product Providers

     70      17.6.  

Debtor-Creditor Relationship

     71      17.7.  

Counterparts; Electronic Execution

     71      17.8.  

Revival and Reinstatement of Obligations; Certain Waivers

     71      17.9.  

Confidentiality

     72      17.10.  

Survival

     73      17.11.  

Patriot Act

     73      17.12.  

Integration

     73      17.13.  

Currency Indemnity

     73      17.14.  

Administrative Borrower as Agent for Borrowers

     74   

 

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EXHIBITS AND SCHEDULES

 

Exhibit A-1   Form of Assignment and Acceptance Exhibit B-1   Form of Borrowing
Base Certificate Exhibit C-1   Form of Compliance Certificate Exhibit L-1   Form
of Interest Election Request Schedule A-1   Agent’s Account Schedule A-2  
Authorized Persons Schedule C-1   Commitments Schedule D-1   Designated Account
Schedule E-2   Existing Letters of Credit Schedule P-1   Permitted Investments
Schedule P-2   Permitted Liens Schedule R-1   Real Property Collateral Schedule
1.1   Definitions Schedule 3.1   Conditions Precedent Schedule 3.6   Conditions
Subsequent Schedule 4.1(b)   Capitalization of Borrower Schedule 4.1(c)  
Capitalization of Borrower’s Subsidiaries Schedule 4.6(b)   Litigation Schedule
4.10   Benefit Plans Schedule 4.11   Environmental Matters Schedule 4.14  
Permitted Indebtedness Schedule 4.24   Location of Inventory Schedule 5.1  
Financial Statements, Reports, Certificates Schedule 5.2   Collateral Reporting
Schedule 6.5   Nature of Business

 

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this “Agreement”), is entered into as of April 25, 2012,
by and among the lenders identified on the signature pages hereof (each of such
lenders, together with its successors and permitted assigns, is referred to
hereinafter as a “Lender”, as that term is hereinafter further defined), WELLS
FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as
administrative agent for the Lenders (in such capacity, together with its
successors and assigns in such capacity, “Agent”), K•SWISS INC., a Delaware
corporation (“Parent”), K-SWISS SALES CORP., a Delaware corporation (“KS
Sales”), K-SWISS DIRECT INC., a California corporation (“KS Direct” and,
together with Parent, KS Sales and any other person that may from time to time
become a party hereto as a borrower, each individually a “Borrower” and
collectively, “Borrowers”, as hereinafter further defined), K-SWISS PACIFIC
INC., a Massachusetts corporation (“KS Pacific”), ROYAL ELASTICS INC., a
California corporation (“RE Inc.”), ROYAL ELASTICS, LLC, a Delaware limited
liability company (“RE LLC”), and K-SWISS NS INC., a Delaware corporation (“KS
NS” and, together with KS Pacific, RE Inc., RE LLC and any other person that may
from time to time become a party hereto as a guarantor, each individually a
“Guarantor” and collectively “Guarantors, as hereinafter further defined).

The parties agree as follows:

1. DEFINITIONS AND CONSTRUCTION.

1.1. Definitions. Capitalized terms used in this Agreement shall have the
meanings specified therefor on Schedule 1.1.

1.2. Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP; provided, that if Administrative
Borrower notifies Agent that Administrative Borrower requests an amendment to
any provision hereof to eliminate the effect of any Accounting Change occurring
after the Closing Date or in the application thereof on the operation of such
provision (or if Agent notifies Administrative Borrower that the Required
Lenders request an amendment to any provision hereof for such purpose),
regardless of whether any such notice is given before or after such Accounting
Change or in the application thereof, then Agent and Administrative Borrower
agree that they will negotiate in good faith amendments to the provisions of
this Agreement that are directly affected by such Accounting Change with the
intent of having the respective positions of the Lenders and Loan Parties after
such Accounting Change conform as nearly as possible to their respective
positions as of the date of this Agreement and, until any such amendments have
been agreed upon and agreed to by the Required Lenders, the provisions in this
Agreement shall be calculated as if no such Accounting Change had occurred. When
used herein, the term “financial statements” shall include the notes and
schedules thereto. Whenever the term “Parent” is used in respect of a financial
covenant or a related definition, it shall be understood to mean Parent and its
Subsidiaries on a consolidated basis, unless the context clearly requires
otherwise. Notwithstanding anything to the contrary contained herein, (a) all
financial statements delivered hereunder shall be prepared, and all financial
covenants contained herein shall be calculated, without giving effect to any
election under the Statement of Financial Accounting Standards No. 159 (or any
similar accounting principle) permitting a Person to value its financial
liabilities or Indebtedness at the fair value thereof, and (b) the term
“unqualified opinion” as used herein to refer to opinions or reports provided by
accountants shall mean an opinion or report that is (i) unqualified, and
(ii) does not include any explanation, supplemental comment, or other comment
concerning the ability of the applicable Person to continue as a going concern
or concerning the scope of the audit

1.3. Code. Any terms used in this Agreement that are defined in the Code shall
be construed and defined as set forth in the Code unless otherwise defined
herein; provided, that to the extent that the Code is used to define any term
herein and such term is defined differently in different Articles of the Code,
the definition of such term contained in Article 9 of the Code shall govern.

 

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1.4. Construction. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
or any other Loan Document refer to this Agreement or such other Loan Document,
as the case may be, as a whole and not to any particular provision of this
Agreement or such other Loan Document, as the case may be. Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified. Any reference in this Agreement or in any other Loan
Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). The words “asset” and “property”
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties. Any reference herein or in
any other Loan Document to the satisfaction, repayment, or payment in full of
the Obligations shall mean (a) the payment or repayment in full in immediately
available funds of (i) the principal amount of, and interest accrued and unpaid
with respect to, all outstanding Loans, together with the payment of any premium
applicable to the repayment of the Loans, (ii) all Lender Group Expenses that
have accrued and are unpaid regardless of whether demand has been made therefor,
(iii) all fees or charges that have accrued hereunder or under any other Loan
Document (including the Letter of Credit Fee and the Unused Line Fee) and are
unpaid, (b) in the case of contingent reimbursement obligations with respect to
Letters of Credit, providing Letter of Credit Collateralization, (c) in the case
of obligations with respect to Bank Products (other than Hedge Obligations),
providing Bank Product Collateralization, (d) the receipt by Agent of cash
collateral in order to secure any other contingent Obligations for which a claim
or demand for payment has been made on or prior to such time or in respect of
matters or circumstances known to Agent or a Lender at such time that are
reasonably expected to result in any loss, cost, damage, or expense (including
attorneys fees and legal expenses), such cash collateral to be in such amount as
Agent reasonably determines is appropriate to secure such contingent
Obligations, (e) the payment or repayment in full in immediately available funds
of all other outstanding Obligations (including the payment of any termination
amount then applicable (or which would or could become applicable as a result of
the repayment of the other Obligations) under Hedge Agreements provided by Hedge
Providers) other than (i) unasserted contingent indemnification Obligations,
(ii) any Bank Product Obligations (other than Hedge Obligations) that, at such
time, are allowed by the applicable Bank Product Provider to remain outstanding
without being required to be repaid or cash collateralized, and (iii) any Hedge
Obligations that, at such time, are allowed by the applicable Hedge Provider to
remain outstanding without being required to be repaid, and (f) the termination
of all of the Commitments of the Lenders. Any reference herein to any Person
shall be construed to include such Person’s successors and assigns. Any
requirement of a writing contained herein or in any other Loan Document shall be
satisfied by the transmission of a Record.

1.5. Time References. Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, all references to time of day refer to
Pacific standard time or Pacific daylight saving time, as in effect in Los
Angeles, California on such day. For purposes of the computation of a period of
time from a specified date to a later specified date, the word “from” means
“from and including” and the words “to” and “until” each means “to and
including”; provided that, with respect to a computation of fees or interest
payable to Agent or any Lender, such period shall in any event consist of at
least one full day.

 

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1.6. Schedules and Exhibits. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.

(a) Currency Translations. For purposes of this Agreement and the other Loan
Documents, where the permissibility of a transaction or determinations of
required actions or circumstances depend upon compliance with, or are determined
by reference to, amounts stated in US Dollars, unless the context of this
Agreement or any other Loan Document clearly requires otherwise or
Administrative Agent otherwise determines, such amounts shall be deemed to refer
to US Dollars or US Dollar Equivalents and any requisite currency translation
shall be based on the Exchange Rate and the permissibility of actions already
taken shall not be affected by subsequent fluctuations in Exchange Rates
(provided that if Indebtedness is incurred to refinance or renew other
Indebtedness, and such refinancing or renewal would cause the applicable dollar
denominated limitation to be exceeded if calculated at the Exchange Rate, such
dollar denominated restriction shall be deemed not to have been exceeded so long
as (i) such refinancing or renewal Indebtedness is denominated in the same
currency as such Indebtedness being refinanced or renewed and (ii) the principal
amount of such refinancing or renewal Indebtedness does not exceed the principal
amount of such Indebtedness being refinanced or renewed except as permitted
under Section 6.1. All certificates, reports and notices delivered under this
Agreement, shall express any amounts, calculations or determinations in US
Dollars or US Dollar Equivalents.

2. LOANS AND TERMS OF PAYMENT.

2.1. Revolving Loans.

(a) Subject to the terms and conditions of this Agreement, and during the term
of this Agreement, each Revolving Lender agrees (severally, not jointly or
jointly and severally) to make revolving loans (“Revolving Loans”) to Borrowers
in an amount which in the aggregate at any one time outstanding shall not to
exceed the lesser of:

(i) such Lender’s Revolver Commitment, or

(ii) such Lender’s Pro Rata Share of an amount equal to the lesser of:

(A) the amount equal to (1) the Maximum Revolver Amount less (2) the sum of
(y) the Letter of Credit Usage at such time, plus (z) the principal amount of
Swing Loans outstanding at such time, and

(B) the amount equal to (1) the Borrowing Base as of such date (based upon the
most recent Borrowing Base Certificate delivered by Borrowers to Agent) less the
sum of (1) the Letter of Credit Usage at such time, plus (2) the principal
amount of Swing Loans outstanding at such time.

Each Revolving Loan shall be a Dollar Denominated Loan (which shall either be a
Base Rate Loan or a LIBOR Rate Loan) or a European Denominated Loan (which shall
either be a Euro Denominated Loan or a Sterling Denominated Loan); provided,
that, Borrower may not borrow, and Revolving Lenders shall have no obligation to
lend, any European Denominated Loans, if the sum of the aggregate outstanding
principal amount of all European Denominated Loans plus the Letter of Credit
Usage with respect to all European Denominated Letters of Credit exceeds or
would exceed the US Dollar Equivalent of $13,000,000.

(b) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to
the terms and conditions of this Agreement, reborrowed at any time during the
term of this Agreement. The outstanding principal amount of the Revolving Loans,
together with interest accrued and unpaid thereon, shall constitute Obligations
and shall be due and payable on the Maturity Date or, if earlier, on the date on
which they are declared due and payable pursuant to the terms of this Agreement.

 

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(c) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall
have the right (but not the obligation), in the exercise of its Permitted
Discretion, to establish and increase or decrease Receivable Reserves, Inventory
Reserves, Bank Product Reserves, and other Reserves against the Borrowing Base
or the Maximum Revolver Amount. The amount of any Receivable Reserve, Inventory
Reserve, Bank Product Reserve, or other Reserve established by Agent shall have
a reasonable relationship to the event, condition, other circumstance, or fact
that is the basis for such reserve and shall not be duplicative of any other
reserve established and currently maintained. Upon establishment or increase in
reserves, Agent agrees to make itself available to discuss the reserve or
increase, and Borrowers may take such action as may be required so that the
event, condition, circumstance, or fact that is the basis for such reserve or
increase no longer exists, in a manner and to the extent reasonably satisfactory
to Agent in the exercise of its Permitted Discretion. In no event shall such
opportunity limit the right of Agent to establish or change such Receivable
Reserve, Inventory Reserve, Bank Product Reserve, or other Reserves, unless
Agent shall have determined, in its Permitted Discretion, that the event,
condition, other circumstance, or fact that was the basis for such Receivable
Reserve, Inventory Reserve, Bank Product Reserve, or other Reserves or such
change no longer exists or has otherwise been adequately addressed by Borrower.

2.2. [Reserved].

2.3. Borrowing Procedures and Settlements.

(a) Procedure for Borrowing Revolving Loans. Subject to the terms and conditions
of this Agreement, each Borrowing shall be of a Dollar Denominated Loan (which
shall either be a Base Rate Loan or a LIBOR Rate Loan) or a European Denominated
Loan (which shall either be a Euro Denominated Loan or a Sterling Denominated
Loan). Each Borrowing shall be made by a written request by an Authorized Person
delivered to Agent and received by Agent no later than 10:00 a.m. Local Time
(i) on the Business Day that is the requested Funding Date in the case of a
request for a Swing Loan, (ii) on the Business Day that is 1 Business Day prior
to the requested Funding Date in the case of a request for a Dollar Denominated
Loan which is a Base Rate Loan, and (iii) on the Business Day that is 3 Business
Days prior to the requested Funding Date in the case of all other requests,
specifying (A) the amount of such Borrowing, (B) whether the requested Borrowing
is for a Dollar Denominated Loan (which shall either be a Base Rate Loan or a
LIBOR Rate Loan) or a European Denominated Loan (which shall either be a Euro
Denominated Loan or a Sterling Denominated Loan), (C) if the requested Borrowing
is for a European Denominated Loan, whether such European Denominated Loan is to
be initially maintained as a Euro Denominated Loan or a Sterling Denominated
Loan, (D) if the requested Borrowing is for a Dollar Denominated Loan, whether
such Dollar Denominated Loan is to be initially maintained as a Base Rate Loan
or a LIBOR Rate Loan, and (E) the requested Funding Date (which shall be a
Business Day); provided, that Agent may, in its sole discretion, elect to accept
as timely requests that are received later than 10:00 a.m. on the applicable
Business Day. At Agent’s election, in lieu of delivering the above-described
written request, any Authorized Person may give Agent telephonic notice of such
request by the required time. In such circumstances, each Borrower agrees that
any such telephonic notice will be confirmed in writing within 24 hours of the
giving of such telephonic notice, but the failure to provide such written
confirmation shall not affect the validity of the request. If any Borrower (or
Administrative Borrower on behalf of such Borrower) fails to specify whether a
requested Loan is to be a Dollar Denominated Loan or a European Denominated
Loan, such requested Loan shall be a Dollar Denominated Loan which is a Base
Rate Loan. If any Borrower (or Administrative Borrower on behalf of such
Borrower) specifies that a requested Loan is to be a European Denominated Loan
but fails to specify whether such requested Loan is to be initially maintained
as a Euro Denominated Loan or a Sterling Denominated Loan, such requested Loan
shall be initially maintained as a Euro Denominated Loan.

 

4

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(b) Making of Swing Loans. In the case of a request for a Revolving Loan which
is a Dollar Denominated Loan and so long as either (i) the aggregate amount of
Swing Loans made since the last Settlement Date, minus all payments or other
amounts applied to Swing Loans since the last Settlement Date, plus the amount
of the requested Swing Loan does not exceed 10% of the Maximum Revolver Amount,
or (ii) Swing Lender, in its sole discretion, agrees to make a Swing Loan
notwithstanding the foregoing limitation, Swing Lender shall make a Revolving
Loan denominated in US Dollars (any such Revolving Loan made by Swing Lender
pursuant to this Section 2.3(b) being referred to as a “Swing Loan” and all such
Revolving Loans being referred to as “Swing Loans”) available to Borrowers on
the Funding Date applicable thereto by transferring immediately available funds
in the amount of such requested Borrowing to the applicable Designated Account.
Each Swing Loan shall be deemed to be a Revolving Loan which is a Dollar
Denominated Loan hereunder and shall be subject to all the terms and conditions
(including Section 3) applicable to other Revolving Loans, except that all
payments (including interest) on any Swing Loan shall be payable to Swing Lender
solely for its own account. Subject to the provisions of Section 2.3(d)(ii),
Swing Lender shall not make and shall not be obligated to make any Swing Loan if
Swing Lender has actual knowledge that (i) one or more of the applicable
conditions precedent set forth in Section 3 will not be satisfied on the
requested Funding Date for the applicable Borrowing, or (ii) the requested
Borrowing would exceed the Availability on such Funding Date. Swing Lender shall
not otherwise be required to determine whether the applicable conditions
precedent set forth in Section 3 have been satisfied on the Funding Date
applicable thereto prior to making any Swing Loan. The Swing Loans shall be
secured by Agent’s Liens, constitute Revolving Loans and Obligations, and bear
interest at the rate applicable from time to time to Revolving Loans that are
Base Rate Loans.

(c) Making of Revolving Loans.

(i) In the event that any Borrower (or Administrative Borrower on behalf of such
Borrower) requests a Borrowing and Swingline Lender is not obligated to make a
Swing Loan, Agent shall notify the Lenders by telecopy, telephone, email, or
other electronic form of transmission, of the requested Borrowing; such
notification to be sent on the Business Day that is at least 1 Business Day
prior to the requested Funding Date. If Agent has notified the Lenders of a
requested Borrowing on the Business Day that is 1 Business Day prior to the
Funding Date, then each Lender shall make the amount of such Lender’s Pro Rata
Share of the requested Borrowing available to Agent in immediately available
funds, to Agent’s Account, not later than 10:00 a.m. Local Time on the Business
Day that is the requested Funding Date. After Agent’s receipt of the proceeds of
such Revolving Loans from the Lenders, Agent shall make the proceeds thereof
available to Borrowers on the applicable Funding Date by transferring
immediately available funds equal to such proceeds received by Agent to the
applicable Designated Account; provided, that, subject to the provisions of
Section 2.3(d)(ii), no Lender shall have an obligation to make any Revolving
Loan, if (1) one or more of the applicable conditions precedent set forth in
Section 3 will not be satisfied on the requested Funding Date for the applicable
Borrowing unless such condition has been waived, or (2) the requested Borrowing
would exceed the Availability on such Funding Date.

(ii) Unless Agent receives notice from a Lender prior to 9:30 a.m. Local Time on
the Business Day that is the requested Funding Date relative to a requested
Borrowing as to which Agent has notified the Lenders of a requested Borrowing
that such Lender will not make available as and when required hereunder to Agent
for the account of Borrowers the amount of that Lender’s Pro Rata Share of the
Borrowing, Agent may assume that each Lender has made or will make such amount
available to Agent in immediately available funds on the Funding Date and Agent
may (but shall not be so required), in reliance upon such assumption, make
available to Borrowers a corresponding amount. If, on the

 

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requested Funding Date, any Lender shall not have remitted the full amount that
it is required to make available to Agent in immediately available funds and if
Agent has made available to Borrowers such amount on the requested Funding Date,
then such Lender shall make the amount of such Lender’s Pro Rata Share of the
requested Borrowing available to Agent in immediately available funds, to
Agent’s Account, no later than 10:00 a.m. Local Time on the Business Day that is
the first Business Day after the requested Funding Date (in which case, the
interest accrued on such Lender’s portion of such Borrowing for the Funding Date
shall be for Agent’s separate account). If any Lender shall not remit the full
amount that it is required to make available to Agent in immediately available
funds as and when required hereby and if Agent has made available to Borrowers
such amount, then that Lender shall be obligated to immediately remit such
amount to Agent, together with interest at the Defaulting Lender Rate for each
day until the date on which such amount is so remitted. A notice submitted by
Agent to any Lender with respect to amounts owing under this Section 2.3(c)(ii)
shall be conclusive, absent manifest error. If the amount that a Lender is
required to remit is made available to Agent, then such payment to Agent shall
constitute such Lender’s Revolving Loan for all purposes of this Agreement. If
such amount is not made available to Agent on the Business Day following the
Funding Date, Agent will notify Administrative Borrower of such failure to fund
and, upon demand by Agent, Borrowers shall pay such amount to Agent for Agent’s
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at the
time to the Revolving Loans composing such Borrowing.

(d) Protective Advances and Optional Overadvances.

(i) Any contrary provision of this Agreement or any other Loan Document
notwithstanding, but subject to Section 2.3(d)(iv), at any time (A) after the
occurrence and during the continuance of a Default or an Event of Default, or
(B) that any of the other applicable conditions precedent set forth in Section 3
are not satisfied, Agent hereby is authorized by Borrowers and the Lenders, from
time to time, in Agent’s sole discretion, to make Revolving Loans to, or for the
benefit of, Borrowers, on behalf of the Revolving Lenders, that Agent, in its
Permitted Discretion, deems necessary or desirable (1) to preserve or protect
the Collateral, or any portion thereof, or (2) to enhance the likelihood of
repayment of the Obligations (other than the Bank Product Obligations) (the
Revolving Loans described in this Section 2.3(d)(i) shall be referred to as
“Protective Advances”). Notwithstanding the foregoing, the aggregate amount of
all Protective Advances outstanding at any one time shall not exceed 10% of the
Maximum Revolver Amount.

(ii) Any contrary provision of this Agreement or any other Loan Document
notwithstanding, but subject to Section 2.3(d)(iv), the Lenders hereby authorize
Agent or Swing Lender, as applicable, and either Agent or Swing Lender, as
applicable, may, but is not obligated to, knowingly and intentionally, continue
to make Revolving Loans (including Swing Loans) to Borrowers notwithstanding
that an Overadvance exists or would be created thereby, so long as (A) after
giving effect to such Revolving Loans, the outstanding Revolver Usage does not
exceed the Borrowing Base by more than 10% of the Maximum Revolver Amount, and
(B) after giving effect to such Revolving Loans, the outstanding Revolver Usage
(except for and excluding amounts charged to the Loan Account for interest,
fees, or Lender Group Expenses) does not exceed the Maximum Revolver Amount. In
the event Agent obtains actual knowledge that the Revolver Usage exceeds the
amounts permitted by the immediately foregoing provisions, regardless of the
amount of, or reason for, such excess, Agent shall notify the Lenders as soon as
practicable (and prior to making any (or any additional) intentional
Overadvances (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses) unless Agent determines that prior
notice would result in imminent harm to the Collateral or its value, in which
case Agent may make such Overadvances and provide notice as promptly as
practicable thereafter), and the Lenders with Revolver Commitments thereupon
shall, together with Agent, jointly determine the terms of arrangements that
shall be implemented with Borrowers intended to reduce, within

 

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a reasonable time, the outstanding principal amount of the Revolving Loans to
Borrowers to an amount permitted by the preceding sentence. In such
circumstances, if any Lender with a Revolver Commitment objects to the proposed
terms of reduction or repayment of any Overadvance, the terms of reduction or
repayment thereof shall be implemented according to the determination of the
Required Lenders. The foregoing provisions are meant for the benefit of the
Lenders and Agent and are not meant for the benefit of any Loan Party, which
shall continue to be bound by the provisions of Section 2.4(e)(1). Each Lender
with a Revolver Commitment shall be obligated to settle with Agent as provided
in Section 2.3(e) (or Section 2.3(g), as applicable) for the amount of such
Lender’s Pro Rata Share of any unintentional Overadvances by Agent reported to
such Lender, any intentional Overadvances made as permitted under this
Section 2.3(d)(ii), and any Overadvances resulting from the charging to the Loan
Account of interest, fees, or Lender Group Expenses.

(iii) Each Protective Advance and each Overadvance (each, an “Extraordinary
Advance”) shall be deemed to be a Revolving Loan denominated in Dollars
hereunder, except that no Extraordinary Advance shall be eligible to be a LIBOR
Rate Loan and, prior to Settlement therefor, all payments on the Extraordinary
Advances shall be payable to Agent solely for its own account. The Extraordinary
Advances shall be repayable on demand, be secured by Agent’s Liens, constitute
Obligations hereunder, and bear interest at the rate applicable from time to
time to Revolving Loans denominated in Dollars that are Base Rate Loans. The
provisions of this Section 2.3(d) are for the exclusive benefit of Agent, Swing
Lender, and the Lenders and are not intended to benefit Borrowers (or any other
Loan Party) in any way.

(iv) Notwithstanding anything contained in this Agreement or any other Loan
Document to the contrary: (A) no Extraordinary Advance may be made by Agent if
such Extraordinary Advance would cause the aggregate principal amount of
Extraordinary Advances outstanding to exceed an amount equal to 10% of the
Maximum Revolver Amount; and (B) to the extent that the making of any
Extraordinary Advance causes the aggregate Revolver Usage to exceed the Maximum
Revolver Amount, such portion of such Extraordinary Advance shall be for Agent’s
sole and separate account and not for the account of any Lender and shall be
entitled to priority in repayment in accordance with Section 2.4(b).

(e) Settlement. It is agreed that each Lender’s funded portion of the Revolving
Loans is intended by the Lenders to equal, at all times, such Lender’s Pro Rata
Share of the outstanding Revolving Loans. Such agreement notwithstanding, Agent,
Swing Lender, and the other Lenders agree (which agreement shall not be for the
benefit of any Loan Party) that in order to facilitate the administration of
this Agreement and the other Loan Documents, settlement among the Lenders as to
the Revolving Loans, the Swing Loans, and the Extraordinary Advances shall take
place on a periodic basis in accordance with the following provisions:

(i) Agent shall request settlement (“Settlement”) with the Lenders on a weekly
basis, or on a more frequent basis if so determined by Agent in its sole
discretion (A) on behalf of Swing Lender, with respect to the outstanding Swing
Loans, (B) for itself, with respect to the outstanding Extraordinary Advances,
and (C) with respect to Parent’s or its Subsidiaries’ payments or other amounts
received, as to each by notifying the Lenders by telecopy, telephone, or other
similar form of transmission, of such requested Settlement, no later than 2:00
p.m. on the Business Day immediately prior to the date of such requested
Settlement (the date of such requested Settlement being the “Settlement Date”).
Such notice of a Settlement Date shall include a summary statement of the amount
and currency of outstanding Revolving Loans, Swing Loans, and Extraordinary
Advances for the period since the prior Settlement Date. Subject to the terms
and conditions contained herein (including Section 2.3(g)): (1) if the amount of
the Revolving Loans (including Swing Loans, and Extraordinary Advances) made by
a Lender that is not a Defaulting Lender exceeds such Lender’s Pro Rata Share of
the Revolving Loans (including Swing Loans, and Extraordinary Advances) as of a
Settlement Date, then Agent shall, by no later than 12:00 p.m.

 

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on the Settlement Date, transfer in immediately available funds to a Deposit
Account of such Lender (as such Lender may designate), an amount such that each
such Lender shall, upon receipt of such amount, have as of the Settlement Date,
its Pro Rata Share of the Revolving Loans (including Swing Loans, and
Extraordinary Advances), and (2) if the amount of the Revolving Loans (including
Swing Loans, and Extraordinary Advances) made by a Lender is less than such
Lender’s Pro Rata Share of the Revolving Loans (including Swing Loans, and
Extraordinary Advances) as of a Settlement Date, such Lender shall no later than
12:00 p.m. on the Settlement Date transfer in immediately available funds to
Agent’s Account, an amount such that each such Lender shall, upon transfer of
such amount, have as of the Settlement Date, its Pro Rata Share of the Revolving
Loans (including Swing Loans and Extraordinary Advances). Such amounts made
available to Agent under clause (2) of the immediately preceding sentence shall
be applied against the amounts of the applicable Swing Loans or Extraordinary
Advances and, together with the portion of such Swing Loans or Extraordinary
Advances representing Swing Lender’s Pro Rata Share thereof, shall constitute
Revolving Loans of such Lenders which are denominated in Dollars. If any such
amount is not made available to Agent by any Lender on the Settlement Date
applicable thereto to the extent required by the terms hereof, Agent shall be
entitled to recover for its account such amount on demand from such Lender
together with interest thereon at the Defaulting Lender Rate.

(ii) In determining whether a Lender’s balance of the Revolving Loans, Swing
Loans, and Extraordinary Advances is less than, equal to, or greater than such
Lender’s Pro Rata Share of the Revolving Loans, Swing Loans, and Extraordinary
Advances as of a Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually received in
good funds by Agent with respect to principal, interest, fees payable by
Borrowers and allocable to the Lenders hereunder, and proceeds of Collateral.

(iii) Between Settlement Dates, Agent, to the extent Extraordinary Advances or
Swing Loans are outstanding, may pay over to Agent or Swing Lender, as
applicable, any payments or other amounts received by Agent, that in accordance
with the terms of this Agreement would be applied to the reduction of the
Revolving Loans, for application to the Extraordinary Advances or Swing Loans.
Between Settlement Dates, Agent, to the extent no Extraordinary Advances or
Swing Loans are outstanding, may pay over to Swing Lender any payments or other
amounts received by Agent, that in accordance with the terms of this Agreement
would be applied to the reduction of the Revolving Loans, for application to
Swing Lender’s Pro Rata Share of the Revolving Loans. If, as of any Settlement
Date, payments or other amounts of Parent or its Subsidiaries received since the
then immediately preceding Settlement Date have been applied to Swing Lender’s
Pro Rata Share of the Revolving Loans other than to Swing Loans, as provided for
in the previous sentence, Swing Lender shall pay to Agent for the accounts of
the Lenders, and Agent shall pay to the Lenders (other than a Defaulting Lender
if Agent has implemented the provisions of Section 2.3(g)), to be applied to the
outstanding Revolving Loans of such Lenders, an amount such that each such
Lender shall, upon receipt of such amount, have, as of such Settlement Date, its
Pro Rata Share of the Revolving Loans. During the period between Settlement
Dates, Swing Lender with respect to Swing Loans, Agent with respect to
Extraordinary Advances, and each Lender with respect to the Revolving Loans
other than Swing Loans and Extraordinary Advances, shall be entitled to interest
at the applicable rate or rates payable under this Agreement on the daily amount
of funds employed by Swing Lender, Agent, or the Lenders, as applicable.

(iv) Anything in this Section 2.3(e) to the contrary notwithstanding, in the
event that a Lender is a Defaulting Lender, Agent shall be entitled to refrain
from remitting settlement amounts to the Defaulting Lender and, instead, shall
be entitled to elect to implement the provisions set forth in Section 2.3(g).

 

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(f) Notation. Agent, as a non-fiduciary agent for Borrowers, shall maintain a
register showing the principal amount of the Revolving Loans, owing to each
Lender, including the Swing Loans owing to Swing Lender, and Extraordinary
Advances owing to Agent, and the interests therein of each Lender, from time to
time and such register shall, absent manifest error, conclusively be presumed to
be correct and accurate.

(g) Defaulting Lenders.

(i) Notwithstanding the provisions of Section 2.4(b)(ii), Agent shall not be
obligated to transfer to a Defaulting Lender any payments made by Borrowers to
Agent for the Defaulting Lender’s benefit or any proceeds of Collateral that
would otherwise be remitted hereunder to the Defaulting Lender, and, in the
absence of such transfer to the Defaulting Lender, Agent shall transfer any such
payments (A) first, to Swing Lender to the extent of any Swing Loans that were
made by Swing Lender and that were required to be, but were not, paid by the
Defaulting Lender, (B) second, to Issuing Lender, to the extent of the portion
of a Letter of Credit Disbursement that was required to be, but was not, paid by
the Defaulting Lender, (C) third, to each Non-Defaulting Lender ratably in
accordance with their Commitments (but, in each case, only to the extent that
such Defaulting Lender’s portion of a Revolving Loan (or other funding
obligation) was funded by such other Non-Defaulting Lender), (D) to a suspense
account maintained by Agent, the proceeds of which shall be retained by Agent
and may be made available to be re-advanced to or for the benefit of Borrowers
(upon the request of any Borrower, or Administrative Borrower on behalf of such
Borrower, and subject to the conditions set forth in Section 3.2) as if such
Defaulting Lender had made its portion of Revolving Loans (or other funding
obligations) hereunder, and (E) from and after the date on which all other
Obligations have been paid in full, to such Defaulting Lender in accordance with
tier (L) of Section 2.4(b)(ii). Subject to the foregoing, Agent may hold and, in
its discretion, re-lend to Borrowers for the account of such Defaulting Lender
the amount of all such payments received and retained by Agent for the account
of such Defaulting Lender. Solely for the purposes of voting or consenting to
matters with respect to the Loan Documents (including the calculation of Pro
Rata Share in connection therewith) and for the purpose of calculating the fee
payable under Section 2.10(b), such Defaulting Lender shall be deemed not to be
a “Lender” and such Lender’s Commitment shall be deemed to be zero; provided,
that the foregoing shall not apply to any of the matters governed by
Section 14.1(a)(i) through (iii). The provisions of this Section 2.3(g) shall
remain effective with respect to such Defaulting Lender until the earlier of
(y) the date on which all of the Non-Defaulting Lenders, Agent, Issuing Lender,
and Borrowers shall have waived, in writing, the application of this
Section 2.3(g) to such Defaulting Lender, or (z) the date on which such
Defaulting Lender makes payment of all amounts that it was obligated to fund
hereunder, pays to Agent all amounts owing by Defaulting Lender in respect of
the amounts that it was obligated to fund hereunder, and, if requested by Agent,
provides adequate assurance of its ability to perform its future obligations
hereunder (on which earlier date, so long as no Event of Default has occurred
and is continuing, any remaining cash collateral held by Agent pursuant to
Section 2.3(g)(ii) shall be released to Borrowers). The operation of this
Section 2.3(g) shall not be construed to increase or otherwise affect the
Commitment of any Lender, to relieve or excuse the performance by such
Defaulting Lender or any other Lender of its duties and obligations hereunder,
or to relieve or excuse the performance by any Loan Party of its duties and
obligations hereunder to Agent, Issuing Lender, or to the Lenders other than
such Defaulting Lender. Any failure by a Defaulting Lender to fund amounts that
it was obligated to fund hereunder shall constitute a material breach by such
Defaulting Lender of this Agreement and shall entitle Administrative Borrower,
at its option, upon written notice to Agent, to arrange for a substitute Lender
to assume the Commitment of such Defaulting Lender, such substitute Lender to be
reasonably acceptable to Agent. In connection with the arrangement of such a
substitute Lender, the Defaulting Lender shall have no right to refuse to be
replaced hereunder, and agrees to execute and deliver a completed form of
Assignment and Acceptance in favor of the substitute Lender (and agrees that it
shall be deemed to have executed and delivered such document if it fails to do
so) subject only to being paid its share of the outstanding Obligations (other
than Bank Product Obligations,

 

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but including (1) all interest, fees, and other amounts that may be due and
payable in respect thereof, and (2) an assumption of its Pro Rata Share of its
participation in the Letters of Credit); provided, that, any such assumption of
the Commitment of such Defaulting Lender shall not be deemed to constitute a
waiver of any of the Lender Groups’ or any Loan Party’s rights or remedies
against any such Defaulting Lender arising out of or in relation to such failure
to fund. In the event of a direct conflict between the priority provisions of
this Section 2.3(g) and any other provision contained in this Agreement or any
other Loan Document, it is the intention of the parties hereto that such
provisions be read together and construed, to the fullest extent possible, to be
in concert with each other. In the event of any actual, irreconcilable conflict
that cannot be resolved as aforesaid, the terms and provisions of this
Section 2.3(g) shall control and govern.

(ii) If any Swing Loan or Letter of Credit is outstanding at the time that a
Lender becomes a Defaulting Lender then:

(A) such Defaulting Lender’s Swing Loan Exposure and Letter of Credit Exposure
shall be reallocated among the Non-Defaulting Lenders in accordance with their
respective Pro Rata Shares but only to the extent (x) the sum of all
Non-Defaulting Lenders’ Revolving Loan Exposures plus such Defaulting Lender’s
Swing Loan Exposure and Letter of Credit Exposure does not exceed the total of
all Non-Defaulting Lenders’ Revolver Commitments and (y) the conditions set
forth in Section 3.2 are satisfied at such time;

(B) if the reallocation described in clause (A) above cannot, or can only
partially, be effected, Borrowers shall within one Business Day following notice
by the Agent (x) first, prepay such Defaulting Lender’s Swing Loan Exposure
(after giving effect to any partial reallocation pursuant to clause (A) above)
and (y) second, cash collateralize such Defaulting Lender’s Letter of Credit
Exposure (after giving effect to any partial reallocation pursuant to clause
(A) above), pursuant to a cash collateral agreement to be entered into in form
and substance reasonably satisfactory to the Agent, for so long as such Letter
of Credit Exposure is outstanding; provided, that Borrower shall not be
obligated to cash collateralize any Defaulting Lender’s Letter of Credit
Exposure if such Defaulting Lender is also the Issuing Lender;

(C) if any Borrower cash collateralizes any portion of such Defaulting Lender’s
Letter of Credit Exposure pursuant to this Section 2.3(g)(ii), Borrowers shall
not be required to pay any Letter of Credit Fees to Agent for the account of
such Defaulting Lender pursuant to Section 2.6(b) with respect to such cash
collateralized portion of such Defaulting Lender’s Letter of Credit Exposure
during the period such Letter of Credit Exposure is cash collateralized;

(D) to the extent the Letter of Credit Exposure of the Non-Defaulting Lenders is
reallocated pursuant to this Section 2.3(g)(ii), then the Letter of Credit Fees
payable to the Non-Defaulting Lenders pursuant to Section 2.6(b) shall be
adjusted in accordance with such Non-Defaulting Lenders’ Letter of Credit
Exposure;

(E) to the extent any Defaulting Lender’s Letter of Credit Exposure is neither
cash collateralized nor reallocated pursuant to this Section 2.3(g)(ii), then,
without prejudice to any rights or remedies of the Issuing Lender or any Lender
hereunder, all Letter of Credit Fees that would have otherwise been payable to
such Defaulting Lender under Section 2.6(b) with respect to such portion of such
Letter of Credit Exposure shall instead be payable to the Issuing Lender until
such portion of such Defaulting Lender’s Letter of Credit Exposure is cash
collateralized or reallocated;

(F) so long as any Lender is a Defaulting Lender, the Swing Lender shall not be
required to make any Swing Loan and the Issuing Lender shall not be required to
issue, amend, or

 

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increase any Letter of Credit, in each case, to the extent (x) the Defaulting
Lender’s Pro Rata Share of such Swing Loans or Letter of Credit can not be
reallocated pursuant to this Section 2.3(g)(ii) or (y) the Swing Lender or
Issuing Lender, as applicable, has not otherwise entered into arrangements
reasonably satisfactory to the Swing Lender or Issuing Lender, as applicable,
and Borrower to eliminate the Swing Lender’s or Issuing Lender’s risk with
respect to the Defaulting Lender’s participation in Swing Loans or Letters of
Credit; and

(G) Agent may release any cash collateral provided by Borrowers pursuant to this
Section 2.3(g)(ii) to the Issuing Lender and the Issuing Lender may apply any
such cash collateral to the payment of such Defaulting Lender’s Pro Rata Share
of any Letter of Credit Disbursement that is not reimbursed by Borrowers
pursuant to Section 2.11(a).

(h) Independent Obligations. All Revolving Loans (other than Swing Loans and
Extraordinary Advances) shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Revolving Loan (or other extension of credit) hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any other Lender to perform its obligations hereunder, and (ii) no failure by
any Lender to perform its obligations hereunder shall excuse any other Lender
from its obligations hereunder.

2.4. Payments; Reductions of Commitments; Prepayments.

(a) Payments by Borrowers.

(i) Except as otherwise expressly provided herein, all payments by Borrowers
shall be made to Agent’s Account for the account of the Lender Group and shall
be made in immediately available funds, no later than 1:30 p.m. Local Time on
the date specified herein. Any payment received by Agent later than 1:30 p.m.
Local Time shall be deemed to have been received (unless Agent, in its sole
discretion, elects to credit it on the date received) on the following Business
Day and any applicable interest or fee shall continue to accrue until such
following Business Day.

(ii) Unless Agent receives notice from Administrative Borrower prior to the date
on which any payment is due to the Lenders that Borrowers will not make such
payment in full as and when required, Agent may assume that Borrowers have made
(or will make) such payment in full to Agent on such date in immediately
available funds and Agent may (but shall not be so required), in reliance upon
such assumption, distribute to each Lender on such due date an amount equal to
the amount then due such Lender. If and to the extent Borrowers do not make such
payment in full to Agent on the date when due, each Lender severally shall repay
to Agent on demand such amount distributed to such Lender, together with
interest thereon at the Defaulting Lender Rate for each day from the date such
amount is distributed to such Lender until the date repaid.

(iii) All payments in respect of the Obligations denominated in a currency other
than Dollars shall be applied first to Obligations denominated in the same
currency as the payments received and second to the Obligations denominated in
the other currencies, if any; provided, that, Agent may, at its option (but is
not obligated to), convert such currency received to the currency in which the
Obligations are denominated at the Exchange Rate calculated by Agent in good
faith on such date and Borrowers shall pay the costs of such conversion (or
Agent may, at its option, charge such costs to the loan account of Borrowers
maintained by such Agent).

(iv) Unless Agent otherwise agrees in writing, all payments of the Obligations
shall be made with the Loan Parties own funds (including, without limitation,
with proceeds of Collateral constituting assets of the Loan Parties and with
funds of the Loan Parties representing the repayment of Specified Permitted
Intercompany Advances made by the Loan Parties).

 

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(b) Apportionment and Application.

(i) So long as no Application Event has occurred and is continuing and except as
otherwise provided herein with respect to Defaulting Lenders, all principal and
interest payments received by Agent shall be apportioned ratably among the
Lenders (according to the unpaid principal balance of the Obligations to which
such payments relate held by each Lender) and all payments of fees and expenses
received by Agent (other than fees or expenses that are for Agent’s separate
account or for the separate account of Issuing Lender) shall be apportioned
ratably among the Lenders having a Pro Rata Share of the type of Commitment or
Obligation to which a particular fee or expense relates. Subject to
Section 2.4(b)(iv), Section 2.4(d)(ii), and Section 2.4(e), all payments to be
made hereunder by Borrowers shall be remitted to Agent and all such payments,
and all proceeds of Collateral received by Agent, shall be applied, so long as
no Application Event has occurred and is continuing and except as otherwise
provided herein with respect to Defaulting Lenders, to reduce the balance of the
Revolving Loans outstanding and, thereafter, to Borrower (to be wired to the
applicable Designated Account) or such other Person entitled thereto under
applicable law.

(ii) At any time that an Application Event has occurred and is continuing and
except as otherwise provided herein with respect to Defaulting Lenders, all
payments remitted to Agent and all proceeds of Collateral received by Agent
shall be applied as follows:

(A) first, to pay any Lender Group Expenses (including cost or expense
reimbursements) or indemnities then due to Agent under the Loan Documents, until
paid in full,

(B) second, to pay any fees or premiums then due to Agent under the Loan
Documents until paid in full,

(C) third, to pay interest due in respect of all Protective Advances until paid
in full,

(D) fourth, to pay the principal of all Protective Advances until paid in full,

(E) fifth, ratably, to pay any Lender Group Expenses (including cost or expense
reimbursements) or indemnities then due to any of the Lenders under the Loan
Documents, until paid in full,

(F) sixth, ratably, to pay any fees or premiums then due to any of the Lenders
under the Loan Documents until paid in full,

(G) seventh, to pay interest accrued in respect of the Swing Loans until paid in
full,

(H) eighth, to pay the principal of all Swing Loans until paid in full,

(I) ninth, ratably, to pay interest accrued in respect of the Revolving Loans
(other than Protective Advances) until paid in full,

(J) tenth, ratably

(1) to pay the principal of all Revolving Loans until paid in full,

 

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(2) to Agent, to be held by Agent, for the benefit of Issuing Lender (and for
the ratable benefit of each of the Lenders that have an obligation to pay to
Agent, for the account of Issuing Lender, a share of each Letter of Credit
Disbursement), as cash collateral in an amount up to 105% or, in the case of
Foreign Denominated Letters of Credit, 115% of the Letter of Credit Usage (to
the extent permitted by applicable law, such cash collateral shall be applied to
the reimbursement of any Letter of Credit Disbursement as and when such
disbursement occurs and, if a Letter of Credit expires undrawn, the cash
collateral held by Agent in respect of such Letter of Credit shall, to the
extent permitted by applicable law, be reapplied pursuant to this
Section 2.4(b)(ii), beginning with tier (A) hereof),

(3) Ratably, up to the amount (after taking into account any amounts previously
paid pursuant to this clause (3). during the continuation of the applicable
Application Event) of the most recently established Bank Product Reserve to
(y) the Bank Product Providers based upon amounts then certified by the
applicable Bank Product Provider to Agent (in form and substance satisfactory to
Agent) to be due and payable to such Bank Product Providers on account of Bank
Product Obligations, and (z) with any balance to be paid to Agent, to be held by
Agent, for the ratable benefit of the Bank Product Providers, as cash collateral
(which cash collateral may be released by Agent to the applicable Bank Product
Provider and applied by such Bank Product Provider to the payment or
reimbursement of any amounts due and payable with respect to Bank Product
Obligations owed to the applicable Bank Product Provider as and when such
amounts first become due and payable and, if and at such time as all such Bank
Product Obligations are paid or otherwise satisfied in full, the cash collateral
held by Agent in respect of such Bank Product Obligations shall be reapplied
pursuant to this Section 2.4(b)(ii), beginning with tier (A) hereof,

(K) eleventh, to pay any other Obligations other than Obligations owed to
Defaulting Lenders.

(L) twelfth, ratably to pay any Obligations owed to Defaulting Lenders; and

(M) thirteenth, to Borrowers (to be wired to the applicable Designated Account)
or such other Person entitled thereto under applicable law.

(iii) Agent promptly shall distribute to each Lender, pursuant to the applicable
wire instructions received from each Lender in writing, such funds as it may be
entitled to receive, subject to a Settlement delay as provided in
Section 2.3(e).

(iv) In each instance, so long as no Application Event has occurred and is
continuing, Section 2.4(b)(i) shall not apply to any payment made by Borrowers
to Agent and specified by any Borrower (or Administrative Borrower on behalf of
such Borrower) to be for the payment of specific Obligations then due and
payable (or prepayable) under any provision of this Agreement or any other Loan
Document.

(v) For purposes of Section 2.4(b)(ii), “paid in full” of a type of Obligation
means payment in cash or immediately available funds of all amounts owing on
account of such type of Obligation, including interest accrued after the
commencement of any Insolvency Proceeding, default interest, interest on
interest, and expense reimbursements, irrespective of whether any of the
foregoing would be or is allowed or disallowed in whole or in part in any
Insolvency Proceeding.

(vi) In the event of a direct conflict between the priority provisions of this
Section 2.4 and any other provision contained in this Agreement or any other
Loan Document, it is the intention of the parties hereto that such provisions be
read together and construed, to the fullest extent possible, to be in concert
with each other. In the event of any actual, irreconcilable conflict that cannot
be resolved as

 

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aforesaid, if the conflict relates to the provisions of Section 2.3(g) and this
Section 2.4, then the provisions of Section 2.3(g) shall control and govern, and
if otherwise, then the terms and provisions of this Section 2.4 shall control
and govern.

(c) Reduction of Commitments.

(i) Revolver Commitments. The Revolver Commitments shall terminate on the
Maturity Date. Borrowers may reduce the Revolver Commitments, without premium or
penalty, to an amount (which may be zero) not less than the sum of (A) the
Revolver Usage as of such date, plus (B) the principal amount of all Revolving
Loans not yet made as to which a request has been given by any Borrower (or
Administrative Borrower on behalf of such Borrower) under Section 2.3(a), plus
(C) the amount of all Letters of Credit not yet issued as to which a request has
been given by Administrative Borrower pursuant to Section 2.11(a). Each such
reduction shall be in an amount which is not less than $5,000,000 (unless the
Revolver Commitments are being reduced to zero and the amount of the Revolver
Commitments in effect immediately prior to such reduction are less than
$5,000,000), shall be made by providing not less than 10 Business Days prior
written notice to Agent, and shall be irrevocable. Once reduced, the Revolver
Commitments may not be increased. Each such reduction of the Revolver
Commitments shall reduce the Revolver Commitments of each Lender proportionately
in accordance with its ratable share thereof.

(d) Optional Prepayments. Borrowers may prepay the principal of any Revolving
Loan at any time in whole or in part, without premium or penalty.

(e) Mandatory Prepayments.

(i) Borrowing Base. If, at any time, (A) the Revolver Usage on such date exceeds
(B) the Borrowing Base reflected in the Borrowing Base Certificate most recently
delivered by Borrowers to Agent, then Borrowers shall promptly, but in any
event, within 1 Business Day prepay the Obligations in accordance with
Section 2.4(f)(i) in an aggregate amount equal to the amount of such excess.

(f) Application of Payments.

(i) Each prepayment pursuant to Section 2.4(e)(i) shall, (A) so long as no
Application Event shall have occurred and be continuing, be applied, first, to
the outstanding principal amount of the Revolving Loans until paid in full, and
second, to cash collateralize the Letters of Credit in an amount equal to 105%
(or, in the case of Foreign Denominated Letters of Credit, 115%) of the then
outstanding Letter of Credit Usage, and (B) if an Application Event shall have
occurred and be continuing, be applied in the manner set forth in
Section 2.4(b)(ii).

2.5. Promise to Pay. Borrowers agree to pay the Lender Group Expenses on the
earlier of (a) the first day of the month following the date on which the
applicable Lender Group Expenses were first incurred or (b) the date on which
demand therefor is made by Agent (it being acknowledged and agreed that any
charging of such costs, expenses or Lender Group Expenses to the Loan Account
pursuant to the provisions of Section 2.6(d) shall be deemed to constitute a
demand for payment thereof for the purposes of this subclause (b)). Borrowers
promise to pay all of the Obligations (including principal, interest, premiums,
if any, fees, costs, and expenses (including Lender Group Expenses)) in full on
the Maturity Date or, if earlier, on the date on which the Obligations (other
than the Bank Product Obligations) become due and payable pursuant to the terms
of this Agreement. Borrowers agree that its obligations contained in the first
sentence of this Section 2.5 shall survive payment or satisfaction in full of
all other Obligations.

 

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2.6. Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations.

(a) Interest Rates. Except as provided in Section 2.6(c), all Obligations
(except for undrawn Letters of Credit) that have been charged to the Loan
Account pursuant to the terms hereof shall bear interest as follows:

(i) if the relevant Obligation is a Dollar Denominated Loan which is a Libor
Rate Loan, at a per annum rate equal to the Libor Rate for the applicable
Interest Period plus the Applicable Margin for Libor Rate Loans,

(ii) if the relevant Loan is a Euro Denominated Loan, at a rate per annum equal
to EURIBOR for the applicable Interest Period plus the Applicable Margin for
Euro Denominated Loans,

(iii) if the relevant Loan is a Sterling Denominated Loan, at a rate per annum
equal to the Libor Rate for the applicable Interest Period plus the Applicable
Margin for Sterling Denominated Loans plus any Mandatory Costs,

(iv) if the relevant Loan is a Dollar Denominated Loan which is a Base Rate
Loan, at a rate per annum equal to the Base Rate plus the Applicable Margin for
Base Rate Loans, and

(v) otherwise, at a per annum rate equal to the Base Rate plus the Applicable
Margin for Base Rate Loans.

(b) Letter of Credit Fee. Borrowers shall pay Agent (for the ratable benefit of
the Revolving Lenders), a Letter of Credit fee (the “Letter of Credit Fee”)
(which fee shall be in addition to the fees, charges, commissions, and costs set
forth in Section 2.11(j)) that shall accrue at a per annum rate equal to the
Applicable Margin for Dollar Denominated Loans which are LIBOR Rate Loans times
the undrawn amount of all outstanding Letters of Credit.

(c) Default Rate. Upon the occurrence and during the continuation of an Event of
Default and at the election of Agent or the Required Lenders,

(i) all Obligations (except for undrawn Letters of Credit) that have been
charged to the Loan Account pursuant to the terms hereof shall bear interest at
a per annum rate equal to 2 percentage points above the per annum rate otherwise
applicable thereunder, and

(ii) the Letter of Credit Fee shall be increased to 2 percentage points above
the per annum rate otherwise applicable hereunder.

(d) Payment. Except to the extent provided to the contrary in Section 2.10 or
Section 2.12(a) or in this Section 2.6(d), (i) all interest, all Letter of
Credit Fees, and all other fees payable hereunder or under any of the other Loan
Documents shall be due and payable, in arrears, on the first day of each month
and (ii) all costs and expenses payable hereunder or under any of the other Loan
Documents, and all Lender Group Expenses shall be due and payable on the earlier
of (x) the first day of the month following the date on which the applicable
costs, expenses, or Lender Group Expenses were first incurred or (y) the date on
which demand therefor is made by Agent (it being acknowledged and agreed that
any charging of such costs, expenses or Lender Group Expenses to the Loan
Account pursuant to the provisions of the following sentence shall be deemed to
constitute a demand for payment thereof for the purposes of this subclause (y)).
Borrowers hereby authorize Agent, from time to time without prior notice to
Borrowers, to charge to the Loan Account (A) on the first day of each month or
otherwise when due, all interest accrued during the prior month or other
applicable period on the Revolving Loans hereunder, (B) on the first day of each
month, all Letter of Credit Fees accrued or chargeable hereunder during the
prior month, (C) on the first day of each month, the Unused Line Fee accrued
during the prior

 

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month pursuant to Section 2.10(b), (D) as and when incurred or accrued, all
audit, appraisal, valuation, or other charges or fees payable hereunder pursuant
to Section 2.10(c), (E) as and when due and payable, all other fees payable
hereunder or under any of the other Loan Documents, (F) as and when incurred or
accrued, all fees, charges, commissions, and costs provided for in
Section 2.11(j), (G) as and when incurred or accrued, all fees and costs
provided for in Section 2.10 (a) or (c), (H) as and when incurred or accrued,
all other Lender Group Expenses, and (I) as and when due and payable all other
payment obligations payable under any Loan Document or any Bank Product
Agreement (including any amounts due and payable to the Bank Product Providers
in respect of Bank Products). All amounts (including interest, fees, costs,
expenses, Lender Group Expenses, or other amounts payable hereunder or under any
other Loan Document or under any Bank Product Agreement) charged to the Loan
Account shall thereupon constitute Revolving Loans hereunder, shall constitute
Obligations hereunder, and shall initially accrue interest at the rate then
applicable to Revolving Loans denominated in Dollars that are Base Rate Loans
(unless and until converted into LIBOR Rate Loans in accordance with the terms
of this Agreement). In the case of Loans for which EURIBOR or LIBOR Rate is
used, interest is payable on the last day of each relevant Interest Period (but
not less frequently than quarterly), and in the case of any other Loans,
interest is payable monthly in arrears.

(e) Computation. All interest and fees chargeable under the Loan Documents shall
be computed on the basis of a 360 day year (or, in the case of Sterling
Denominated Loans, a 365 or 366 day year, as applicable), in each case, for the
actual number of days elapsed in the period during which the interest or fees
accrue. In the event the Base Rate is changed from time to time hereafter, the
rates of interest hereunder based upon the Base Rate automatically and
immediately shall be increased or decreased by an amount equal to such change in
the Base Rate.

(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the
interest rate or rates payable under this Agreement, plus any other amounts paid
in connection herewith, exceed the highest rate permissible under any law that a
court of competent jurisdiction shall, in a final determination, deem
applicable. Loan Parties and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, that, anything contained herein to the
contrary notwithstanding, if such rate or rates of interest or manner of payment
exceeds the maximum allowable under applicable law, then, ipso facto, as of the
date of this Agreement, Borrowers are and shall be liable only for the payment
of such maximum amount as is allowed by law, and payment received from Borrowers
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.

2.7. Crediting Payments. The receipt of any payment item by Agent shall not be
required to be considered a payment on account unless such payment item is a
wire transfer of immediately available federal funds made to Agent’s Account or
unless and until such payment item is honored when presented for payment. Should
any payment item not be honored when presented for payment, then Borrowers shall
be deemed not to have made such payment and interest shall be calculated
accordingly. Anything to the contrary contained herein notwithstanding, any
payment item shall be deemed received by Agent only if it is received into
Agent’s Account on a Business Day on or before 1:30 p.m. If any payment item is
received into Agent’s Account on a non-Business Day or after 1:30 p.m. on a
Business Day (unless Agent, in its sole discretion, elects to credit it on the
date received), it shall be deemed to have been received by Agent as of the
opening of business on the immediately following Business Day.

2.8. Designated Account. Agent is authorized to make the Revolving Loans, and
Issuing Lender is authorized to issue the Letters of Credit, under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Person or, without instructions, if pursuant to
Section 2.6(d). Borrowers agree to establish and maintain one or more Designated
Accounts with the Designated Account Bank for the purpose of receiving the
proceeds of the Revolving Loans

 

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requested by any Borrower (or Administrative Borrower on behalf of such
Borrower) and made by Agent or the Lenders hereunder. Unless otherwise agreed by
Agent and any Borrower (or Administrative Borrower on behalf of such Borrower),
any Revolving Loan or Swing Loan requested by any Borrower (or Administrative
Borrower on behalf of such Borrower) and made by Agent or the Lenders hereunder
shall be made to the applicable Designated Account. Notwithstanding anything
contained herein to the contrary, (a) Borrowers authorize Agent to remit
proceeds of Revolving Loans to a Designated Account, (b) except as otherwise
agreed by Agent, proceeds of Dollar Denominated Loans shall not be remitted to a
Foreign Subsidiary Designated Account, (c) except as otherwise agreed by Agent,
proceeds of European Denominated Loans shall be remitted to a Designated Account
maintained in London, England, (d) except as otherwise agreed by Agent, any
proceeds of European Denominated Loans remitted to a Foreign Subsidiary
Designated Account shall be deemed to be a Revolving Loan made to Borrowers,
which immediately make an intercompany loan to the non-Loan Party Subsidiary of
Parent which owns such Foreign Subsidiary Designated Account, (e) except as
otherwise agreed by Agent, any European Denominated Loan the proceeds of which
are remitted to a Foreign Subsidiary Designated Account shall be deemed to
constitute a representation and warranty by Administrative Borrower that,
immediately before and after giving effect to the intercompany loan deemed to
have been made in accordance with the terms of clause (d) above, no Event of
Default has occurred and is continuing and Excess Availability shall be
$10,000,000 or greater.

2.9. Maintenance of Loan Account; Statements of Obligations. Agent shall
maintain an account on its books in the name of Borrowers (the “Loan Account”)
on which Borrowers will be charged with all Revolving Loans (including
Extraordinary Advances and Swing Loans) made by Agent, Swing Lender, or the
Lenders to Borrowers or for Borrowers’ account, the Letters of Credit issued or
arranged by Issuing Lender for Borrowers’ account, and with all other payment
Obligations hereunder or under the other Loan Documents, including, accrued
interest, fees and expenses, and Lender Group Expenses. In accordance with
Section 2.7, the Loan Account will be credited with all payments received by
Agent from Borrowers or for Borrowers’ account. Agent shall make available to
Administrative Borrower monthly statements regarding the Loan Account, including
the principal amount of the Revolving Loans, interest accrued hereunder, fees
accrued or charged hereunder or under the other Loan Documents, and a summary
itemization of all charges and expenses constituting Lender Group Expenses
accrued hereunder or under the other Loan Documents, and each such statement,
absent manifest error, shall be conclusively presumed to be correct and accurate
and constitute an account stated between Borrowers and the Lender Group unless,
within 30 days after Agent first makes such a statement available to Borrowers,
Administrative Borrower shall deliver to Agent written objection thereto
describing the error or errors contained in such statement.

2.10. Fees.

(a) Agent Fees. Borrowers shall pay to Agent, for the account of Agent, as and
when due and payable under the terms of the Fee Letter, the fees set forth in
the Fee Letter.

(b) Unused Line Fee. Borrowers shall pay to Agent, for the ratable account of
the Revolving Lenders, on the first day of each month from and after the Closing
Date up to the first day of the month prior to the date on which the Obligations
are paid in full and on the date on which the Obligations are paid in full, an
unused line fee (the “Unused Line Fee”) in an amount equal to 0.50% per annum
times the result of (i) the aggregate amount of the Revolver Commitments, less
(ii) the average amount of the Revolver Usage during the immediately preceding
month (or portion thereof).

(c) Field Examination and Other Fees. Borrowers shall pay to Agent, field
examination, appraisal, and valuation fees and charges, as and when incurred or
chargeable, as follows (i) a fee of $1,000 per day, per examiner, plus
out-of-pocket expenses (including travel, meals, and lodging) for each

 

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field examination of Borrowers performed by personnel employed by Agent, and
(ii) the fees or charges paid or incurred by Agent (but, in any event, no less
than a charge of $1,000 per day, per Person, plus out-of-pocket expenses
(including travel, meals, and lodging)) if it elects to employ the services of
one or more third Persons to perform field examinations of Parent or its
Subsidiaries, to establish electronic collateral reporting systems, or to
appraise the Collateral, or any portion thereof; provided, that so long as no
Event of Default shall have occurred and be continuing, Borrowers shall not be
obligated to reimburse Agent (A) for more than 2 field examinations during any
calendar year or more than 2 appraisals of the Collateral during any calendar
year if Excess Availability shall be greater than $20,000,000 at all times
during such calendar year or (ii) for more than 3 field examinations or more
than 3 appraisals of Collateral during any calendar year if Excess Availability
shall be less than or equal to $20,000,000 at any time during such fiscal year.

2.11. Letters of Credit.

(a) Subject to the terms and conditions of this Agreement, upon the request of
any Borrower (or Administrative Borrower on behalf of such Borrower) made in
accordance herewith, Issuing Lender agrees to issue, or to cause an Underlying
Issuer (including, as Issuing Lender’s agent) to issue, a requested Letter of
Credit for the account of Borrowers. If Issuing Lender, at its option, elects to
cause an Underlying Issuer to issue a requested Letter of Credit, then Issuing
Lender agrees that it will enter into arrangements relative to the reimbursement
of such Underlying Issuer (which may include, among other means, by becoming an
applicant with respect to such Letter of Credit or entering into undertakings or
other arrangements that provide for reimbursement of such Underlying Issuer with
respect to such drawings under Letter of Credit; each such obligation or
undertaking, irrespective of whether in writing, a “Reimbursement Undertaking”)
with respect to Letters of Credit issued by such Underlying Issuer for the
account of Borrowers. By submitting a request to Issuing Lender for the issuance
of a Letter of Credit, any Borrower (or Administrative Borrower on behalf of
such Borrower) shall be deemed to have requested that (i) Issuing Lender issue
or (ii) an Underlying Issuer issue the requested Letter of Credit (and, in such
case, to have requested Issuing Lender to issue a Reimbursement Undertaking with
respect to such requested Letter of Credit). Each Borrower acknowledges and
agrees that each Borrower is and shall be deemed to be an applicant (within the
meaning of Section 5-102(a)(2) of the Code) with respect to each Underlying
Letter of Credit. Each request for the issuance of a Letter of Credit, or the
amendment, renewal, or extension of any outstanding Letter of Credit, shall be
made in writing by an Authorized Person and delivered to Issuing Lender via hand
delivery, telefacsimile, or other electronic method of transmission reasonably
in advance of the requested date of issuance, amendment, renewal, or extension.
Each such request shall be in form and substance reasonably satisfactory to
Issuing Lender and (i) shall specify (A) the amount of such Letter of Credit,
(B) the date of issuance, amendment, renewal, or extension of such Letter of
Credit, (C) the proposed expiration date of such Letter of Credit, (D) the name
and address of the beneficiary of the Letter of Credit, (E) whether such Letter
of Credit is to be denominated in Dollars, Euros or Sterling and (F) such other
information (including, the conditions to drawing, and, in the case of an
amendment, renewal, or extension, identification of the Letter of Credit to be
so amended, renewed, or extended) as shall be necessary to prepare, amend,
renew, or extend such Letter of Credit, and (ii) shall be accompanied by such
Issuer Documents as Agent, Issuing Lender or Underlying Issuer may request or
require, to the extent that such requests or requirements are consistent with
the Issuer Documents that Issuing Lender or Underlying Issuer generally requests
for Letters of Credit in similar circumstances. Borrowers shall not request, and
Issuing Lender shall have no obligation to issue or cause to be issued, any
European Denominated Letter of Credit if the sum of the aggregate outstanding
principal amount of all European Denominated Loans plus the Letter of Credit
Usage with respect to all European Denominated Letters of Credit exceeds or
would exceed the US Dollar Equivalent of $13,000,000. Anything contained herein
to the contrary notwithstanding, Issuing Lender may, but shall not be obligated
to, issue or cause the issuance of a Letter of Credit or to issue a
Reimbursement Undertaking in respect of an Underlying Letter of Credit, in
either case, that supports the obligations of

 

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Parent or its Subsidiaries in respect of (A) a lease of real property to the
extent that the face amount of such Letter of Credit or the amount of such
Reimbursement Undertaking exceeds the highest rent (including all rent-like
charges) payable under such lease for a period of one year, or (B) an employment
contract to the extent that the face amount of such Letter of Credit or the
amount of such Reimbursement Undertaking exceeds the highest compensation
payable under such contract for a period of one year.

(b) Issuing Lender shall have no obligation to issue a Letter of Credit or a
Reimbursement Undertaking in respect of an Underlying Letter of Credit, in
either case, if any of the following would result after giving effect to the
requested issuance:

(i) the Letter of Credit Usage would exceed $5,000,000, or

(ii) the Letter of Credit Usage would exceed the Maximum Revolver Amount less
the outstanding amount of Revolving Loans (including Swing Loans), or

(iii) the Letter of Credit Usage would exceed the Borrowing Base at such time
less the outstanding principal balance of the Revolving Loans (inclusive of
Swing Loans) at such time.

(c) In the event there is a Defaulting Lender as of the date of any request for
the issuance of a Letter of Credit, the Issuing Lender shall not be required to
issue or arrange for such Letter of Credit to the extent (x) the Defaulting
Lender’s Letter of Credit Exposure with respect to such Letter of Credit may not
be reallocated pursuant to Section 2.3(g)(ii) or (y) the Issuing Lender has not
otherwise entered into arrangements reasonably satisfactory to it and Borrowers
to eliminate the Issuing Lender’s risk with respect to the participation in such
Letter of Credit of the Defaulting Lender, which arrangements may include
Borrowers cash collateralizing such Defaulting Lender’s Letter of Credit
Exposure in accordance with Section 2.3(g)(ii). Additionally, Issuing Lender
shall have no obligation to issue a Letter of Credit or a Reimbursement
Undertaking in respect of an Underlying Letter of Credit, in either case, if
(I) any order, judgment, or decree of any Governmental Authority or arbitrator
shall, by its terms, purport to enjoin or restrain Issuing Lender from issuing
such Letter of Credit or Reimbursement Undertaking or Underlying Issuer from
issuing such Letter of Credit, or any law applicable to Issuing Lender or
Underlying Issuer or any request or directive (whether or not having the force
of law) from any Governmental Authority with jurisdiction over Issuing Lender or
Underlying Issuer shall prohibit or request that Issuing Lender or Underlying
Issuer refrain from the issuance of letters of credit generally or such Letter
of Credit or Reimbursement Undertaking (as applicable) in particular, or (II)
the issuance of such Letter of Credit would violate one or more policies of
Issuing Lender or Underlying Issuer applicable to letters of credit generally.

(d) Any Issuing Lender (other than Wells Fargo or any of its Affiliates) shall
notify Agent in writing no later than the Business Day immediately following the
Business Day on which such Issuing Lender issued any Letter of Credit; provided
that (y) until Agent advises any such Issuing Lender that the provisions of
Section 3.2 are not satisfied, or (z) the aggregate amount of the Letters of
Credit issued in any such week exceeds such amount as shall be agreed by Agent
and such Issuing Lender, such Issuing Lender shall be required to so notify
Agent in writing only once each week of the Letters of Credit issued by such
Issuing Lender during the immediately preceding week as well as the daily
amounts outstanding for the prior week, such notice to be furnished on such day
of the week as Agent and such Issuing Lender may agree. Borrowers and the Lender
Group hereby acknowledge and agree that all Existing Letters of Credit (if any)
shall constitute Letters of Credit under this Agreement on and after the Closing
Date with the same effect as if such Existing Letters of Credit were issued by
Issuing Lender or an Underlying Issuer at the request of Borrowers on the
Closing Date. Each Letter of Credit shall be in form and substance reasonably
acceptable to Issuing Lender, including the requirement that the amounts payable
thereunder must be payable in Dollars, Euros or Sterling. If Issuing Lender
makes a payment under a

 

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Letter of Credit or an Underlying Issuer makes a payment under an Underlying
Letter of Credit, Borrowers shall pay to Agent an amount equal to the applicable
Letter of Credit Disbursement on the date such Letter of Credit Disbursement is
made and, in the absence of such payment, the amount of the Letter of Credit
Disbursement immediately and automatically shall be deemed to be a Revolving
Loan hereunder (notwithstanding any failure to satisfy any condition precedent
set forth in Section 3) and, initially, shall bear interest at the rate then
applicable to Revolving Loans denominated in Dollars that are Base Rate Loans.
If a Letter of Credit Disbursement is deemed to be a Revolving Loan hereunder,
Borrowers’ obligation to pay the amount of such Letter of Credit Disbursement to
Issuing Lender shall be automatically converted into an obligation to pay the
resulting Revolving Loan. Promptly following receipt by Agent of any payment
from Borrowers pursuant to this paragraph, Agent shall distribute such payment
to Issuing Lender or, to the extent that Lenders have made payments pursuant to
Section 2.11(b) to reimburse Issuing Lender, then to such Lenders and Issuing
Lender as their interests may appear.

(e) Promptly following receipt of a notice of a Letter of Credit Disbursement
pursuant to Section 2.11(a), each Revolving Lender agrees to fund its Pro Rata
Share of any Revolving Loan deemed made pursuant to Section 2.11(a) on the same
terms and conditions as if Borrowers had requested the amount thereof as a
Revolving Loan and Agent shall promptly pay to Issuing Lender the amounts so
received by it from the Lenders. By the issuance of a Letter of Credit or a
Reimbursement Undertaking (or an amendment, renewal, or extension of a Letter of
Credit or a Reimbursement Undertaking) and without any further action on the
part of Issuing Lender or the Revolving Lenders, Issuing Lender shall be deemed
to have granted to each Revolving Lender, and each Revolving Lender shall be
deemed to have purchased, a participation in each Letter of Credit issued by
Issuing Lender and each Reimbursement Undertaking, in an amount equal to its Pro
Rata Share of such Letter of Credit or Reimbursement Undertaking, and each such
Lender agrees to pay to Agent, for the account of Issuing Lender, such Lender’s
Pro Rata Share of any Letter of Credit Disbursement made by Issuing Lender or an
Underlying Issuer under the applicable Letter of Credit. In consideration and in
furtherance of the foregoing, each Revolving Lender hereby absolutely and
unconditionally agrees to pay to Agent, for the account of Issuing Lender, such
Lender’s Pro Rata Share of each Letter of Credit Disbursement made by Issuing
Lender or an Underlying Issuer and not reimbursed by Borrower on the date due as
provided in Section 2.11(a), or of any reimbursement payment this is required to
be refunded (or that Agent or Issuing Lender elects, based upon the advice of
counsel, to refund) to Borrower for any reason. Each Revolving Lender
acknowledges and agrees that its obligation to deliver to Agent, for the account
of Issuing Lender, an amount equal to its respective Pro Rata Share of each
Letter of Credit Disbursement pursuant to this Section 2.11(b) shall be absolute
and unconditional and such remittance shall be made notwithstanding the
occurrence or continuation of an Event of Default or Default or the failure to
satisfy any condition set forth in Section 3. If any such Lender fails to make
available to Agent the amount of such Lender’s Pro Rata Share of a Letter of
Credit Disbursement as provided in this Section, such Lender shall be deemed to
be a Defaulting Lender and Agent (for the account of Issuing Lender) shall be
entitled to recover such amount on demand from such Lender together with
interest thereon at the Defaulting Lender Rate until paid in full.

(f) Borrowers hereby agree to indemnify, save, defend, and hold the Lender Group
and each Underlying Issuer harmless from any damage, loss, cost, expense, or
liability (other than Taxes, which shall be governed by Section 16), and
reasonable and documented attorneys fees and expenses incurred by Issuing
Lender, any other member of the Lender Group, or any Underlying Issuer arising
out of or in connection with any Reimbursement Undertaking or any Letter of
Credit; provided, that Borrower shall not be obligated hereunder to indemnify
the Lender Group or any Underlying Issuer for any loss, cost, expense, or
liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of Issuing Lender, any
other member of the Lender Group, or any Underlying Issuer. Borrowers agree to
be bound by the Underlying Issuer’s regulations and interpretations of any
Letter of Credit or by Issuing Lender’s interpretations of any Reimbursement

 

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Undertaking even though this interpretation may be different from any Borrower’s
own. Borrowers understand that the Reimbursement Undertakings may require
Issuing Lender to indemnify the Underlying Issuer for certain costs or
liabilities arising out of claims by Borrowers against such Underlying Issuer.
Borrowers hereby agree to indemnify, save, defend, and hold Issuing Lender and
the other members of the Lender Group harmless with respect to any loss, cost,
expense (including reasonable and documented attorneys fees and expenses), or
liability (other than Taxes, which shall be governed by Section 16) incurred by
them as a result of Issuing Lender’s indemnification of an Underlying Issuer;
provided, that Borrowers shall not be obligated hereunder to indemnify for any
such loss, cost, expense, or liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of Issuing Lender or any other member of the Lender Group.

(g) Each Lender and Borrowers agree that, in paying any drawing under a Letter
of Credit, neither Issuing Lender nor any Underlying Issuer (as applicable)
shall have any responsibility to obtain any document (other than any sight
draft, certificates and documents expressly required by the Letter of Credit or
the Underlying Letter of Credit (as applicable)) or to ascertain or inquire as
to the validity or accuracy of any such document or the authority of the Person
executing or delivering any such document. None of Issuing Lender, any
Underlying Issuer, Agent, any of the Lender-Related Persons or Agent-Related
Persons, nor any correspondent, participant or assignee of Issuing Lender shall
be liable to any Lender or any Loan Party for (i) any action taken or omitted in
connection herewith at the request or with the approval of the Lenders or the
Required Lenders, as applicable; (ii) any action taken or omitted in the absence
of gross negligence or willful misconduct; (iii) any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit or any error in
interpretation of technical terms; or (iv) the due execution, effectiveness,
validity or enforceability of any document or instrument related to any Letter
of Credit or Issuer Document. Borrowers hereby assume all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; provided, that, this assumption is not intended to, and shall not,
preclude Borrowers from pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. None of
Issuing Lender, any Underlying Issuer, Agent, any of the Lender-Related Persons
or Agent-Related Persons, nor any correspondent, participant or assignee of
Issuing Lender or any Underlying Issuer shall be liable or responsible for any
of the matters described in clauses (i) through (vi) of Section 2.11(h) or for
any action, neglect or omission under or in connection with any Letter of Credit
or Issuer Document, including in connection with the issuance or any amendment
of any Letter of Credit, the failure to issue or amend any Letter of Credit, the
honoring or dishonoring of any demand under any Letter of Credit, or the
following of any Borrower’s instructions or those contained in the Letter of
Credit or any modifications, amendments, or supplements thereto, and such action
or neglect or omission will bind Borrowers. In furtherance and not in limitation
of the foregoing, Issuing Lender and each Underlying Issuer may accept documents
that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary (or
Issuing Lender and any Underlying Issuer may refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit and may disregard any requirement in a Letter of
Credit that notice of dishonor be given in a particular manner and any
requirement that presentation be made at a particular place or by a particular
time of day), and neither Issuing Lender nor any Underlying Issuer shall be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason. Neither Issuing Lender nor any
Underlying Issuer shall be responsible for the wording of any Letter of Credit
(including any drawing conditions or any terms or conditions that are
ineffective, ambiguous, inconsistent, unduly complicated or reasonably
impossible to satisfy), notwithstanding any assistance Issuing Lender or any
Underlying Issuer may provide to Borrowers with drafting or recommending text
for any letter of credit application or with the structuring of any transaction
related to

 

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any Letter of Credit, and Borrowers hereby acknowledge and agree that any such
assistance will not constitute legal or other advice by Issuing Lender or any
Underlying Issuer or any representation or warranty by Issuing Lender or any
Underlying Issuer that any such wording or such Letter of Credit will be
effective. Without limiting the foregoing, Issuing Lender or any Underlying
Issuer may, as it deems appropriate, use in any Letter of Credit any portion of
the language prepared by Borrowers and contained in the letter of credit
application relative to drawings under such Letter of Credit. Borrowers hereby
acknowledge and agree that neither any Underlying Issuer nor any member of the
Lender Group shall be responsible for delays, errors, or omissions resulting
from the malfunction of equipment in connection with any Letter of Credit.

(h) The obligation of Borrowers to reimburse Issuing Lender for each drawing
under each Letter of Credit shall be absolute, unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances, including the following:

(i) any lack of validity or enforceability of such Letter of Credit, this
Agreement, or any other Loan Document,

(ii) the existence of any claim, counterclaim, setoff, defense or other right
that Parent or any of its Subsidiaries may have at any time against any
beneficiary or any transferee of such Letter of Credit (or any Person for whom
any such beneficiary or any such transferee may be acting), Issuing Lender or
any other Person, whether in connection with this Agreement, the transactions
contemplated hereby or by such Letter of Credit or any agreement or instrument
relating thereto, or any unrelated transaction,

(iii) any draft, demand, certificate or other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect,
or any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under such Letter of Credit,

(iv) any payment by Issuing Lender under such Letter of Credit against
presentation of a draft or certificate that does not substantially or strictly
comply with the terms of such Letter of Credit (including, without limitation,
any requirement that presentation be made at a particular place or by a
particular time of day), or any payment made by Issuing Lender under such Letter
of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of such Letter of Credit,

(v) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing, including any other circumstance that might otherwise
constitute a defense available to, or discharge of, Parent or any of its
Subsidiaries, or

(vi) the fact that any Default or Event of Default shall have occurred and be
continuing.

(i) Borrowers hereby authorize and direct any Underlying Issuer to deliver to
Issuing Lender all instruments, documents, and other writings and property
received by such Underlying Issuer pursuant to such Underlying Letter of Credit
and to accept and rely upon Issuing Lender’s instructions with respect to all
matters arising in connection with such Underlying Letter of Credit and the
related application.

(j) Borrowers acknowledge and agree that any and all fees, charges, costs, or
commissions in effect from time to time, of Issuing Lender relating to Letters
of Credit or incurred by Issuing Lender relating to Underlying Letters of
Credit, upon the issuance of any Letter of Credit, upon the payment or

 

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negotiation of any drawing under any Letter of Credit, or upon the occurrence of
any other activity with respect to any Letter of Credit (including the transfer,
amendment, or cancellation of any Letter of Credit), together with any and all
fronting fees in effect from time to time related to Letters of Credit, shall be
Lender Group Expenses for purposes of this Agreement and shall be reimbursable
promptly, but in any event, within 1 Business Day after the date on which such
fees, charges, costs, or commissions are first incurred or accrued by Borrowers
to Agent for the account of Issuing Lender; it being acknowledged and agreed by
Borrowers that, as of the Closing Date, Issuing Lender is entitled to charge
Borrowers a fronting fee of 0.25% per annum times the undrawn amount of each
Underlying Letter of Credit and that such fronting fee may be changed by Issuing
Lender from time to time without notice.

(k) If by reason of (i) any change after the Closing Date in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
thereof by any Governmental Authority, or (ii) compliance by Issuing Lender, any
other member of the Lender Group, or Underlying Issuer with any direction,
request, or requirement (irrespective of whether having the force of law) of any
Governmental Authority or monetary authority including, Regulation D of the
Board of Governors as from time to time in effect (and any successor thereto):

(i) any reserve, deposit, or similar requirement is or shall be imposed or
modified in respect of any Letter of Credit issued or caused to be issued
hereunder or hereby, or

(ii) there shall be imposed on Issuing Lender, any other member of the Lender
Group, or Underlying Issuer any other condition regarding any Letter of Credit
or Reimbursement Undertaking,

and the result of the foregoing is to increase, directly or indirectly, the cost
to Issuing Lender, any other member of the Lender Group, or an Underlying Issuer
of issuing, making, participating in, or maintaining any Reimbursement
Undertaking or Letter of Credit or to reduce the amount receivable in respect
thereof, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Administrative Borrower, and Borrowers shall pay within 30 days after
demand therefor, such amounts as Agent may specify to be necessary to compensate
Issuing Lender, any other member of the Lender Group, or an Underlying Issuer
for such additional cost or reduced receipt, together with interest on such
amount from the date of such demand until payment in full thereof at the rate
then applicable to Base Rate Loans hereunder; provided, that (A) Borrowers shall
not be required to provide any compensation pursuant to this Section 2.11(k) for
any such amounts incurred more than 180 days prior to the date on which the
demand for payment of such amounts is first made to Borrowers, and (B) if an
event or circumstance giving rise to such amounts is retroactive, then the
180-day period referred to above shall be extended to include the period of
retroactive effect thereof. The determination by Agent of any amount due
pursuant to this Section 2.11(k), as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of manifest
or demonstrable error, be final and conclusive and binding on all of the parties
hereto.

(l) Unless otherwise expressly agreed by Issuing Lender and Borrowers when a
Letter of Credit is issued (including any such agreement applicable to any
Existing Letter of Credit), (i) the rules of the ISP and the UCP 600 shall apply
to each standby Letter of Credit, and (ii) the rules of the UCP 600 shall apply
to each commercial Letter of Credit.

(m) In the event of a direct conflict between the provisions of this
Section 2.11 and any provision contained in any Issuer Document, it is the
intention of the parties hereto that such provisions be read together and
construed, to the fullest extent possible, to be in concert with each other. In
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of this Section 2.11 shall control and
govern.

 

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2.12. Interest Rate Election.

(a) Each Borrowing of Loans initially shall be of the Type specified in the
applicable request for Borrowing made in accordance with Section 2.3(c) and, if
applicable, shall have an initial Interest Period as specified in such Borrowing
request. Thereafter, the Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing and, in the case of a Borrowing of
European Denominated Loans or LIBOR Rate Loans, may elect Interest Periods
therefor, all as provided herein. Any Borrower (or Administrative Borrower on
behalf of such Borrower) may elect different options with respect to different
portions of the affected Borrowing, and the Loans comprising each such portion
shall be considered a separate Borrowing. This Section shall not apply to
Swingline Loans or Extraordinary Advances, which may not be so converted or
continued.

(b) To make an election pursuant to this Section, any Borrower (or
Administrative Borrower on behalf of such Borrower) shall notify the Agent in
writing of such election by the time that a Borrowing request would be required
under Section 2.3 if any Borrower (or Administrative Borrower on behalf of such
Borrower) was requesting a Borrowing of Loans of the Type resulting from such
election to be made on the effective date of such election. Each such Interest
Election Request shall be irrevocable. At Agent’s election, in lieu of giving an
Interest Rate Election in writing, any Authorized Person may give Agent
telephonic notice of such Interest Rate Election. In such circumstance, any
Borrower (or Administrative Borrower on behalf of such Borrower) agrees that any
such telephonic notice will be confirmed in writing within 24 hours of the
giving of such telephonic notice, but the failure to provide such written
confirmation shall not affect the validity of such request.

(c) Each telephonic and written Interest Election Request shall specify the
following information:

(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall
be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be a Borrowing of a Dollar
Denominated Loan, a Euro Denominated Loan or a Sterling Denominated Loan; and

(iv) if the resulting Borrowing is a Borrowing of a LIBOR Rate Loan or a
European Denominated Loan, the Interest Period to be applicable thereto after
giving effect to such election, which shall be a period contemplated by the
definition of the term “Interest Period”.

If any such Interest Election Request requests a Borrowing of a LIBOR Rate Loan
or a European Denominated Loan, but does not specify an Interest Period, then
the Borrowers shall be deemed to have selected an Interest Period of one month’s
duration.

(d) Promptly following receipt of an Interest Election Request, the Agent shall
advise each Lender of the details thereof and of such Lender’s portion of each
resulting Borrowing.

(e) If any Borrower (or Administrative Borrower on behalf of such Borrower)
fails to deliver a timely Interest Election Request with respect to a LIBOR Rate
Loan or a European Denominated Loan prior to the end of the Interest Period
applicable thereto, then, unless, such Borrowing is repaid as

 

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provided herein, at the end of such Interest Period, (i) if such Loan is a LIBOR
Rate Loan, such Loan shall be converted to a Base Rate Loan, (ii) if such Loan
is a Euro Denominated Loan, such Loan shall be continued as a Euro Denominated
Loan with an Interest Period of one month and (iii) if such Loan is a Sterling
Denominated Loan, such Loan shall be continued as a Sterling Denominated Loan
with an Interest Period of one month. Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the Agent, at
the request of the Required Lenders, so notifies the Administrative Borrower,
then (A) no outstanding Borrowing of Dollar Denominated Loans may be converted
to or continued as a LIBOR Rate Loan or a European Denominated Loan, (B) no
Borrowing of a Dollar Denominated Loan may be made as a LIBOR Rate Loan and
(C) unless repaid, (1) each LIBOR Rate Loan shall be converted to Base Rate Loan
at the end of the Interest Period applicable thereto, (2) each Euro Denominated
Loan shall be continued as a Euro Denominated Loan with an Interest Period of
one month and (3) each Sterling Denominated Loan shall be continued as a
Sterling Denominated Loan with an Interest Period of one month;

(f) In connection with each LIBOR Rate Loan or European Denominated Loan,
Borrower shall indemnify, defend, and hold Agent and the Lenders harmless
against any loss, cost, or expense actually incurred by Agent or any Lender as a
result of (A) the payment of any principal of any LIBOR Rate Loan or European
Denominated Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (B) the conversion of
any LIBOR Rate Loan or European Denominated Loan other than on the last day of
the Interest Period applicable thereto, or (C) the failure to borrow, convert,
continue or prepay any LIBOR Rate Loan or European Denominated Loan on the date
specified in any Interest Election Request received by Agent delivered pursuant
hereto (such losses, costs, or expenses, “Funding Losses”). A certificate of
Agent or a Lender delivered to Administrative Borrower setting forth in
reasonable detail any amount or amounts that Agent or such Lender is entitled to
receive pursuant to this Section 2.12 shall be conclusive absent manifest error.
Borrowers shall pay such amount to Agent or the Lender, as applicable, within 30
days of the date of its receipt of such certificate. If a payment of a LIBOR
Rate Loan or European Denominated Loan on a day other than the last day of the
applicable Interest Period would result in a Funding Loss, Agent may, in its
sole discretion at the request of Administrative Borrower, hold the amount of
such payment as cash collateral in support of the Obligations until the last day
of such Interest Period and apply such amounts to the payment of the applicable
LIBOR Rate Loan or European Denominated Loan on such last day, it being agreed
that Agent has no obligation to so defer the application of payments to any
LIBOR Rate Loan or European Denominated Loan and that, in the event that Agent
does not defer such application, Borrowers shall be obligated to pay any
resulting Funding Losses.

(g) Unless Agent, in its sole discretion, agrees otherwise, Borrowers shall have
not more than 5 LIBOR Rate Loans and European Denominated Loans in effect at any
given time. Borrowers only may make an Interest Election Request for any
proposed LIBOR Rate Loan or European Denominated Loan of at least $1,000,000.

(h) Conversion. Borrowers may convert LIBOR Rate Loans and European Denominated
Loans to Base Rate Loans at any time; provided, that in the event that LIBOR
Rate Loans and European Denominated Loans are converted or prepaid on any date
that is not the last day of the Interest Period applicable thereto, including as
a result of any prepayment through the required application by Agent of any
payments or proceeds of Collateral in accordance with Section 2.4(b) or for any
other reason, including early termination of the term of this Agreement or
acceleration of all or any portion of the Obligations pursuant to the terms
hereof, Borrowers shall indemnify, defend, and hold Agent and the Lenders and
their Participants harmless against any and all Funding Losses in accordance
with Section 2.12 (f).

 

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(i) Special Provisions Applicable to LIBOR Rate and Eurocurrency Base Rates.

(i) The LIBOR Rate and Eurocurrency Base Rate may be adjusted by Agent with
respect to any Lender on a prospective basis to take into account any additional
or increased costs to such Lender of maintaining or obtaining any eurodollar
deposits or increased costs, in each case, due to changes in applicable law
(other than changes in laws relative to Taxes, which shall be governed by
Section 16) occurring subsequent to the commencement of the then applicable
Interest Period, including changes in tax laws (except changes of general
applicability in corporate income tax laws) and changes in the reserve
requirements imposed by the Board of Governors, which additional or increased
costs would increase the cost of funding or maintaining loans bearing interest
at the LIBOR Rate or Eurocurrency Base Rate. In any such event, the affected
Lender shall give Administrative Borrower and Agent notice of such a
determination and adjustment and Agent promptly shall transmit the notice to
each other Lender and, upon its receipt of the notice from the affected Lender,
Administrative Borrower may, by notice to such affected Lender (A) require such
Lender to furnish to Administrative Borrower a statement setting forth in
reasonable detail the basis for adjusting such LIBOR Rate or Eurocurrency Base
Rate and the method for determining the amount of such adjustment, or (B) repay
the LIBOR Rate Loans or European Denominated Loans of such Lender with respect
to which such adjustment is made (together with any amounts due under
Section 2.12(f)).

(ii) In the event that any change in market conditions or any law, regulation,
treaty, or directive, or any change therein or in the interpretation or
application thereof, shall at any time after the date hereof, in the reasonable
opinion of any Lender, make it unlawful or impractical for such Lender to fund
or maintain LIBOR Rate Loans or European Denominated Loans or to continue such
funding or maintaining, or to determine or charge interest rates at the LIBOR
Rate or Eurocurrency Base Rate, such Lender shall give notice of such changed
circumstances to Agent and Administrative Borrower and Agent promptly shall
transmit the notice to each other Lender and (y) in the case of any LIBOR Rate
Loans or European Denominated Loans of such Lender that are outstanding, the
date specified in such Lender’s notice shall be deemed to be the last day of the
Interest Period of such LIBOR Rate Loans or European Denominated Loans, and
interest upon the LIBOR Rate Loans or European Denominated Loans of such Lender
thereafter shall accrue interest at the rate then applicable to Base Rate Loans,
and (z) Borrowers shall not be entitled to elect to Borrow LIBOR Rate Loans or
European Denominated Loans or convert other Loans into LIBOR Rate Loans or
European Denominated Loans until such Lender determines that it would no longer
be unlawful or impractical to do so.

(j) No Requirement of Matched Funding. Anything to the contrary contained herein
notwithstanding, neither Agent, nor any Lender, nor any of their Participants,
is required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate.

2.13. Capital Requirements.

(a) If, after the date hereof, any Lender determines that (i) the adoption of or
change in any law, rule, regulation or guideline regarding capital or reserve
requirements for banks or bank holding companies, or any change in the
interpretation, implementation, or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender’s or
such holding company’s capital as a consequence of such Lender’s Commitments
hereunder to a level below that which such Lender or such holding company could
have achieved but for such adoption, change, or compliance (taking into
consideration such Lender’s or such holding company’s then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity’s capital) by any amount deemed by such Lender to be material, then such
Lender may notify Administrative Borrower and Agent thereof. Following receipt
of such notice, Borrowers agree to pay such Lender on demand the

 

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amount of such reduction of return of capital as and when such reduction is
determined, payable within 30 days after presentation by such Lender of a
statement in the amount and setting forth in reasonable detail such Lender’s
calculation thereof and the assumptions upon which such calculation was based
(which statement shall be deemed true and correct absent manifest error). In
determining such amount, such Lender may use any reasonable averaging and
attribution methods. Failure or delay on the part of any Lender to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s right to demand such compensation; provided that Borrowers shall not be
required to compensate a Lender pursuant to this Section for any reductions in
return incurred more than 180 days prior to the date that such Lender notifies
Administrative Borrower of such law, rule, regulation or guideline giving rise
to such reductions and of such Lender’s intention to claim compensation
therefor; provided further that if such claim arises by reason of the adoption
of or change in any law, rule, regulation or guideline that is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.

(b) If any Lender requests additional or increased costs referred to in
Section 2.12(i)(i) or amounts under Section 2.13(a) or sends a notice under
Section 2.12(i)(ii) relative to changed circumstances (any such Lender, an
“Affected Lender”), then such Affected Lender shall use reasonable efforts to
promptly designate a different one of its lending offices or to assign its
rights and obligations hereunder to another of its offices or branches, if
(i) in the reasonable judgment of such Affected Lender, such designation or
assignment would eliminate or reduce amounts payable pursuant to
Section 2.12(i)(i) or Section 2.13(a), as applicable, or would eliminate the
illegality or impracticality of funding or maintaining LIBOR Rate Loans or
European Denominated Loans and (ii) in the reasonable judgment of such Affected
Lender, such designation or assignment would not subject it to any material
unreimbursed cost or expense and would not otherwise be materially
disadvantageous to it. Borrowers agree to pay all reasonable out-of-pocket costs
and expenses incurred by such Affected Lender in connection with any such
designation or assignment. If, after such reasonable efforts, such Affected
Lender does not so designate a different one of its lending offices or assign
its rights to another of its offices or branches so as to eliminate Borrowers’
obligation to pay any future amounts to such Affected Lender pursuant to
Section 2.12(i)(i) or Section 2.13(a), as applicable, or to enable Borrowers to
obtain LIBOR Rate Loans or European Denominated Loans, then Borrowers (without
prejudice to any amounts then due to such Affected Lender under
Section 2.12(i)(i) or Section 2.13(a), as applicable) may, unless prior to the
effective date of any such assignment the Affected Lender withdraws its request
for such additional amounts under Section 2.12(i)(i) or Section 2.13(a), as
applicable, or indicates that it is no longer unlawful or impractical to fund or
maintain LIBOR Rate Loans or European Denominated Loans, may seek a substitute
Lender reasonably acceptable to Agent to purchase the Obligations owed to such
Affected Lender and such Affected Lender’s Commitments hereunder (a “Replacement
Lender”), and if such Replacement Lender agrees to such purchase, such Affected
Lender shall assign to the Replacement Lender its Obligations and Commitments,
pursuant to an Assignment and Acceptance Agreement, and upon such purchase by
the Replacement Lender, such Replacement Lender shall be deemed to be a “Lender”
for purposes of this Agreement and such Affected Lender shall cease to be a
“Lender” for purposes of this Agreement.

(c) Notwithstanding anything herein to the contrary, the issuance of any rules,
regulations or directions under the Dodd-Frank Wall Street Reform and Consumer
Protection Act and all requests, rules, guidelines or directives thereunder or
issued in connection therewith after the date of this Agreement shall be deemed
to be a change in law, rule, regulation or guideline for purposes of Sections
2.12 and 2.13 and the protection of Sections 2.12 and 2.13 shall be available to
each Lender and Issuing Lender regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation, guideline or other
change or condition which shall have occurred or been imposed, so long as it
shall be customary for lenders or issuing banks affected thereby to comply
therewith. Notwithstanding any other provision herein, no Lender or Issuing
Lender shall demand compensation pursuant to this Section 2.13 if it shall

 

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not at the time be the general policy or practice of such Lender or Issuing
Lender (as the case may be) to demand such compensation in similar circumstances
under comparable provisions of other credit agreements, if any.

(d) Change of Lending Office. Each Lender may at any time or from time to time
designate, by written notice to the Agent to the extent not already reflected in
this Section 2.13(d), one or more lending offices (which, for this purpose, may
include Affiliates or branches of the respective Lender) for the various Loans
made, and Letters of Credit issued or participated in, by such Lender (including
by designating a separate lending office (or branch or Affiliate) to act as such
with respect to European Denominated Loans and European Denominated Letters of
Credit; provided that, for designations made after the Closing Date, to the
extent such designation shall result in increased costs under Section 2.13 in
excess of those which would be charged in the absence of the designation of a
different lending office (including a different Affiliate of the respective
Lender), then the Borrowers shall not be obligated to pay such excess increased
costs (although the Borrowers, in accordance with and pursuant to the other
provisions of this Agreement, shall be obligated to pay the costs which would
apply in the absence of such designation and any subsequent increased costs of
the type described above resulting from changes after the date of the respective
designation). Each lending office and branch or Affiliate of any Lender
designated as provided above shall, for all purposes of this Agreement, be
treated in the same manner as the respective Lender (and shall be entitled to
all indemnities and similar provisions in respect of its acting as such, subject
to all of the requirements and limitations herein). Wells Fargo hereby
designates Wells Fargo Bank, National Association (London Branch) as its lending
office for the European Denominated Loans made by Wells Fargo and for the
European Denominated Letters of Credit issued or participated in by Wells Fargo.

2.14. Joint and Several Liability of Borrowers.

(a) Each Borrower is accepting joint and several liability hereunder and under
the other Loan Documents in consideration of the financial accommodations to be
provided by the Lender Group under this Agreement, for the mutual benefit,
directly and indirectly, of each Borrower and in consideration of the
undertakings of the other Borrowers to accept joint and several liability for
the Obligations.

(b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally
accepts, not merely as a surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the payment and performance
of all of the Obligations (including any Obligations arising under this
Section 2.14), it being the intention of the parties hereto that all the
Obligations shall be the joint and several obligations of each Borrower without
preferences or distinction among them.

(c) If and to the extent that any Borrower shall fail to make any payment with
respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event the
other Borrowers will make such payment with respect to, or perform, such
Obligation until such time as all of the Obligations are paid in full.

(d) The Obligations of each Borrower under the provisions of this Section 2.14
constitute the absolute and unconditional, full recourse Obligations of each
Borrower enforceable against each Borrower to the full extent of its properties
and assets, irrespective of the validity, regularity or enforceability of the
provisions of this Agreement (other than this Section 2.14(d)) or any other
circumstances whatsoever.

(e) Except as otherwise expressly provided in this Agreement, each Borrower
hereby waives notice of acceptance of its joint and several liability, notice of
any Loans or Letters of Credit issued under or pursuant to this Agreement,
notice of the occurrence of any Default, Event of Default, or of any

 

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demand for any payment under this Agreement, notice of any action at any time
taken or omitted by Agent or Lenders under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and, generally,
to the extent permitted by applicable law, all demands, notices and other
formalities of every kind in connection with this Agreement (except as otherwise
provided in this Agreement). Each Borrower hereby assents to, and waives notice
of, any extension or postponement of the time for the payment of any of the
Obligations, the acceptance of any payment of any of the Obligations, the
acceptance of any partial payment thereon, any waiver, consent or other action
or acquiescence by Agent or Lenders at any time or times in respect of any
default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by Agent or Lenders in respect of any of the Obligations,
and the taking, addition, substitution or release, in whole or in part, at any
time or times, of any security for any of the Obligations or the addition,
substitution or release, in whole or in part, of any Borrower. Without limiting
the generality of the foregoing, each Borrower assents to any other action or
delay in acting or failure to act on the part of any Agent or Lender with
respect to the failure by any Borrower to comply with any of its respective
Obligations, including, without limitation, any failure strictly or diligently
to assert any right or to pursue any remedy or to comply fully with applicable
laws or regulations thereunder, which might, but for the provisions of this
Section 2.14 afford grounds for terminating, discharging or relieving any
Borrower, in whole or in part, from any of its Obligations under this
Section 2.14, it being the intention of each Borrower that, so long as any of
the Obligations hereunder remain unsatisfied, the Obligations of each Borrower
under this Section 2.14 shall not be discharged except by performance and then
only to the extent of such performance. The Obligations of each Borrower under
this Section 2.14 shall not be diminished or rendered unenforceable by any
winding up, reorganization, arrangement, liquidation, reconstruction or similar
proceeding with respect to any other Borrower or any Agent or Lender.

(f) Each Borrower represents and warrants to Agent and Lenders that such
Borrower is currently informed of the financial condition of 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 further represents
and warrants to Agent and Lenders that such Borrower has read and understands
the terms and conditions of the Loan Documents. Each Borrower hereby covenants
that such Borrower will continue to keep informed of Borrowers’ financial
condition and of all other circumstances which bear upon the risk of nonpayment
or nonperformance of the Obligations.

(g) The provisions of this Section 2.14 are made for the benefit of Agent, each
member of the Lender Group, each Bank Product Provider, and their respective
successors and assigns, and may be enforced by it or them from time to time
against any or all Borrowers as often as occasion therefor may arise and without
requirement on the part of Agent, any member of the Lender Group, any Bank
Product Provider, or any of their successors or assigns first to marshal any of
its or their claims or to exercise any of its or their rights against any
Borrower or to exhaust any remedies available to it or them against any Borrower
or to resort to any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy. The provisions of this
Section 2.14 shall remain in effect until all of the Obligations shall have been
paid in full or otherwise fully satisfied. If at any time, any payment, or any
part thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by Agent or any Lender upon the insolvency,
bankruptcy or reorganization of any Borrower, or otherwise, the provisions of
this Section 2.14 will forthwith be reinstated in effect, as though such payment
had not been made.

(h) Each Borrower hereby agrees that it will not enforce any of its rights of
contribution or subrogation against any other Borrower with respect to any
liability incurred by it hereunder or under any of the other Loan Documents, any
payments made by it to Agent or Lenders with respect to any of the Obligations
or any collateral security therefor until such time as all of the Obligations
have been paid in full in cash. Any claim which any Borrower may have against
any other Borrower with respect to any

 

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payments to any Agent or any member of the Lender Group hereunder or under any
of the Bank Product Agreements are hereby expressly made subordinate and junior
in right of payment, without limitation as to any increases in the Obligations
arising hereunder or thereunder, to the prior payment in full in cash of the
Obligations and, in the event of any insolvency, bankruptcy, receivership,
liquidation, reorganization or other similar proceeding under the laws of any
jurisdiction relating to any Borrower, its debts or its assets, whether
voluntary or involuntary, all such Obligations shall be paid in full in cash
before any payment or distribution of any character, whether in cash, securities
or other property, shall be made to any other Borrower therefor.

(i) Each Borrower hereby agrees that after the occurrence and during the
continuance of any Default or Event of Default, such Borrower will not demand,
sue for or otherwise attempt to collect any indebtedness of any other Borrower
owing to such Borrower until the Obligations shall have been paid in full in
cash. If, notwithstanding the foregoing sentence, such Borrower shall collect,
enforce or receive any amounts in respect of such indebtedness, such amounts
shall be collected, enforced and received by such Borrower as trustee for Agent,
and such Borrower shall deliver any such amounts to Agent for application to the
Obligations in accordance with Section 2.4(b).

3. CONDITIONS; TERM OF AGREEMENT.

3.1. Conditions Precedent to the Initial Extension of Credit. The obligation of
each Lender to make the initial extensions of credit provided for hereunder is
subject to the fulfillment, to the satisfaction of Agent and each Lender, of
each of the conditions precedent set forth on Schedule 3.1 (the making of such
initial extensions of credit by a Lender being conclusively deemed to be its
satisfaction or waiver of the conditions precedent ).

3.2. Conditions Precedent to all Extensions of Credit. The obligation of the
Lender Group (or any member thereof) to make any Revolving Loans hereunder (or
to extend any other credit hereunder) at any time shall be subject to the
following conditions precedent:

(a) the representations and warranties of Parent or its Subsidiaries contained
in this Agreement or in the other Loan Documents shall be true and correct in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof) on and as of the date of such
extension of credit, as though made on and as of such date (except to the extent
that such representations and warranties relate solely to an earlier date, in
which case such representations and warranties shall be true and correct in all
material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof) as of such earlier date); and

(b) no Default or Event of Default shall have occurred and be continuing on the
date of such extension of credit, nor shall either result from the making
thereof.

Notwithstanding anything to the contrary contained in this Agreement and without
limiting any other conditions contained in this Agreement (a) the obligation of
the Lender Group (or any member thereof) to make any Euro Denominated Loan or
issue or cause to be issued any Euro Denominated Letter of Credit at any time
shall be subject to the condition that Borrowers shall designate and maintain a
Designated Account denominated in Euros with Wells Fargo Bank, National
Association (London Branch) in London, England, which Designated Account shall
be in the name of a Borrower or a Subsidiary of Parent which is not a Loan
Party, and (b) the obligation of the Lender Group (or any member thereof) to
make any Sterling Denominated Loan or issue or cause to be issued any Sterling
Denominated Letter of Credit at any time shall be subject to the condition that
Borrowers shall designate

 

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and maintain a Designated Account denominated in Sterling with Wells Fargo Bank,
National Association (London Branch) in London, England, which Designated
Account shall be in the name of a Borrower or a Subsidiary of Parent which is
not a Loan Party.

3.3. Maturity. This Agreement shall continue in full force and effect for a term
ending on the Maturity Date.

3.4. Effect of Maturity. On the Maturity Date, all commitments of the Lender
Group to provide additional credit hereunder shall automatically be terminated
and all of the Obligations immediately shall become due and payable without
notice or demand and Borrower shall be required to repay all of the Obligations
in full. No termination of the obligations of the Lender Group (other than
payment in full of the Obligations and termination of the Commitments) shall
relieve or discharge any Loan Party of its duties, obligations, or covenants
hereunder or under any other Loan Document and Agent’s Liens in the Collateral
shall continue to secure the Obligations and shall remain in effect until all
Obligations have been paid in full and the Commitments have been terminated.
When all of the Obligations have been paid in full and the Lender Group’s
obligations to provide additional credit under the Loan Documents have been
terminated irrevocably, Agent will, at Administrative Borrower’s sole expense,
execute and deliver any termination statements, lien releases, discharges of
security interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, Agent’s Liens and all notices of security interests and liens previously
filed by Agent.

3.5. Early Termination by Borrowers. Administrative Borrower has the option, at
any time upon 10 Business Days prior written notice to Agent, to terminate this
Agreement and terminate the Commitments hereunder by repaying to Agent all of
the Obligations in full. The foregoing notwithstanding, (a) Administrative
Borrower may rescind termination notices relative to proposed payments in full
of the Obligations with the proceeds of third party Indebtedness if the closing
for such issuance or incurrence does not happen on or before the date of the
proposed termination (in which case, a new notice shall be required to be sent
in connection with any subsequent termination), and (b) Borrowers may extend the
date of termination at any time with the consent of Agent (which consent shall
not be unreasonably withheld or delayed).

3.6. Conditions Subsequent. The obligation of the Lender Group (or any member
thereof) to continue to make Loans (or otherwise extend credit hereunder) is
subject to the fulfillment, on or before the date applicable thereto, of the
conditions subsequent set forth on Schedule 3.6 (the failure by the applicable
Loan Party to so perform or cause to be performed such conditions subsequent as
and when required by the terms thereof, shall constitute an immediate Event of
Default).

4. REPRESENTATIONS AND WARRANTIES.

In order to induce the Lender Group to enter into this Agreement, each Loan
Party makes the following representations and warranties to the Lender Group
which shall be true, correct, and complete, in all material respects (except
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof), as of the Closing Date, and shall be true, correct, and complete, in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof), as of the date of the making of
each Revolving Loan (or other extension of credit) made thereafter, as though
made on and as of the date of such Revolving Loan (or other extension of credit)
(except to the extent that such representations and warranties relate solely to
an earlier date, in which case such representations and warranties shall be true
and correct in all material respects (except that such materiality qualifier
shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof) as of such earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:

4.1. Due Organization and Qualification; Subsidiaries.

(a) Each Loan Party (i) is duly organized and existing and in good standing
under the laws of the jurisdiction of its organization, (ii) is qualified to do
business in any state where the failure to be so qualified could reasonably be
expected to result in a Material Adverse Effect, and (iii) has all requisite
power and authority to own and operate its properties, to carry on its business
as now conducted and as proposed to be conducted, to enter into the Loan
Documents to which it is a party and to carry out the transactions contemplated
thereby.

 

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(b) Set forth on Schedule 4.1(b) (as such Schedule may be updated from time to
time to reflect changes resulting from transactions permitted under this
Agreement) is a complete and accurate description of the authorized Equity
Interest of each Loan Party, by class, and, as of the Closing Date, a
description of the number of shares of each such class that are issued and
outstanding. Other than as described on Schedule 4.1(b), there are no
subscriptions, options, warrants, or calls relating to any shares of any Loan
Party’s Equity Interest, including any right of conversion or exchange under any
outstanding security or other instrument. Each Loan Party is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its Equity Interest or any security convertible into or
exchangeable for any of its Equity Interest.

(c) Set forth on Schedule 4.1(c) (as such Schedule may be updated from time to
time to reflect changes resulting from transactions permitted under this
Agreement), is a complete and accurate list of the Loan Parties’ direct and
indirect Subsidiaries, showing: (i) the number of shares of each class of common
and preferred Equity Interests authorized for each of such Subsidiaries, and
(ii) the number and the percentage of the outstanding shares of each such class
owned directly or indirectly by each Loan Party. All of the outstanding Equity
Interest of each such Subsidiary has been validly issued and is fully paid and
non-assessable.

(d) Except as set forth on Schedule 4.1(c), there are no subscriptions, options,
warrants, or calls relating to any shares of Parent’s or its Subsidiaries’
Equity Interest, including any right of conversion or exchange under any
outstanding security or other instrument.

4.2. Due Authorization; No Conflict.

(a) As to each Loan Party, the execution, delivery, and performance by such Loan
Party of the Loan Documents to which it is a party have been duly authorized by
all necessary action on the part of such Loan Party.

(b) As to each Loan Party, the execution, delivery, and performance by such Loan
Party of the Loan Documents to which it is a party do not and will not
(i) violate any material provision of federal, state, or local law or regulation
applicable to any Loan Party or its Subsidiaries, the Governing Documents of any
Loan Party or its Subsidiaries, or any order, judgment, or decree of any court
or other Governmental Authority binding on any Loan Party or its Subsidiaries,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material agreement of any Loan Party
or its Subsidiaries where any such conflict, breach or default could
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any assets of any Loan Party, other than
Permitted Liens, or (iv) require any approval of any holder of Equity Interest
of a Loan Party or any approval or consent of any Person under any material
agreement of any Loan Party, other than consents or

 

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approvals that have been obtained and that are still in force and effect and
except, in the case of material agreements, for consents or approvals, the
failure to obtain could not individually or in the aggregate reasonably be
expected to cause a Material Adverse Effect.

4.3. Governmental Consents. The execution, delivery, and performance by each
Loan Party of the Loan Documents to which such Loan Party is a party and the
consummation of the transactions contemplated by the Loan Documents do not and
will not require any registration with, consent, or approval of, or notice to,
or other action with or by, any Governmental Authority, other than
registrations, consents, approvals, notices, or other actions that have been
obtained and that are still in force and effect and except for filings and
recordings with respect to the Collateral to be made, or otherwise delivered to
Agent for filing or recordation, as of the Closing Date.

4.4. Binding Obligations; Perfected Liens.

(a) Each Loan Document has been duly executed and delivered by each Loan Party
that is a party thereto and is the legally valid and binding obligation of such
Loan Party, enforceable against such Loan Party in accordance with its
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors’ rights generally.

(b) Agent’s Liens are validly created, perfected (other than (i) in respect of
motor vehicles that are subject to a certificate of title, (ii) money,
(iii) letter-of-credit rights (other than supporting obligations,
(iv) commercial tort claims (other than those that, by the terms of the Guaranty
and Security Agreement, are required to be perfected), and (v) any Deposit
Accounts and Securities Accounts not subject to a Control Agreement as permitted
by Section 7(k)(iv) of the Security Agreement, and subject only to the filing of
financing statements, the recordation of the Copyright Security Agreement, and
the recordation of the Mortgages, in each case, in the appropriate filing
offices), and first priority Liens, subject only to Permitted Liens which are
non-consensual Permitted Liens, permitted purchase money Liens, or the interests
of lessors under Capital Leases.

4.5. Title to Assets; No Encumbrances. Each of the Loan Parties and its
Subsidiaries has (a) good, sufficient and legal title to (in the case of fee
interests in Real Property), (b) valid leasehold interests in (in the case of
leasehold interests in real or personal property), and (c) good and marketable
title to (in the case of all other personal property), all of their respective
assets reflected in their most recent financial statements delivered pursuant to
Section 5.1, in each case except for assets disposed of since the date of such
financial statements to the extent permitted hereby. All of such assets are free
and clear of Liens except for Permitted Liens.

4.6. Litigation.

(a) There are no actions, suits, or proceedings pending or, to the knowledge of
Borrower, after due inquiry, threatened in writing against a Loan Party or any
of its Subsidiaries that either individually or in the aggregate could
reasonably be expected to result in a Material Adverse Effect.

(b) Schedule 4.6(b) sets forth a complete and accurate description, with respect
to each of the actions, suits, or proceedings with asserted liabilities in
excess of, or that could reasonably be expected to result in liabilities in
excess of, $250,000 that, as of the Closing Date, is pending or, to the
knowledge of Borrower, after due inquiry, threatened against a Loan Party or any
of its Subsidiaries, of (i) the parties to such actions, suits, or proceedings,
(ii) the nature of the dispute that is the subject of such actions, suits, or
proceedings, (iii) the procedural status, as of the Closing Date, with respect
to such actions, suits, or proceedings, and (iv) whether any liability of the
Loan Parties’ and their Subsidiaries in connection with such actions, suits, or
proceedings is covered by insurance.

 

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4.7. Compliance with Laws. No Loan Party nor any of its Subsidiaries (a) is in
violation of any applicable laws, rules, regulations, executive orders, or codes
(including Environmental Laws) that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect, or (b) is subject
to or in default with respect to any final judgments, writs, injunctions,
decrees, rules or regulations of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.

4.8. No Material Adverse Effect. All historical financial statements relating to
the Loan Parties and their Subsidiaries that have been delivered by Parent to
Agent have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and present fairly in all material respects, the
Loan Parties’ and their Subsidiaries’ consolidated financial condition as of the
date thereof and results of operations for the period then ended. Since
December 31, 2011, no event, circumstance, or change has occurred that has or
could reasonably be expected to result in a Material Adverse Effect with respect
to the Loan Parties and their Subsidiaries.

4.9. Solvency.

(a) Each Loan Party is Solvent.

(b) No transfer of property is being made by any Loan Party and no obligation is
being incurred by any Loan Party in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of such Loan Party.

4.10. Employee Benefits. Except as set forth on Schedule 4.10 (as such Schedule
may be updated from time to time, without the consent of any Lender or Agent, to
include retirement and severance plans that are required by a Governmental
Authority outside of the United States so long as such updated Schedule is
delivered together with written notice thereof to Agent), no Loan Party, none of
their Subsidiaries, nor any of their ERISA Affiliates maintains or contributes
to any Benefit Plan.

4.11. Environmental Condition. Except as set forth on Schedule 4.11, (a) to each
Loan Party’s knowledge, no Loan Party’s nor any of its Subsidiaries’ properties
or assets has ever been used by a Loan Party, its Subsidiaries, or by previous
owners or operators in the disposal of, or to produce, store, handle, treat,
release, or transport, any Hazardous Materials, where such disposal, production,
storage, handling, treatment, release or transport was in violation, in any
material respect, of any applicable Environmental Law, (b) to each Loan Party’s
knowledge, after due inquiry, no Loan Party’s nor any of its Subsidiaries’
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, (c) no Loan Party nor any of its Subsidiaries has received notice
that a Lien arising under any Environmental Law has attached to any revenues or
to any Real Property owned or operated by a Loan Party or its Subsidiaries, and
(d) no Loan Party nor any of its Subsidiaries nor any of their respective
facilities or operations is subject to any outstanding written order, consent
decree, or settlement agreement with any Person relating to any Environmental
Law or Environmental Liability that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.

 

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4.12. Complete Disclosure. All factual information taken as a whole (other than
forward-looking information and projections and information of a general
economic nature and general information about Parent’s industry) furnished by or
on behalf of a Loan Party or its Subsidiaries in writing to Agent or any Lender
(including all information contained in the Schedules hereto or in the other
Loan Documents) for purposes of or in connection with this Agreement or the
other Loan Documents, and all other such factual information taken as a whole
(other than forward-looking information and projections and information of a
general economic nature and general information about Parent’s industry)
hereafter furnished by or on behalf of a Loan Party or its Subsidiaries in
writing to Agent or any Lender will be, true and accurate, in all material
respects, on the date as of which such information is dated or certified and not
incomplete by omitting to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect at such time in light
of the circumstances under which such information was provided. The Projections
delivered to Agent on March 14, 2012 represent, and as of the date on which any
other Projections are delivered to Agent, such additional Projections represent,
Parent’s good faith estimate, on the date such Projections are delivered, of the
Loan Parties’ and their Subsidiaries’ future performance for the periods covered
thereby based upon assumptions believed by Parent to be reasonable at the time
of the delivery thereof to Agent (it being understood that such Projections are
subject to significant uncertainties and contingencies, many of which are beyond
the control of the Loan Parties and their Subsidiaries, and no assurances can be
given that such Projections will be realized, and although reflecting Parent’s
good faith estimate, projections or forecasts based on methods and assumptions
which Parent believed to be reasonable at the time such Projections were
prepared, are not to be viewed as facts, and that actual results during the
period or periods covered by the Projections may differ materially from
projected or estimated results).

4.13. Patriot Act. To the extent applicable, each Loan Party is in compliance,
in all material respects, with the (a) Trading with the Enemy Act, as amended,
and each of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (b) Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”). No part of the
proceeds of the loans made hereunder will be used by any Loan Party or any of
their Affiliates, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

4.14. Indebtedness. Set forth on Schedule 4.14 is a true and complete list of
all Indebtedness of each Loan Party and each of its Subsidiaries outstanding
immediately prior to the Closing Date that is to remain outstanding immediately
after giving effect to the closing hereunder on the Closing Date and such
Schedule accurately sets forth the aggregate principal amount of such
Indebtedness as of the Closing Date. No Loan Party is or will become a guarantor
of, or otherwise liable for, any Indebtedness of a Subsidiary of Parent that is
not a Loan Party, except as consented to in writing by Agent. As of March 31,
2012, the aggregate outstanding principal amount of all Existing Permitted
Intercompany Indebtedness due and payable in Dollars is $16,418,801.94 and the
aggregate outstanding principal amount of all Existing Permitted Intercompany
Indebtedness due and payable in Euros is €7,500,000. As of the Closing Date, the
aggregate outstanding amount of all Indebtedness of the Loan Parties owing to
any and all Subsidiaries of Parent that are not Loan Parties is $0.

4.15. Payment of Taxes. Except as otherwise permitted under Section 5.5, all tax
returns and reports of each Loan Party and its Subsidiaries required to be filed
by any of them have been timely filed, and all taxes shown on such tax returns
to be due and payable and all assessments, fees and other governmental charges
upon a Loan Party and its Subsidiaries and upon their respective assets, income,
businesses and franchises that are due and payable have been paid when due and
payable. Each Loan

 

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Party and each of its Subsidiaries have made adequate provision in accordance
with GAAP for all taxes not yet due and payable. Each Loan Party knows of no
proposed tax assessment against a Loan Party or any of its Subsidiaries that is
not being actively contested by such Loan Party or such Subsidiary diligently,
in good faith, and by appropriate proceedings; provided such reserves or other
appropriate provisions, if any, as shall be required in conformity with GAAP
shall have been made or provided therefor.

4.16. Margin Stock. No Loan Party nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of the loans made to Borrowers will be used to purchase or carry
any Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock or for any purpose that violates the provisions of
Regulation T, U or X of the Board of Governors.

4.17. Governmental Regulation. No Loan Party nor any of its Subsidiaries is
subject to regulation under the Federal Power Act or the Investment Company Act
of 1940 or under any other federal or state statute or regulation which may
limit its ability to incur Indebtedness or which may otherwise render all or any
portion of the Obligations unenforceable. No Loan Party nor any of its
Subsidiaries is a “registered investment company” or a company “controlled” by a
“registered investment company” or a “principal underwriter” of a “registered
investment company” as such terms are defined in the Investment Company Act of
1940.

4.18. OFAC. No Loan Party nor any of its Subsidiaries is in violation of any of
the country or list based economic and trade sanctions administered and enforced
by OFAC. No Loan Party nor any of its Subsidiaries (a) is a Sanctioned Person or
a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or
(c) derives revenues from investments in, or transactions with Sanctioned
Persons or Sanctioned Entities. No proceeds of any loan made hereunder will be
used to fund any operations in, finance any investments or activities in, or
make any payments to, a Sanctioned Person or a Sanctioned Entity.

4.19. Employee and Labor Matters. There is (i) no unfair labor practice
complaint pending or, to the knowledge of Borrower, threatened against Parent or
its Subsidiaries before any Governmental Authority and no grievance or
arbitration proceeding pending or threatened against Parent or its Subsidiaries
which arises out of or under any collective bargaining agreement and that could
reasonably be expected to result in a material liability, (ii) no strike, labor
dispute, slowdown, stoppage or similar action or grievance pending or threatened
in writing against Parent or its Subsidiaries that could reasonably be expected
to result in a material liability, or (iii) to the knowledge of each Loan Party,
after due inquiry, no union representation question existing with respect to the
employees of Parent or its Subsidiaries and no union organizing activity taking
place with respect to any of the employees of Parent or its Subsidiaries. None
of Parent or its Subsidiaries has incurred any liability or obligation under the
Worker Adjustment and Retraining Notification Act or similar state law, which
remains unpaid or unsatisfied. The hours worked and payments made to employees
of Parent or its Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable legal requirements, except to the extent
such violations could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect. All material payments due from
Parent or its Subsidiaries on account of wages and employee health and welfare
insurance and other benefits have been paid or accrued as a liability on the
books of Parent, except where the failure to do so could not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.

4.20. [Reserved.]

 

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4.21. Leases. Each Loan Party and its Subsidiaries enjoy peaceful and
undisturbed possession under all leases material to their business and to which
they are parties or under which they are operating, and, subject to Permitted
Protests, all of such material leases are valid and subsisting and no material
default by the applicable Loan Party or its Subsidiaries exists under any of
them.

4.22. Eligible Accounts. As to each Account that is identified by Borrowers as
an Eligible Account in a Borrowing Base Certificate submitted to Agent, such
Account is (a) a bona fide existing payment obligation of the applicable Account
Debtor created by the sale and delivery of Inventory or the rendition of
services to such Account Debtor in the ordinary course of the Borrower’s
business, (b) owed to the Borrowers without any known defenses, disputes,
offsets, counterclaims, or rights of return or cancellation, and (c) not
excluded as ineligible by virtue of one or more of the excluding criteria (other
than any Administrative Agent-discretionary criteria) set forth in the
definition of Eligible Accounts.

4.23. Eligible Inventory. As to each item of Inventory that is identified by the
Borrowers as Eligible Inventory in a Borrowing Base Certificate submitted to
Agent, such Inventory is (a) of good and merchantable quality, free from known
defects, and (b) not excluded as ineligible by virtue of one or more of the
excluding criteria (other than any Agent-discretionary criteria) set forth in
the definition of Eligible Inventory.

4.24. Location of Inventory. The Inventory of Loan Parties is not stored with a
bailee, warehouseman, or similar party and is located only at, or in-transit
between, the locations identified on Schedule 4.24 (as such Schedule may be
updated pursuant to Section 5.14).

4.25. Inventory Records. Each Loan Party keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its and its
Subsidiaries’ Inventory and the book value thereof.

5. AFFIRMATIVE COVENANTS.

Each Loan Party covenants and agrees that, until termination of all of the
Commitments and payment in full of the Obligations, the Loan Parties shall, and
shall cause each of their Subsidiaries to, comply with each of the following:

5.1. Financial Statements, Reports, Certificates. Loan Parties (a) will deliver
to Agent, with copies to each Lender, each of the financial statements, reports,
and other items set forth on Schedule 5.1 no later than the times specified
therein, (b) agrees that no Subsidiary of a Loan Party will have a fiscal year
different from that of Borrower, (c) agrees to maintain a system of accounting
that enables Borrower to produce financial statements in accordance with GAAP,
and (d) agrees that it will, and will cause each other Loan Party to, (i) keep a
reporting system that shows all additions, sales, claims, returns, and
allowances with respect to its and its Subsidiaries’ sales, and (ii) maintain
its billing systems and practices substantially as in effect as of the Closing
Date and shall only make material modifications thereto with notice to, and with
the consent of, Agent.

5.2. Reporting. Loan Parties (a) will deliver to Agent (and if so requested by
Agent, with copies for each Lender) each of the reports set forth on Schedule
5.2 at the times specified therein, and (b) agrees to use commercially
reasonable efforts in cooperation with Agent to facilitate and implement a
system of electronic collateral reporting in order to provide electronic
reporting of each of the items set forth on such Schedule. If Agent has not
received in immediately available funds an amount not less than $21,000,000 (in
an account at Wells Fargo acceptable to Agent), representing the proceeds of the
cash collateral that secured the obligations of Parent and any of its
Subsidiaries under the Existing Credit Facility, within one (1) Business Day of
the Closing Date, Borrower shall deliver promptly, but in any event no later
than one (1) Business Day after the Closing Date, an updated Borrowing Base
Certificate as of the week ended April 20, 2012.

 

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5.3. Existence. Except as otherwise permitted under Section 6.3 or Section 6.4,
each Loan Party will, and will cause each of its Subsidiaries to, at all times
preserve and keep in full force and effect such Person’s valid existence and
good standing in its jurisdiction of organization and, except as could not
reasonably be expected to result in a Material Adverse Effect, good standing
with respect to all other jurisdictions in which it is qualified to do business
and any rights, franchises, permits, licenses, accreditations, authorizations,
or other approvals material to their businesses.

5.4. Maintenance of Properties. Each Loan Party will, and will cause each of its
Subsidiaries to, maintain and preserve all of its assets that are necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear, tear, casualty, and condemnation and Permitted
Dispositions excepted (and except where the failure to so maintain and preserve
assets could not reasonably be expected to result in a Material Adverse Effect).

5.5. Taxes. Each Loan Party will, and will cause each of its Subsidiaries to,
pay in full before delinquency or before the expiration of any extension period
all material governmental assessments and taxes imposed, levied, or assessed
against it, or any of its assets or in respect of any of its income, businesses,
or franchises, except to the extent that the validity of such governmental
assessment or tax is the subject of a Permitted Protest.

5.6. Insurance. Each Loan Party will, and will cause each of its Subsidiaries
to, at Borrower’s expense, (a) maintain insurance respecting each Loan Party’s
and its Subsidiaries’ assets wherever located, covering liabilities, losses or
damages as are customarily are insured against by other Persons engaged in same
or similar businesses and similarly situated and located. All such policies of
insurance shall be with financially sound and reputable insurance companies
acceptable to Agent (it being agreed that, as of the Closing Date, FM Global is
acceptable to Agent) and in such amounts as is carried generally in accordance
with sound business practice by companies in similar businesses similarly
situated and located and, in any event, in amount, adequacy, and scope
reasonably satisfactory to Agent (it being agreed that the amount, adequacy, and
scope of the policies of insurance of Loan Parties in effect as of the Closing
Date are acceptable to Agent). All property insurance policies covering the
Collateral are to be made payable to Agent for the benefit of Agent and the
Lenders, as their interests may appear, in case of loss, pursuant to a standard
loss payable endorsement with a standard non contributory “lender” or “secured
party” clause and are to contain such other provisions as Agent may reasonably
require to fully protect the Lenders’ interest in the Collateral and to any
payments to be made under such policies. All certificates of property and
general liability insurance are to be delivered to Agent, with the loss payable
(but only in respect of Collateral) and additional insured endorsements in favor
of Agent and shall provide for not less than 30 days (10 days in the case of
non-payment) prior written notice to Agent of the exercise of any right of
cancellation. If Parent or its Subsidiaries fail to maintain such insurance,
Agent may arrange for such insurance, but at Borrowers’ expense and without any
responsibility on Agent’s part for obtaining the insurance, the solvency of the
insurance companies, the adequacy of the coverage, or the collection of claims.
Parent shall give Agent prompt notice of any loss exceeding $250,000 covered by
its or its Subsidiaries’ casualty or business interruption insurance. Upon the
occurrence and during the continuance of an Event of Default, Agent shall have
the sole right to file claims under any property and general liability insurance
policies in respect of the Collateral, to receive, receipt and give acquittance
for any payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.

 

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5.7. Inspection.

(a) Each Loan Party will, and will cause each of its Subsidiaries to, permit
Agent, any Lender, and each of their respective duly authorized representatives
or agents to visit any of its properties and inspect any of its assets or books
and records, to examine and make copies of its books and records, and to discuss
its affairs, finances, and accounts with, and to be advised as to the same by,
its officers and employees (provided an authorized representative of Parent
shall be allowed to be present) at such reasonable times and intervals as Agent
or any Lender, as applicable, may designate and, so long as no Default or Event
of Default has occurred and is continuing, with reasonable prior notice to
Parent and during regular business hours.

(b) Each Loan Party will, and will cause each of its Subsidiaries to, permit
Agent and each of its duly authorized representatives or agents to conduct
appraisals and valuations at such reasonable times and intervals as Agent may
designate. So long as no Default or Event of Default has occurred and is
continuing, Agent agrees to provide Parent with a copy of the report for any
such valuation upon request by Parent so long as (i) such report exists,
(ii) the third person employed by Agent to perform such valuation consents to
such disclosure, and (iii) Parent executes and delivers to Agent a non-reliance
letter reasonably satisfactory to Agent.

5.8. Compliance with Laws. Each Loan Party will, and will cause each of its
Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations, and orders of any Governmental Authority, other than laws, rules,
regulations, and orders the non-compliance with which, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

5.9. Environmental. Each Loan Party will, and will cause each of its
Subsidiaries to,

(a) Keep any property either owned or operated by Parent or its Subsidiaries
free of any Environmental Liens or post bonds or other financial assurances
sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens,

(b) Comply, in all material respects, with Environmental Laws and provide to
Agent documentation of such compliance which Agent reasonably requests,

(c) Promptly notify Agent of any release of which Borrower has knowledge of a
Hazardous Material in any reportable quantity from or onto property owned or
operated by Parent or its Subsidiaries and take any Remedial Actions required to
abate said release or otherwise to come into compliance, in all material
respects, with applicable Environmental Law, and

(d) Promptly, but in any event within 5 Business Days of its receipt thereof,
provide Agent with written notice of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of Parent or its Subsidiaries, (ii) commencement of any Environmental Action or
written notice that an Environmental Action will be filed against Parent or its
Subsidiaries, and (iii) written notice of a violation, citation, or other
administrative order from a Governmental Authority.

5.10. Disclosure Updates. Each Loan Party will, promptly and in no event later
than 5 Business Days after obtaining knowledge thereof, notify Agent if any
written information, exhibit, or report furnished to Agent or the Lenders
contained, at the time it was furnished, any untrue statement of a material fact
or omitted to state any material fact necessary to make the statements contained
therein not misleading in light of the circumstances in which made. The
foregoing to the contrary notwithstanding, any notification pursuant to the
foregoing provision will not cure or remedy the effect of the prior untrue
statement of a material fact or omission of any material fact nor shall any such
notification have the effect of amending or modifying this Agreement or any of
the Schedules hereto.

 

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5.11. Formation of Subsidiaries. Each Loan Party will, at the time that any Loan
Party forms any direct or indirect Subsidiary or acquires any direct or indirect
Subsidiary after the Closing Date, within 10 days of such formation or
acquisition (or such later date as permitted by Agent in its sole discretion)
(a) cause such new Subsidiary to provide to Agent a joinder to the Guaranty and
Security Agreement, together with such other security agreements (including
mortgages with respect to any Real Property owned in fee of such new Subsidiary
with a fair market value greater than $500,000), as well as appropriate
financing statements (and with respect to all property subject to a mortgage,
fixture filings), all in form and substance reasonably satisfactory to Agent
(including being sufficient to grant Agent a first priority Lien (subject to
Permitted Liens) in and to the assets of such newly formed or acquired
Subsidiary); provided, that the joinder to the Guaranty and Security Agreement,
and such other security agreements shall not be required to be provided to Agent
with respect to any Subsidiary of Parent that is a CFC if providing such
agreements would result in adverse tax consequences or the costs to the Loan
Parties of providing such guaranty or such security agreements are unreasonably
excessive (as determined by Agent in consultation with Parent) in relation to
the benefits to Agent and the Lenders of the security or guarantee afforded
thereby, (b) provide, or cause the applicable Loan Party to provide, to Agent a
pledge agreement (or an addendum to the Guaranty and Security Agreement) and
appropriate certificates and powers or financing statements, pledging all of the
direct or beneficial ownership interest in such new Subsidiary in form and
substance reasonably satisfactory to Agent; provided, that only 65% of the total
outstanding voting Equity Interests of any first tier Subsidiary of Parent that
is a CFC (and none of the Equity Interests of any Subsidiary of such CFC) shall
be required to be pledged if pledging a greater amount would result in adverse
tax consequences or the costs to the Loan Parties of providing such pledge are
unreasonably excessive (as determined by Agent in consultation with Parent) in
relation to the benefits to Agent and the Lenders of the security afforded
thereby (which pledge, if reasonably requested by Agent, shall be governed by
the laws of the jurisdiction of such Subsidiary), and (c) provide to Agent all
other documentation, including one or more opinions of counsel reasonably
satisfactory to Agent, which, in its opinion, is appropriate with respect to the
execution and delivery of the applicable documentation referred to above
(including policies of title insurance or other documentation with respect to
all Real Property owned in fee and subject to a mortgage). Any document,
agreement, or instrument executed or issued pursuant to this Section 5.11 shall
constitute a Loan Document.

5.12. Further Assurances. Each Loan Party will, and will cause each of the other
Loan Parties to, at any time upon the reasonable request of Agent, execute or
deliver to Agent any and all financing statements, fixture filings, security
agreements, pledges, assignments, mortgages, deeds of trust, opinions of
counsel, and all other documents (the “Additional Documents”) that Agent may
reasonably request in form and substance reasonably satisfactory to Agent, to
create, perfect, and continue perfected or to better perfect Agent’s Liens in
all of the assets of Loan Parties (whether now owned or hereafter arising or
acquired, tangible or intangible, real or personal), to create and perfect Liens
in favor of Agent in any Real Property acquired by Parent or any other Loan
Party with a fair market value in excess of $500,000, and in order to fully
consummate all of the transactions contemplated hereby and under the other Loan
Documents; provided that the foregoing shall not apply to any Subsidiary of
Parent that is a CFC if providing such documents would result in adverse tax
consequences or the costs to the Loan Parties of providing such documents are
unreasonably excessive (as determined by Agent in consultation with Parent) in
relation to the benefits to Agent and the Lenders of the security afforded
thereby. To the maximum extent permitted by applicable law, if Parent or any
other Loan Party refuses or fails to execute or deliver any reasonably requested
Additional Documents within a reasonable period of time following the request to
do so, Parent and each other Loan Party hereby authorizes Agent to execute any
such Additional Documents in the applicable Loan Party’s name and authorizes
Agent to file such executed Additional Documents in any appropriate filing
office. In furtherance of, and not in limitation of, the foregoing, each Loan
Party shall take such actions as Agent may reasonably request from time to time
to ensure that the Obligations are guarantied by the Guarantors and are secured
by substantially all of the assets of Loan Parties, including all of the
outstanding capital Equity Interests of Parent’s Subsidiaries (subject to
exceptions and limitations contained in the Loan Documents with respect to
CFCs).

 

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5.13. Lender Meetings. Parent will, within 90 days after the close of each
fiscal year of Parent, at the request of Agent or of the Required Lenders and
upon reasonable prior notice, hold a meeting (at a mutually agreeable location
and time or, at the option of Agent, by conference call) with all Lenders who
choose to attend such meeting at which meeting shall be reviewed the financial
results of the previous fiscal year and the financial condition of Parent and
its Subsidiaries and the projections presented for the current fiscal year of
Parent.

5.14. Location of Inventory. Each Loan Party will keep its Inventory only at the
locations identified on Schedule 4.24; provided, that Administrative Borrower
may amend Schedule 4.24 so long as such amendment occurs by written notice to
Agent not less than 10 days prior to the date on which such Inventory is moved
to such new location or such chief executive office is relocated and so long as
such new location is within the continental United States.

5.15. Compliance with ERISA and the IRC. In addition to and without limiting the
generality of Section 5.8, (a) comply in all material respects with applicable
provisions of ERISA, the IRC and the regulations thereunder with respect to all
Employee Benefit Plans, (b) without the prior written consent of Agent and the
Required Lenders, not take any action or fail to take action the result of which
could be a material liability to the PBGC or to a Multiemployer Plan (other than
claims for benefits, contributions or premiums payable in the ordinary course),
(c) not participate in any prohibited transaction that could result in any civil
penalty under ERISA or tax under the IRC, other than any prohibited transaction
that could not reasonably be expected to result in liability other than de
minimis liability, and (d) operate each Employee Benefit Plan in such a manner
that will not incur any material tax liability under Section 4980B of the IRC
and (e) furnish to Agent upon Agent’s written request such additional
information about any Employee Benefit Plan for which Parent or any Subsidiary,
or ERISA Affiliate could reasonably expect to incur any material liability as
may be reasonably requested by Agent.

6. NEGATIVE COVENANTS.

Each Loan Party covenants and agrees that, until termination of all of the
Commitments and payment in full of the Obligations, the Loan Parties will not,
and will not permit any of their Subsidiaries to, do any of the following:

6.1. Indebtedness. Each Loan Party will not, and will not permit any of its
Subsidiaries to create, incur, assume, suffer to exist, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except for Permitted Indebtedness; provided, that, in no event
will any Loan Party create, incur, suffer to exist, guarantee or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness for borrowed money owing to any Subsidiary of Parent that is not a
Loan Party.

6.2. Liens. Each Loan Party will not, and will not permit any of its
Subsidiaries to create, incur, assume, or suffer to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens.

6.3. Restrictions on Fundamental Changes. Each Loan Party will not, and will not
permit any of its Subsidiaries to,

 

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(a) Other than in order to consummate a Permitted Acquisition, enter into any
merger, consolidation, reorganization, or recapitalization, or reclassify its
Equity Interests, except for (i) any merger between Loan Parties, provided, that
a Borrower must be the surviving entity of any such merger to which it is a
party, (ii) any merger between a Loan Party and a Subsidiary of such Loan Party
that is not a Loan Party so long as such Loan Party is the surviving entity of
any such merger, and (iii) any merger between Subsidiaries of Parent that are
not Loan Parties,

(b) liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), except for (i) the liquidation or dissolution of non-operating
Subsidiaries of Parent with nominal assets and nominal liabilities, (ii) the
liquidation or dissolution of a Loan Party (other than a Borrower) or any of its
wholly-owned Subsidiaries so long as all of the assets (including any interest
in any Equity Interests) of such liquidating or dissolving Loan Party or
Subsidiary are transferred to a Loan Party that is not liquidating or
dissolving, or (iii) the liquidation or dissolution of a Subsidiary of Parent
that is not a Loan Party (other than any such Subsidiary the Equity Interests of
which (or any portion thereof) is subject to a Lien in favor of Agent) so long
as all of the assets of such liquidating or dissolving Subsidiary are
transferred to a Subsidiary of Parent that is not liquidating or dissolving, or

(c) suspend or cease operating a substantial portion of its or their business,
except as permitted pursuant to clauses (a) or (b) above or in connection with a
transaction permitted under Section 6.4.

6.4. Disposal of Assets. Other than Permitted Dispositions or transactions
expressly permitted by Sections 6.3 or 6.9, each Loan Party will not, and will
not permit any of its Subsidiaries to convey, sell, lease, license, assign,
transfer, or otherwise dispose of (or enter into an agreement to convey, sell,
lease, license, assign, transfer, or otherwise dispose of) any of its or their
assets.

6.5. Nature of Business. Each Loan Party will not, and will not permit any of
its Subsidiaries to make any change in the nature of its or their business as
described in Schedule 6.5 or acquire any properties or assets that are not
reasonably related to the conduct of such business activities; provided, that
the foregoing shall not prevent Parent and its Subsidiaries from engaging in any
business that is reasonably related or ancillary to its or their business.

6.6. Prepayments and Amendments. Each Loan Party will not, and will not permit
any of its Subsidiaries to,

(a) Except in connection with Refinancing Indebtedness permitted by Section 6.1,

(i) optionally prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of Parent or its Subsidiaries, other than (A) the Obligations in
accordance with this Agreement, and (B) Permitted Intercompany Advances, or

(ii) make any payment on account of Indebtedness that has been contractually
subordinated in right of payment to the Obligations if such payment is not
permitted at such time under the subordination terms and conditions, or

(b) Directly or indirectly, amend, modify, or change any of the terms or
provisions of

(i) any agreement, instrument, document, indenture, or other writing evidencing
or concerning Permitted Indebtedness other than (A) the Obligations in
accordance with this Agreement, (B) Permitted Intercompany Advances, and
(C) Indebtedness permitted under clauses (c), (h), (j) and (k) of the definition
of Permitted Indebtedness, or

 

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(ii) the Governing Documents of any Loan Party or any of its Subsidiaries if the
effect thereof, either individually or in the aggregate, could reasonably be
expected to be materially adverse to the interests of the Lenders.

6.7. Restricted Payments. Each Loan Party will not, and will not permit any of
its Subsidiaries to make any Restricted Payment; provided, that, so long as it
is permitted by law, and so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom,

(a) Parent may make distributions to former employees, officers, or directors of
Parent (or any spouses, ex-spouses, or estates of any of the foregoing) on
account of redemptions of Equity Interests of Parent held by such Persons,
provided, that the aggregate amount of such redemptions made by Parent during
the term of this Agreement plus the amount of Indebtedness outstanding under
clause (l) of the definition of Permitted Indebtedness, does not exceed $250,000
in the aggregate,

(b) Parent may make distributions to former employees, officers, or directors of
Parent (or any spouses, ex-spouses, or estates of any of the foregoing), solely
in the form of forgiveness of Indebtedness of such Persons owing to Parent on
account of repurchases of the Equity Interests of Parent held by such Persons;
provided that such Indebtedness was incurred by such Persons solely to acquire
Equity Interests of Parent, and

(c) Parent may pay cash dividends in amounts legally available therefor;
provided, that, (i) no Event of Default has occurred and is continuing or would
result therefrom, (ii) the aggregate amount of all such dividends shall not
exceed $3,000,000 during any fiscal year, (iii) Borrowers shall have Excess
Availability of $10,000,000 or more immediately after giving effect thereto,
(iv) the Loan Parties shall be in pro forma compliance with each financial
covenant in Section 7 of the Agreement for the test period most recently ended
prior to the paying of any such dividend, determined as if such dividend was
paid on the first day of such test period, and (v) the Fixed Charge Coverage
Ratio of Parent and its Subsidiaries for the twelve month period most recently
ended prior to paying any such dividend, determined as if such dividend was paid
on the first day of such period, shall not be less than 1.0:1.0.

6.8. Accounting Methods. Each Loan Party will not, and will not permit any of
its Subsidiaries to modify or change its fiscal year or its method of accounting
(other than as may be required to conform to GAAP).

6.9. Investments. Each Loan Party will not, and will not permit any of its
Subsidiaries to, directly or indirectly, make or acquire any Investment or incur
any liabilities (including contingent obligations) for or in connection with any
Investment except for Permitted Investments.

6.10. Transactions with Affiliates. Each Loan Party will not, and will not
permit any of its Subsidiaries to, directly or indirectly, enter into or permit
to exist any transaction with any Affiliate of Parent or any of its Subsidiaries
except for :

(a) transactions between Parent or its Subsidiaries, on the one hand, and any
Affiliate of Parent or its Subsidiaries, on the other hand, so long as such
transactions (i) are either (A) Qualified Affiliate Transaction or (B) are fully
disclosed to Agent prior to the consummation thereof (except for sales of
inventory in the ordinary course of business), if they involve one or more
payments by Parent or its Subsidiaries in excess of $500,000 for any single
transaction or series of related transactions, and (ii) are no less favorable,
taken as a whole, to Parent or its Subsidiaries, as applicable, than would be
obtained in an arm’s length transaction with a non-Affiliate,

 

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(b) so long as it has been approved by Parent’s or its applicable Subsidiary’s
board of directors (or comparable governing body) in accordance with applicable
law, any indemnity provided for the benefit of directors (or comparable
managers) of Parent or its applicable Subsidiary,

(c) so long as it has been approved by Parent’s or its applicable Subsidiary’s
board of directors (or comparable governing body) in accordance with applicable
law, the payment of reasonable compensation, severance, or employee benefit
arrangements to employees, officers, and outside directors of Parent and its
Subsidiaries in the ordinary course of business and consistent with industry
practice,

(d) transactions permitted by Section 6.3 or Section 6.7, or any Permitted
Intercompany Advance,

(e) transactions solely between or among Loan Parties, and

(f) transactions solely between or among Subsidiaries of Parent which are not
Loan Parties.

6.11. Use of Proceeds. Each Loan Party will not, and will not permit any of its
Subsidiaries to use the proceeds of any loan made hereunder for any purpose
other than (a) on the Closing Date, (i) to repay, in full, the outstanding
principal, accrued interest, and accrued fees and expenses owing under or in
connection with the Existing Credit Facility and (ii) to pay the fees, costs,
and expenses incurred in connection with this Agreement, the other Loan
Documents, and the transactions contemplated hereby and thereby, in each case,
as set forth in the Funds Flow Agreement, and (b) thereafter, consistent with
the terms and conditions hereof, for their lawful and permitted purposes
(including that no part of the proceeds of the loans made to Borrowers will be
used to purchase or carry any such Margin Stock or to extend credit to others
for the purpose of purchasing or carrying any such Margin Stock or for any
purpose that violates the provisions of Regulation T, U or X of the Board of
Governors).

6.12. Limitation on Issuance of Equity Interests. Except for the issuance or
sale of Qualified Equity Interests by Parent, Parent will not, and will not
permit any of its Subsidiaries to issue or sell or enter into any agreement or
arrangement for the issuance or sale of any of its Equity Interests.

7. FINANCIAL COVENANTS.

Each Loan Party covenants and agrees that, until termination of all of the
Commitments and payment in full of the Obligations:

(a) Minimum EBITDA. During any Compliance Period, the EBITDA of Parent and its
Subsidiaries (on a consolidated basis) for the most recently ended period set
forth below for which Agent has received financial statements of Parent and its
Subsidiaries shall not be less than the amount set forth below opposite such
period:

 

Period

   Minimum EBITDA  

4/1/11 - 3/31/12

   ($ 69,654,000 ) 

5/1/11 - 4/30/12

   ($ 69,654,000 ) 

6/1/11 - 5/31/12

   ($ 69,654,000 ) 

7/1/11 - 6/30/12

   ($ 57,623,000 ) 

8/1/11 - 7/31/12

   ($ 57,623,000 ) 

9/1/11 - 8/31/12

   ($ 57,623,000 ) 

10/1/11 - 9/30/12

   ($ 50,449,000 ) 

 

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11/1/11 - 10/31/12

   ($ 50,449,000 ) 

12/1/11 - 11/30/12

   ($ 50,449,000 ) 

1/1/12 - 12/31/12

   ($ 5,536,000 ) 

2/1/12 - 1/31/13

   ($ 5,536,000 ) 

3/1/12 - 2/28/13

   ($ 5,536,000 ) 

4/1/12 - 3/31/13

   ($ 1,265,000 ) 

5/1/12 - 4/30/13

   ($ 1,265,000 ) 

6/1/12 - 5/31/13

   ($ 1,265,000 ) 

7/1/12 - 6/30/13

   $ 1,191,000   

8/1/12 - 7/31/13

   $ 1,191,000   

9/1/12 - 8/31/13

   $ 1,191,000   

10/1/12 - 9/30/13

   $ 4,607,000   

11/1/12 - 10/31/13

   $ 4,607,000   

12/1/12 - 11/30/13

   $ 4,607,000   

(b) Fixed Charge Coverage Ratio. During any Compliance Period, the Fixed Charge
Coverage Ratio of Parent and its Subsidiaries (on a consolidated basis) for the
most recently ended period of twelve consecutive fiscal months for which Agent
has received financial statements of Parent and its Subsidiaries, commencing
with the twelve fiscal month period ending on December 31, 2013, shall not be
less than 1:0:1.0:

Capital Expenditures. During any Compliance Period, the Capital Expenditures of
Parent and its Subsidiaries (on a consolidated basis) for the most recently
ended fiscal year (or any portion thereof) of Parent for which Agent has
received financial statements of Parent and its Subsidiaries shall not be
greater than $2,400,000.

8. EVENTS OF DEFAULT.

Any one or more of the following events shall constitute an event of default
(each, an “Event of Default”) under this Agreement:

8.1. Payments. If Borrowers fail to pay when due and payable, or when declared
due and payable, (a) all or any portion of the Obligations consisting of
interest, fees, or charges due the Lender Group, reimbursement of Lender Group
Expenses, or other amounts (other than any portion thereof constituting
principal) constituting Obligations (including any portion thereof that accrues
after the commencement of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any such Insolvency
Proceeding), and such failure continues for a period of 3 Business Days, (b) all
or any portion of the principal of the Loans, or (c) any amount payable to
Issuing Lender in reimbursement of any drawing under a Letter of Credit;

8.2. Covenants. If any Loan Party or any of its Subsidiaries:

(a) fails to perform or observe any covenant or other agreement contained in any
of (i) Sections 5.1, 5.2, 5.3 (solely if any Borrower is not in good standing in
its jurisdiction of organization), 5.6, 5.7 (solely if any Borrower refuses to
allow Agent or its representatives or agents to visit such Borrower’s
properties, inspect its assets or books or records, examine and make copies of
its books and records, or discuss Borrower’s affairs, finances, and accounts
with officers and employees of Borrower), 5.10, 5.11, 5.13, 5.14, or 5.15 of
this Agreement, (ii) Sections 6 of this Agreement, (iii) Section 7 of this
Agreement, or (iv) Section 7 of the Guaranty and Security Agreement;

 

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(b) fails to perform or observe any covenant or other agreement contained in any
of Sections 5.3 (other than if any Borrower is not in good standing in its
jurisdiction of organization), 5.5, 5.8, and 5.12 of this Agreement and such
failure continues for a period of 10 days after the earlier of (i) the date on
which such failure shall first become known to any officer of any Loan Party or
(ii) the date on which written notice thereof is given to Administrative
Borrower by Agent; or

(c) fails to perform or observe any covenant or other agreement contained in
this Agreement, or in any of the other Loan Documents, in each case, other than
any such covenant or agreement that is the subject of another provision of this
Section 8 (in which event such other provision of this Section 8 shall govern),
and such failure continues for a period of 30 days after the earlier of (i) the
date on which such failure shall first become known to any officer of any Loan
Party or (ii) the date on which written notice thereof is given to
Administrative Borrower by Agent;

8.3. Judgments. If one or more judgments, orders, or awards for the payment of
money involving an aggregate amount of $1,000,000, or more (except to the extent
fully covered (other than to the extent of customary deductibles) by insurance
pursuant to which the insurer has not denied coverage) is entered or filed
against a Loan Party or any of its Subsidiaries, or with respect to any of their
respective assets, and either (a) there is a period of 30 consecutive days at
any time after the entry of any such judgment, order, or award during which
(1) the same is not discharged, satisfied, vacated, stayed, or bonded pending
appeal, or (2) a stay of enforcement thereof is not in effect, or
(b) enforcement proceedings are commenced upon such judgment, order, or award;

8.4. Voluntary Bankruptcy, etc. If an Insolvency Proceeding is commenced by a
Loan Party or any of its Subsidiaries;

8.5. Involuntary Bankruptcy, etc. If an Insolvency Proceeding is commenced
against a Loan Party or any of its Subsidiaries and any of the following events
occur: (a) such Loan Party or such Subsidiary consents to the institution of
such Insolvency Proceeding against it, (b) the petition commencing the
Insolvency Proceeding is not timely controverted, (c) the petition commencing
the Insolvency Proceeding is not dismissed within 60 calendar days of the date
of the filing thereof, (d) an interim trustee is appointed to take possession of
all or any substantial portion of the properties or assets of, or to operate all
or any substantial portion of the business of, such Loan Party or its
Subsidiary, or (e) an order for relief shall have been issued or entered
therein;

8.6. Default Under Other Agreements. If there is (a) a default in one or more
agreements to which a Loan Party or any of its Subsidiaries is a party with one
or more third Persons relative to a Loan Party’s or any of its Subsidiaries’
Indebtedness involving an aggregate amount of $1,000,000 or more, and such
default (i) occurs at the final maturity of the obligations thereunder, or
(ii) results in a right by such third Person, irrespective of whether exercised,
to accelerate the maturity of such Loan Party’s or its Subsidiary’s obligations
thereunder, or (b) a default in or an involuntary early termination of one or
more Hedge Agreements to which a Loan Party or any of its Subsidiaries is a
party involving an aggregate amount of $1,000,000 or more;

8.7. Representations, etc. If any warranty, representation, certificate,
statement, or Record made herein or in any other Loan Document or delivered in
writing to Agent or any Lender in connection with this Agreement or any other
Loan Document proves to be untrue in any material respect (except that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof) as of the date of issuance or making or deemed making thereof;

 

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8.8. Guaranty. If the obligation of any Guarantor under the guaranty contained
in the Guaranty and Security Agreement is limited or terminated by operation of
law or by such Guarantor (other than in accordance with the terms of this
Agreement);

8.9. Security Documents. If Guaranty and Security Agreement or any other Loan
Document that purports to create a Lien, shall, for any reason, fail or cease to
create a valid and perfected and, except to the extent of Permitted Liens which
are non-consensual Permitted Liens, permitted purchase money Liens or the
interests of lessors under Capital Leases, first priority Lien on the Collateral
covered thereby, except (a) as a result of a disposition of the applicable
Collateral in a transaction permitted under this Agreement, (b) with respect to
Collateral the aggregate value of which, for all such Collateral, does not
exceed at any time, $1,000,000, or (c) as the result of an action or failure to
act on the part of Agent;

8.10. Loan Documents. The validity or enforceability of any Loan Document shall
at any time for any reason (other than solely as the result of an action or
failure to act on the part of Agent) be declared to be null and void, or a
proceeding shall be commenced by a Loan Party or its Subsidiaries, or by any
Governmental Authority having jurisdiction over a Loan Party or its
Subsidiaries, seeking to establish the invalidity or unenforceability thereof,
or a Loan Party or its Subsidiaries shall deny that such Loan Party or its
Subsidiaries has any liability or obligation purported to be created under any
Loan Document; or

8.11. Change of Control. A Change of Control shall occur, whether directly or
indirectly.

8.12. ERISA. The occurrence of any of the following events with respect to any
Loan Party or any of its ERISA Affiliates: (i) any Loan Party or any ERISA
Affiliate fails to make full payment when due of all amounts which, under the
provisions of any Pension Plan or Section 412 or 430 of the IRC, any Loan Party
or any ERISA Affiliate is required to pay as contributions to such Pension Plan,
and such failure could reasonably be expected to result in liability in excess
of $1,000,000, (ii) an accumulated funding deficiency or funding shortfall in
excess of $1,000,000 occurs or exists, whether or not waived, with respect to
any Pension Plan, individually or in the aggregate, (iii) a Termination Event
which could reasonably be expected to result in liability in excess of
$1,000,000 either individually or in the aggregate, or (iv) any Loan Party or
any ERISA Affiliate as employers under one or more Multiemployer Plans makes a
complete or partial withdrawal from any such Multiemployer Plan and incurs a
withdrawal liability requiring payments in an amount exceeding $1,000,000.

9. RIGHTS AND REMEDIES.

9.1. Rights and Remedies. Upon the occurrence and during the continuation of an
Event of Default, Agent may, and, at the instruction of the Required Lenders,
shall (in each case under clauses (a) or (b) by written notice to Borrower), in
addition to any other rights or remedies provided for hereunder or under any
other Loan Document or by applicable law, do any one or more of the following:

(a) (i) declare the principal of, and any and all accrued and unpaid interest
and fees in respect of, the Loans and all other Obligations (other than the Bank
Product Obligations), whether evidenced by this Agreement or by any of the other
Loan Documents to be immediately due and payable, whereupon the same shall
become and be immediately due and payable and Borrower shall be obligated to
repay all of such Obligations in full, without presentment, demand, protest, or
further notice or other requirements of any kind, all of which are hereby
expressly waived by Borrowers, (ii) terminate any Letter of Credit that may be
terminated in accordance with its terms, and (iii) direct Borrowers to provide
(and Borrowers agree that upon receipt of such notice it will provide) Letter of
Credit Collateralization to Agent to be held as security for Borrowers’
reimbursement obligations for drawings that may subsequently occur under issued
and outstanding Letters of Credit;

 

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(b) declare the Commitments terminated, whereupon the Commitments shall
immediately be terminated together with (i) any obligation of any Revolving
Lender to make Revolving Loans, (ii) the obligation of the Swing Lender to make
Swing Loans, and (iii) the obligation of Issuing Lender to issue Letters of
Credit; and

(c) exercise all other rights and remedies available to Agent or the Lenders
under the Loan Documents, under applicable law, or in equity.

The foregoing to the contrary notwithstanding, upon the occurrence of any Event
of Default described in Section 8.4 or Section 8.5, in addition to the remedies
set forth above, without any notice to Borrowers or any other Person or any act
by the Lender Group, the Commitments shall automatically terminate and the
Obligations (other than the Bank Product Obligations), inclusive of the
principal of, and any and all accrued and unpaid interest and fees in respect
of, the Loans and all other Obligations (other than the Bank Product
Obligations), whether evidenced by this Agreement or by any of the other Loan
Documents, shall automatically become and be immediately due and payable and
Borrowers shall automatically be obligated to repay all of such Obligations in
full (including Borrowers being obligated to provide (and Borrowers agree that
it will provide) (1) Letter of Credit Collateralization to Agent to be held as
security for Borrowers’ reimbursement obligations in respect of drawings that
may subsequently occur under issued and outstanding Letters of Credit and
(2) Bank Product Collateralization to be held as security for Parent’s or its
Subsidiaries’ obligations in respect of outstanding Bank Products), without
presentment, demand, protest, or notice or other requirements of any kind, all
of are expressly waived by Borrowers.

9.2. Remedies Cumulative. The rights and remedies of the Lender Group under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.

10. WAIVERS; INDEMNIFICATION.

10.1. Demand; Protest; etc. Each Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by the
Lender Group on which any Borrower may in any way be liable.

10.2. The Lender Group’s Liability for Collateral. Each Borrower hereby agrees
that: (a) so long as Agent complies with its obligations, if any, under the
Code, the Lender Group shall not in any way or manner be liable or responsible
for: (i) the safekeeping of the Collateral, (ii) any loss or damage thereto
occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by Borrower.

10.3. Indemnification. Borrowers shall pay, indemnify, defend, and hold the
Agent-Related Persons, the Lender-Related Persons, and each Participant (each,
an “Indemnified Person”) harmless (to the fullest extent permitted by law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, liabilities, fines, costs, penalties, and damages, and all
reasonable fees and disbursements of attorneys, experts, or consultants and all
other costs and expenses actually incurred in connection therewith or in
connection with the enforcement of this indemnification (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or

 

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incurred by any of them (a) in connection with or as a result of or related to
the execution and delivery (provided that Borrower shall not be liable for costs
and expenses (including attorneys fees) of any Lender (other than Wells Fargo)
incurred in advising, structuring, drafting, reviewing, administering or
syndicating the Loan Documents), enforcement, performance, or administration
(including any restructuring or workout with respect hereto) of this Agreement,
any of the other Loan Documents, or the transactions contemplated hereby or
thereby or the monitoring of Parent’s and its Subsidiaries’ compliance with the
terms of the Loan Documents (provided, that the indemnification in this clause
(a) shall not extend to (i) disputes solely between or among the Lenders,
(ii) disputes solely between or among the Lenders and their respective
Affiliates; it being understood and agreed that the indemnification in this
clause (a) shall extend to Agent (but not the Lenders) relative to disputes
between or among Agent on the one hand, and one or more Lenders, or one or more
of their Affiliates, on the other hand, or (iii) any Taxes or any costs
attributable to Taxes, which shall be governed by Section 16), (b) with respect
to any investigation, litigation, or proceeding related to this Agreement, any
other Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any act,
omission, event, or circumstance in any manner related thereto, and (c) in
connection with or arising out of any presence or release of Hazardous Materials
at, on, under, to or from any assets or properties owned, leased or operated by
Parent or any of its Subsidiaries or any Environmental Actions, Environmental
Liabilities or Remedial Actions related in any way to any such assets or
properties of Parent or any of its Subsidiaries (each and all of the foregoing,
the “Indemnified Liabilities”). The foregoing to the contrary notwithstanding,
Borrowers shall have no obligation to any Indemnified Person under this
Section 10.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person or its officers, directors,
employees, attorneys, or agents. This provision shall survive the termination of
this Agreement and the repayment in full of the Obligations. If any Indemnified
Person makes any payment to any other Indemnified Person with respect to an
Indemnified Liability as to which Borrowers were required to indemnify the
Indemnified Person receiving such payment, the Indemnified Person making such
payment is entitled to be indemnified and reimbursed by Borrowers with respect
thereto. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH
INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN
PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

11. NOTICES.

Unless otherwise provided in this Agreement, all notices or demands relating to
this Agreement or any other Loan Document shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
registered or certified mail (postage prepaid, return receipt requested),
overnight courier, electronic mail (at such email addresses as a party may
designate in accordance herewith), or telefacsimile. In the case of notices or
demands to Loan Parties or Agent, as the case may be, they shall be sent to the
respective address set forth below:

 

If to any Loan Party:   

KŸSwiss Inc.

1248 Oak Crest Drive

Westlake Village, California 91361

  

Attn: Mr. George Powlick and Lee Green, Esq.

Fax No.: (818) 706-5390

with copies to:    Lewitt, Hackman, Shapiro, Marshall & Harlan    16633 Ventura
Boulevard, 11th Floor

 

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   Encino, CA 91436    Attn: John B. Marshall, Esq.    Fax No.: (818) 981-4764
If to Agent:    Wells Fargo Bank, National Association    2450 Colorado Avenue,
Suite 3000W    Santa Monica, California 90404    Attn: Business Finance Manager
   Fax No.: (310) 453-7413 with copies to:   

Otterbourg, Steindler, Houston & Rosen, P.C.

230 Park Avenue

New York, NY 10169

  

Attn: Michael Barocas, Esq.

Fax No. (212) 682-6104

Any party hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other
party. All notices or demands sent in accordance with this Section 11, shall be
deemed received on the earlier of the date of actual receipt or 3 Business Days
after the deposit thereof in the mail; provided, that (a) notices sent by
overnight courier service shall be deemed to have been given when received,
(b) notices by facsimile shall be deemed to have been given when sent (except
that, if not given during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next Business Day
for the recipient) and (c) notices by electronic mail shall be deemed received
upon the sender’s receipt of an acknowledgment from the intended recipient (such
as by the “return receipt requested” function, as available, return email or
other written acknowledgment).

12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE PROVISION.

(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL
MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO, AND ANY
CLAIMS, CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR THEREUNDER OR RELATED
HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN
THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED
IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA; PROVIDED, THAT ANY SUIT
SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING
SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH LOAN
PARTY AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO

 

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ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12(b).

(c) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH LOAN PARTY AND EACH
MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS, IF ANY, TO A
JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR
INDIRECTLY BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH A
“CLAIM”). EACH LOAN PARTY AND EACH MEMBER OF THE LENDER GROUP REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.

(d) EACH LOAN PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF
LOS ANGELES AND THE STATE OF CALIFORNIA IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENTS, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT. 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
AGENT 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.

(e) NO CLAIM MAY BE MADE BY ANY LOAN PARTY AGAINST THE AGENT, THE SWING LENDER,
ANY OTHER LENDER, ISSUING LENDER, OR THE UNDERLYING ISSUER, OR ANY AFFILIATE,
DIRECTOR, OFFICER, EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT
OF ANY OF THEM 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 OTHER LOAN DOCUMENT, 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 SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN
OR SUSPECTED TO EXIST IN ITS FAVOR.

 

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(f) IN THE EVENT ANY LEGAL PROCEEDING IS FILED IN A COURT OF THE STATE OF
CALIFORNIA (THE “COURT”) BY OR AGAINST ANY PARTY HERETO IN CONNECTION WITH ANY
CLAIM AND THE WAIVER SET FORTH IN CLAUSE (C) ABOVE IS NOT ENFORCEABLE IN SUCH
PROCEEDING, THE PARTIES HERETO AGREE AS FOLLOWS:

(i) WITH THE EXCEPTION OF THE MATTERS SPECIFIED IN SUBCLAUSE (ii) BELOW, ANY
CLAIM SHALL BE DETERMINED BY A GENERAL REFERENCE PROCEEDING IN ACCORDANCE WITH
THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 THROUGH 645.1.
THE PARTIES INTEND THIS GENERAL REFERENCE AGREEMENT TO BE SPECIFICALLY
ENFORCEABLE. VENUE FOR THE REFERENCE PROCEEDING SHALL BE IN THE COUNTY OF LOS
ANGELES, CALIFORNIA.

(ii) THE FOLLOWING MATTERS SHALL NOT BE SUBJECT TO A GENERAL REFERENCE
PROCEEDING: (A) NON-JUDICIAL FORECLOSURE OF ANY SECURITY INTERESTS IN REAL OR
PERSONAL PROPERTY, (B) EXERCISE OF SELF-HELP REMEDIES (INCLUDING SET-OFF OR
RECOUPMENT), (C) APPOINTMENT OF A RECEIVER, AND (D) TEMPORARY, PROVISIONAL, OR
ANCILLARY REMEDIES (INCLUDING WRITS OF ATTACHMENT, WRITS OF POSSESSION,
TEMPORARY RESTRAINING ORDERS, OR PRELIMINARY INJUNCTIONS). THIS AGREEMENT DOES
NOT LIMIT THE RIGHT OF ANY PARTY TO EXERCISE OR OPPOSE ANY OF THE RIGHTS AND
REMEDIES DESCRIBED IN CLAUSES (A) - (D) AND ANY SUCH EXERCISE OR OPPOSITION DOES
NOT WAIVE THE RIGHT OF ANY PARTY TO PARTICIPATE IN A REFERENCE PROCEEDING
PURSUANT TO THIS AGREEMENT WITH RESPECT TO ANY OTHER MATTER.

(iii) UPON THE WRITTEN REQUEST OF ANY PARTY, THE PARTIES SHALL SELECT A SINGLE
REFEREE, WHO SHALL BE A RETIRED JUDGE OR JUSTICE. IF THE PARTIES DO NOT AGREE
UPON A REFEREE WITHIN 10 DAYS OF SUCH WRITTEN REQUEST, THEN, ANY PARTY SHALL
HAVE THE RIGHT TO REQUEST THE COURT TO APPOINT A REFEREE PURSUANT TO CALIFORNIA
CODE OF CIVIL PROCEDURE SECTION 640(B). THE REFEREE SHALL BE APPOINTED TO SIT
WITH ALL OF THE POWERS PROVIDED BY LAW. PENDING APPOINTMENT OF THE REFEREE, THE
COURT SHALL HAVE THE POWER TO ISSUE TEMPORARY OR PROVISIONAL REMEDIES.

(iv) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE REFEREE SHALL
DETERMINE THE MANNER IN WHICH THE REFERENCE PROCEEDING IS CONDUCTED INCLUDING
THE TIME AND PLACE OF HEARINGS, THE ORDER OF PRESENTATION OF EVIDENCE, AND ALL
OTHER QUESTIONS THAT ARISE WITH RESPECT TO THE COURSE OF THE REFERENCE
PROCEEDING. ALL PROCEEDINGS AND HEARINGS CONDUCTED BEFORE THE REFEREE, EXCEPT
FOR TRIAL, SHALL BE CONDUCTED WITHOUT A COURT REPORTER, EXCEPT WHEN ANY PARTY SO
REQUESTS A COURT REPORTER AND A TRANSCRIPT IS ORDERED, A COURT REPORTER SHALL BE
USED AND THE REFEREE SHALL BE PROVIDED A COURTESY COPY OF THE TRANSCRIPT. THE
PARTY MAKING SUCH REQUEST SHALL HAVE THE OBLIGATION TO ARRANGE FOR AND PAY THE
COSTS OF THE COURT REPORTER, PROVIDED THAT SUCH COSTS, ALONG WITH THE REFEREE’S
FEES, SHALL ULTIMATELY BE BORNE BY THE PARTY WHO DOES NOT PREVAIL, AS DETERMINED
BY THE REFEREE.

(v) THE REFEREE MAY REQUIRE ONE OR MORE PREHEARING CONFERENCES. THE PARTIES
HERETO SHALL BE ENTITLED TO DISCOVERY, AND THE REFEREE SHALL OVERSEE DISCOVERY
IN ACCORDANCE WITH THE RULES OF DISCOVERY, AND SHALL ENFORCE ALL DISCOVERY
ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE IN PROCEEDINGS AT LAW IN THE
STATE OF CALIFORNIA.

 

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(vi) THE REFEREE SHALL APPLY THE RULES OF EVIDENCE APPLICABLE TO PROCEEDINGS AT
LAW IN THE STATE OF CALIFORNIA AND SHALL DETERMINE ALL ISSUES IN ACCORDANCE WITH
CALIFORNIA SUBSTANTIVE AND PROCEDURAL LAW. THE REFEREE SHALL BE EMPOWERED TO
ENTER EQUITABLE AS WELL AS LEGAL RELIEF AND RULE ON ANY MOTION WHICH WOULD BE
AUTHORIZED IN A TRIAL, INCLUDING MOTIONS FOR DEFAULT JUDGMENT OR SUMMARY
JUDGMENT. THE REFEREE SHALL REPORT HIS OR HER DECISION, WHICH REPORT SHALL ALSO
INCLUDE FINDINGS OF FACT AND CONCLUSIONS OF LAW. THE REFEREE SHALL ISSUE A
DECISION AND PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE, SECTION 644, THE
REFEREE’S DECISION SHALL BE ENTERED BY THE COURT AS A JUDGMENT IN THE SAME
MANNER AS IF THE ACTION HAD BEEN TRIED BY THE COURT. THE FINAL JUDGMENT OR ORDER
FROM ANY APPEALABLE DECISION OR ORDER ENTERED BY THE REFEREE SHALL BE FULLY
APPEALABLE AS IF IT HAS BEEN ENTERED BY THE COURT.

(vii) THE PARTIES RECOGNIZE AND AGREE THAT ALL CLAIMS RESOLVED IN A GENERAL
REFERENCE PROCEEDING PURSUANT HERETO WILL BE DECIDED BY A REFEREE AND NOT BY A
JURY. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL
OF THEIR OWN CHOICE, EACH PARTY HERETO KNOWINGLY AND VOLUNTARILY AND FOR THEIR
MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION SHALL APPLY TO ANY DISPUTE
BETWEEN THEM THAT ARISES OUT OF OR IS RELATED TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS.

13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

13.1. Assignments and Participations.

(a) (i) Subject to the conditions set forth in clause (a)(ii) below, any Lender
may assign and delegate all or any portion of its rights and duties under the
Loan Documents (including the Obligations owed to it and its Commitments) to one
or more assignees so long as such prospective assignee is an Eligible Transferee
(each, an “Assignee”), with the prior written consent (such consent not be
unreasonably withheld or delayed) of:

(A) Administrative Borrower; provided, that no consent of Administrative
Borrower shall be required (1) if an Event of Default has occurred and is
continuing, or (2) in connection with an assignment to a Person that is a Lender
or an Affiliate (other than natural persons) of a Lender; provided further, that
Administrative Borrower shall be deemed to have consented to a proposed
assignment unless it objects thereto by written notice to Agent within 5
Business Days after having received notice thereof; and

(B) Agent, Swing Lender, and Issuing Lender.

(ii) Assignments shall be subject to the following additional conditions:

(A) no assignment may be made (i) so long as no Event of Default has occurred
and is continuing, to an Ineligible Institution, (ii) so long as no Event of
Default has occurred and is continuing, to a Competitor, or (iii) to a natural
person,

 

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(B) no assignment may be made to a Loan Party, or an Affiliate of a Loan Party,

(C) the amount of the Commitments and the other rights and obligations of the
assigning Lender hereunder and under the other Loan Documents subject to each
such assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to Agent) shall be in a minimum amount
(unless waived by Agent) of $5,000,000 (except such minimum amount shall not
apply to (I) an assignment or delegation by any Lender to any other Lender, an
Affiliate of any Lender, or a Related Fund of such Lender or (II) a group of new
Lenders, each of which is an Affiliate of each other or a Related Fund of such
new Lender to the extent that the aggregate amount to be assigned to all such
new Lenders is at least $5,000,000);

(D) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;

(E) the parties to each assignment shall execute and deliver to Agent an
Assignment and Acceptance; provided, that Borrowers and Agent may continue to
deal solely and directly with the assigning Lender in connection with the
interest so assigned to an Assignee until written notice of such assignment,
together with payment instructions, addresses, and related information with
respect to the Assignee, have been given to Administrative Borrower and Agent by
such Lender and the Assignee.

(F) unless waived by Agent, the assigning Lender or Assignee has paid to Agent,
for Agent’s separate account, a processing fee in the amount of $3,500; and

(G) the assignee, if it is not a Lender, shall deliver to Agent an
Administrative Questionnaire in a form approved by Agent (the “Administrative
Questionnaire”).

(b) From and after the date that Agent receives the executed Assignment and
Acceptance and, if applicable, payment of the required processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall be a “Lender” and shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assigning Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (except with respect to Section 10.3) and be released from any future
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto); provided, that nothing contained
herein shall release any assigning Lender from obligations that survive the
termination of this Agreement, including such assigning Lender’s obligations
under Section 15 and Section 17.9(a).

(c) By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the Assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto,
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party or the
performance or observance by any Loan Party of any of its obligations under this
Agreement or any other Loan Document furnished pursuant hereto, (iii) such
Assignee confirms that it has received a copy of this Agreement, together with
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance,
(iv) such Assignee will, independently and

 

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without reliance upon Agent, such assigning Lender 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, (v) such Assignee appoints and authorizes Agent to take
such actions and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to Agent, by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto, and (vi) such Assignee
agrees that it will perform all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.

(d) Immediately upon Agent’s receipt of the required processing fee, if
applicable, and delivery of notice to the assigning Lender pursuant to
Section 13.1(b), this Agreement shall be deemed to be amended to the extent, but
only to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom. The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning Lender
pro tanto.

(e) Any Lender may at any time sell to one or more commercial banks, financial
institutions, or other Persons (a “Participant”) participating interests in all
or any portion of its Obligations, its Commitment, and the other rights and
interests of that Lender (the “Originating Lender”) hereunder and under the
other Loan Documents; provided, that (i) the Originating Lender shall remain a
“Lender” for all purposes of this Agreement and the other Loan Documents and the
Participant receiving the participating interest in the Obligations, the
Commitments, and the other rights and interests of the Originating Lender
hereunder shall not constitute a “Lender” hereunder or under the other Loan
Documents and the Originating Lender’s obligations under this Agreement shall
remain unchanged, (ii) the Originating Lender shall remain solely responsible
for the performance of such obligations, (iii) Borrowers, Agent, and the Lenders
shall continue to deal solely and directly with the Originating Lender in
connection with the Originating Lender’s rights and obligations under this
Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant
any participating interest under which the Participant has the right to approve
any amendment to, or any consent or waiver with respect to, this Agreement or
any other Loan Document, except to the extent such amendment to, or consent or
waiver with respect to this Agreement or of any other Loan Document would
(A) extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in which such Participant is participating, (C) release
all or substantially all of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participant is participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
Participant through such Lender (other than a waiver of default interest), or
(E) decreases the amount or postpones the due dates of scheduled principal
repayments or prepayments or premiums payable to such Participant through such
Lender, (v) no participation shall be sold to a natural person, (vi) no
participation shall be sold to a Loan Party or an Affiliate of a Loan Party and
(vii) all amounts payable by Borrowers hereunder shall be determined as if such
Lender had not sold such participation, except that, if amounts outstanding
under this Agreement are due and unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant only shall be
derivative through the Originating Lender with whom such Participant
participates and no Participant shall have any rights under this Agreement or
the other Loan Documents or any direct rights as to the other Lenders, Agent,
Borrowers, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves.

(f) In connection with any such assignment or participation or proposed
assignment or participation or any grant of a security interest in, or pledge
of, its rights under and interest in this

 

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Agreement, a Lender may, subject to the provisions of Section 17.9, disclose all
documents and information which it now or hereafter may have relating to Parent
and its Subsidiaries and their respective businesses.

(g) Any other provision in this Agreement notwithstanding, any Lender may at any
time create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR §203.24, and such Federal Reserve Bank may enforce such pledge
or security interest in any manner permitted under applicable law.

(h) Agent (as a non-fiduciary agent on behalf of Borrower) shall maintain, or
cause to be maintained, a register (the “Register”) on which it enters the name
and address of each Lender as the registered owner of any Loan (and the
principal amount thereof and stated interest thereon) held by such Lender (each,
a “Registered Loan”). Other than in connection with an assignment by a Lender of
all or any portion of its portion of any Loan to an Affiliate of such Lender or
a Related Fund of such Lender (i) a Registered Loan (and the registered note, if
any, evidencing the same) may be assigned or sold in whole or in part only by
registration of such assignment or sale on the Register (and each registered
note shall expressly so provide) and (ii) any assignment or sale of all or part
of such Registered Loan (and the registered note, if any, evidencing the same)
may be effected only by registration of such assignment or sale on the Register,
together with the surrender of the registered note, if any, evidencing the same
duly endorsed by (or accompanied by a written instrument of assignment or sale
duly executed by) the holder of such registered note, whereupon, at the request
of the designated assignee(s) or transferee(s), one or more new registered notes
in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or sale of
any Registered Loan (and the registered note, if any evidencing the same),
Borrowers shall treat the Person in whose name such Registered Loan (and the
registered note, if any, evidencing the same) is registered as the owner thereof
for the purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary. In the case of any assignment by a
Lender of all or any portion of its Loans to an Affiliate of such Lender or a
Related Fund of such Lender, and which assignment is not recorded in the
Register, the assigning Lender, on behalf of Borrowers, shall maintain a
register comparable to the Register.

(i) In the event that a Lender sells participations in any Registered Loan, such
Lender, as a non-fiduciary agent on behalf of Borrowers, shall maintain (or
cause to be maintained) a register on which it enters the name of all
participants in the Registered Loans held by it (and the principal amount (and
stated interest thereon) of the portion of such Registered Loans that is subject
to such participations) (the “Participant Register”). A Registered Loan (and the
Registered Note, if any, evidencing the same) may be participated in whole or in
part only by registration of such participation on the Participant Register (and
each registered note shall expressly so provide). Any participation of such
Registered Loan (and the registered note, if any, evidencing the same) may be
effected only by the registration of such participation on the Participant
Register.

(j) Agent shall make a copy of the Register (and each Lender shall make a copy
of its Participant Register in the extent it has one) available for review by
Borrowers from time to time as Borrowers may reasonably request.

13.2. Successors. This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided, that no Loan
Party may assign this Agreement or any rights or duties hereunder without the
Lenders’ prior written consent and any prohibited assignment shall be absolutely
void ab initio. No consent to assignment by the Lenders shall release any Loan
Party from its Obligations. A Lender may assign this Agreement and the other
Loan Documents and its rights and duties hereunder and thereunder pursuant to
Section 13.1 and, except as expressly required pursuant to Section 13.1, no
consent or approval by any Loan Party is required in connection with any such
assignment.

 

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14. AMENDMENTS; WAIVERS.

14.1. Amendments and Waivers.

(a) No amendment, waiver or other modification of any provision of this
Agreement or any other Loan Document (other than Bank Product Agreements or the
Fee Letter), and no consent with respect to any departure by any Loan Party
therefrom, shall be effective unless the same shall be in writing and signed by
the Required Lenders (or by Agent at the written request of the Required
Lenders) and the Loan Parties that are party thereto and then any such waiver or
consent shall be effective, but only in the specific instance and for the
specific purpose for which given; provided, that no such waiver, amendment, or
consent shall, unless in writing and signed by all of the Lenders directly
affected thereby and all of the Loan Parties that are party thereto, do any of
the following:

(i) increase the amount of or extend the expiration date of any Commitment of
any Lender or amend, modify, or eliminate the last sentence of
Section 2.4(c)(i),

(ii) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees, or other amounts due
hereunder or under any other Loan Document,

(iii) reduce the principal of, or the rate of interest on, any loan or other
extension of credit hereunder, or reduce any fees or other amounts payable
hereunder or under any other Loan Document (except (y) in connection with the
waiver of applicability of Section 2.6(c) (which waiver shall be effective with
the written consent of the Required Lenders), and (z) that any amendment or
modification of defined terms used in the financial covenants in this Agreement
shall not constitute a reduction in the rate of interest or a reduction of fees
for purposes of this clause (iii)),

(iv) amend, modify, or eliminate this Section or any provision of this Agreement
providing for consent or other action by all Lenders,

(v) amend, modify, or eliminate Section 3.1 or 3.2,

(vi) amend, modify, or eliminate Section 15.11,

(vii) other than as permitted by Section 15.11, release Agent’s Lien in and to
any of the Collateral,

(viii) amend, modify, or eliminate the definitions of “Required Lenders” or “Pro
Rata Share”,

(ix) contractually subordinate any of Agent’s Liens,

(x) other than in connection with a merger, liquidation, dissolution or sale of
such Person expressly permitted by the terms hereof or the other Loan Documents,
release Borrower or any Guarantor from any obligation for the payment of money
or consent to the assignment or transfer by Borrower or any Guarantor of any of
its rights or duties under this Agreement or the other Loan Documents,

 

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(xi) amend, modify, or eliminate any of the provisions of Section 2.4(b)(i) or
(ii) or Section 2.4(e) or (f), or

(xii) amend, modify, or eliminate any of the provisions of Section 13.1 with
respect to assignments to, or participations with, any Loan Party or an
Affiliate of any Loan Party.

(b) No amendment, waiver, modification, or consent shall amend, modify, waive,
or eliminate,

(i) the definition of, or any of the terms or provisions of, the Fee Letter,
without the written consent of Agent and Borrowers (and shall not require the
written consent of any of the Lenders),

(ii) any provision of Section 15 pertaining to Agent, or any other rights or
duties of Agent under this Agreement or the other Loan Documents, without the
written consent of Agent, Borrowers, and the Required Lenders,

(c) No amendment, waiver, modification, elimination, or consent shall amend,
without written consent of Agent, Borrowers and the Supermajority Lenders,
modify, or eliminate the definition of Borrowing Base or any of the defined
terms (including the definitions of Eligible Accounts and Eligible Inventory)
that are used in such definition to the extent that any such change results in
more credit being made available to Borrowers based upon the Borrowing Base, but
not otherwise, or the definition of Maximum Revolver Amount, or change
Section 2.1(c),

(d) No amendment, waiver, modification, elimination, or consent shall amend,
modify, or waive any provision of this Agreement or the other Loan Documents
pertaining to Issuing Lender, or any other rights or duties of Issuing Lender or
Underlying Issuer under this Agreement or the other Loan Documents, without the
written consent of Issuing Lender, Agent, Borrowers, and the Required Lenders,

(e) No amendment, waiver, modification, elimination, or consent shall amend,
modify, or waive any provision of this Agreement or the other Loan Documents
pertaining to Swing Lender, or any other rights or duties of Swing Lender under
this Agreement or the other Loan Documents, without the written consent of Swing
Lender, Agent, Borrowers, and the Required Lenders,

(f) Anything in this Section 14.1 to the contrary notwithstanding, (i) any
amendment, modification, elimination, waiver, consent, termination, or release
of, or with respect to, any provision of this Agreement or any other Loan
Document that relates only to the relationship of the Lender Group among
themselves, and that does not affect the rights or obligations of Loan Parties,
shall not require consent by or the agreement of any Loan Party, and (ii) any
amendment, waiver, modification, elimination, or consent of or with respect to
any provision of this Agreement or any other Loan Document may be entered into
without the consent of, or over the objection of, any Defaulting Lender other
than any of the matters governed by Section 14.1(a)(i) through (iii) that affect
such Lender.

14.2. Replacement of Certain Lenders.

(a) If (i) any action to be taken by the Lender Group or Agent hereunder
requires the consent, authorization, or agreement of all Lenders or all Lenders
affected thereby and if such action has received the consent, authorization, or
agreement of the Required Lenders but not of all Lenders or all Lenders affected
thereby, or (ii) any Lender makes a claim for compensation under Section 16,
then Administrative Borrower or Agent, upon at least 5 Business Days prior
irrevocable notice, may permanently replace any Lender that failed to give its
consent, authorization, or agreement (a “Non-Consenting Lender”) or any Lender
that made a claim for compensation (a “Tax Lender”) with one or

 

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more Replacement Lenders, and the Non-Consenting Lender or Tax Lender, as
applicable, shall have no right to refuse to be replaced hereunder. Such notice
to replace the Non-Consenting Lender or Tax Lender, as applicable, shall specify
an effective date for such replacement, which date shall not be later than 15
Business Days after the date such notice is given.

(b) Prior to the effective date of such replacement, the Non-Consenting Lender
or Tax Lender, as applicable, and each Replacement Lender shall execute and
deliver an Assignment and Acceptance, subject only to the Non-Consenting Lender
or Tax Lender, as applicable, being repaid in full its share of the outstanding
Obligations (without any premium or penalty of any kind whatsoever, but
including (i) all interest, fees and other amounts that may be due in payable in
respect thereof, and (ii) an assumption of its Pro Rata Share of participations
in the Letters of Credit). If the Non-Consenting Lender or Tax Lender, as
applicable, shall refuse or fail to execute and deliver any such Assignment and
Acceptance prior to the effective date of such replacement, Agent may, but shall
not be required to, execute and deliver such Assignment and Acceptance in the
name or and on behalf of the Non-Consenting Lender or Tax Lender, as applicable,
and irrespective of whether Agent executes and delivers such Assignment and
Acceptance, the Non-Consenting Lender or Tax Lender, as applicable, shall be
deemed to have executed and delivered such Assignment and Acceptance. The
replacement of any Non-Consenting Lender or Tax Lender, as applicable, shall be
made in accordance with the terms of Section 13.1. Until such time as one or
more Replacement Lenders shall have acquired all of the Obligations, the
Commitments, and the other rights and obligations of the Non-Consenting Lender
or Tax Lender, as applicable, hereunder and under the other Loan Documents, the
Non-Consenting Lender or Tax Lender, as applicable, shall remain obligated to
make the Non-Consenting Lender’s or Tax Lender’s, as applicable, Pro Rata Share
of Revolving Loans and to purchase a participation in each Letter of Credit, in
an amount equal to its Pro Rata Share of participations in such Letters of
Credit.

14.3. No Waivers; Cumulative Remedies. No failure by Agent or any Lender to
exercise any right, remedy, or option under this Agreement or any other Loan
Document, or delay by Agent or any Lender in exercising the same, will operate
as a waiver thereof. No waiver by Agent or any Lender will be effective unless
it is in writing, and then only to the extent specifically stated. No waiver by
Agent or any Lender on any occasion shall affect or diminish Agent’s and each
Lender’s rights thereafter to require strict performance by Loan Parties of any
provision of this Agreement. Agent’s and each Lender’s rights under this
Agreement and the other Loan Documents will be cumulative and not exclusive of
any other right or remedy that Agent or any Lender may have.

15. AGENT; THE LENDER GROUP.

15.1. Appointment and Authorization of Agent. Each Lender hereby designates and
appoints Wells Fargo as its agent under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes (and by entering into a
Bank Product Agreement, each Bank Product Provider shall be deemed to designate,
appoint, and authorize) Agent to execute and deliver each of the other Loan
Documents on its behalf and to take such other action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to Agent by the terms
of this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Agent agrees to act as agent for and on behalf of
the Lenders (and the Bank Product Providers) on the conditions contained in this
Section 15. Any provision to the contrary contained elsewhere in this Agreement
or in any other Loan Document notwithstanding, Agent shall not have any duties
or responsibilities, except those expressly set forth herein or in the other
Loan Documents, nor shall Agent have or be deemed to have any fiduciary
relationship with any Lender (or Bank Product Provider), and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Loan Document or otherwise exist
against Agent. Without limiting the generality of the foregoing, the use of the
term “agent” in this Agreement or the

 

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other Loan Documents with reference to Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only a representative
relationship between independent contracting parties. Each Lender hereby further
authorizes (and by entering into a Bank Product Agreement, each Bank Product
Provider shall be deemed to authorize) Agent to act as the secured party under
each of the Loan Documents that create a Lien on any item of Collateral. Except
as expressly otherwise provided in this Agreement, Agent shall have and may use
its sole discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions that Agent
expressly is entitled to take or assert under or pursuant to this Agreement and
the other Loan Documents. Without limiting the generality of the foregoing, or
of any other provision of the Loan Documents that provides rights or powers to
Agent, Lenders agree that Agent shall have the right to exercise the following
powers as long as this Agreement remains in effect: (a) maintain, in accordance
with its customary business practices, ledgers and records reflecting the status
of the Obligations, the Collateral, payments and proceeds of Collateral, and
related matters, (b) execute or file any and all financing or similar statements
or notices, amendments, renewals, supplements, documents, instruments, proofs of
claim, notices and other written agreements with respect to the Loan Documents,
(c) make Revolving Loans, for itself or on behalf of Lenders, as provided in the
Loan Documents, (d) exclusively receive, apply, and distribute payments and
proceeds of the Collateral as provided in the Loan Documents, (e) open and
maintain such bank accounts and cash management arrangements as Agent deems
necessary and appropriate in accordance with the Loan Documents for the
foregoing purposes, (f) perform, exercise, and enforce any and all other rights
and remedies of the Lender Group with respect to Parent or its Subsidiaries, the
Obligations, the Collateral, or otherwise related to any of same as provided in
the Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent
may deem necessary or appropriate for the performance and fulfillment of its
functions and powers pursuant to the Loan Documents.

15.2. Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys in fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney in fact that it selects as
long as such selection was made without gross negligence or willful misconduct.

15.3. Liability of Agent. None of the Agent-Related Persons shall (a) be liable
for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (b) be responsible in any manner to any of the Lenders (or Bank Product
Providers) for any recital, statement, representation or warranty made by Parent
or any of its Subsidiaries or Affiliates, or any officer or director thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
Parent or its Subsidiaries or any other party to any Loan Document to perform
its obligations hereunder or thereunder. No Agent-Related Person shall be under
any obligation to any Lenders (or Bank Product Providers) to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the books and records or properties of Parent or its Subsidiaries.

15.4. Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, telefacsimile or other electronic
method of transmission, telex or telephone message, statement or other document
or conversation believed by it to be genuine and correct and to have been
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Person or Persons, and upon advice and statements of legal counsel (including
counsel to Borrowers or counsel to any Lender), independent accountants and
other experts selected by Agent. Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless Agent shall first receive such advice or concurrence of the Lenders as it
deems appropriate and until such instructions are received, Agent shall act, or
refrain from acting, as it deems advisable. If Agent so requests, it shall first
be indemnified to its reasonable satisfaction by the Lenders (and, if it so
elects, the Bank Product Providers) against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action. Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any other Loan Document in accordance with
a request or consent of the Required Lenders and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the
Lenders (and Bank Product Providers).

15.5. Notice of Default or Event of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest, fees, and
expenses required to be paid to Agent for the account of the Lenders and, except
with respect to Events of Default of which Agent has actual knowledge, unless
Agent shall have received written notice from a Lender or Administrative
Borrower referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a “notice of default.” Agent promptly
will notify the Lenders of its receipt of any such notice or of any Event of
Default of which Agent has actual knowledge. If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
Section 15.4, Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Required Lenders in accordance with
Section 9; provided, that unless and until Agent has received any such request,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable.

15.6. Credit Decision. Each Lender (and Bank Product Provider) acknowledges that
none of the Agent-Related Persons has made any representation or warranty to it,
and that no act by Agent hereinafter taken, including any review of the affairs
of Parent and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender (or Bank
Product Provider). Each Lender represents (and by entering into a Bank Product
Agreement, each Bank Product Provider shall be deemed to represent) to Agent
that it has, independently and without reliance upon any Agent-Related Person
and based on such due diligence, documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrowers or any other Person party to a Loan Document, and
all applicable bank regulatory laws relating to the transactions contemplated
hereby, and made its own decision to enter into this Agreement and to extend
credit to Borrowers. Each Lender also represents (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to represent) that
it will, independently and without reliance upon any Agent-Related Person and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers or any other Person party to a Loan Document.
Except for notices, reports, and other documents expressly herein required to be
furnished to the Lenders by Agent, Agent shall not have any duty or
responsibility to provide any Lender (or Bank Product Provider) with any credit
or other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrowers or any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons. Each Lender acknowledges (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to acknowledge)
that Agent does not have any duty or

 

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responsibility, either initially or on a continuing basis (except to the extent,
if any, that is expressly specified herein) to provide such Lender (or Bank
Product Provider) with any credit or other information with respect to any
Borrower, its Affiliates or any of their respective business, legal, financial
or other affairs, and irrespective of whether such information came into Agent’s
or its Affiliates’ or representatives’ possession before or after the date on
which such Lender became a party to this Agreement (or such Bank Product
Provider entered into a Bank Product Agreement).

15.7. Costs and Expenses; Indemnification. Agent may incur and pay Lender Group
Expenses to the extent Agent reasonably deems necessary or appropriate for the
performance and fulfillment of its functions, powers, and obligations pursuant
to the Loan Documents, including court costs, attorneys fees and expenses, fees
and expenses of financial accountants, advisors, consultants, and appraisers,
costs of collection by outside collection agencies, auctioneer fees and
expenses, and costs of security guards or insurance premiums paid to maintain
the Collateral, whether or not Borrowers are obligated to reimburse Agent or
Lenders for such expenses pursuant to this Agreement or otherwise. Agent is
authorized and directed to deduct and retain sufficient amounts from payments or
proceeds of the Collateral received by Agent to reimburse Agent for such
out-of-pocket costs and expenses prior to the distribution of any amounts to
Lenders (or Bank Product Providers). In the event Agent is not reimbursed for
such costs and expenses by Parent or its Subsidiaries, each Lender hereby agrees
that it is and shall be obligated to pay to Agent such Lender’s ratable thereof.
Whether or not the transactions contemplated hereby are consummated, each of the
Lenders, on a ratable basis, shall indemnify and defend the Agent-Related
Persons (to the extent not reimbursed by or on behalf of Borrower and without
limiting the obligation of Borrowers to do so) from and against any and all
Indemnified Liabilities; provided, that no Lender shall be liable for the
payment to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting solely from such Person’s gross negligence or willful
misconduct nor shall any Lender be liable for the obligations of any Defaulting
Lender in failing to make a Revolving Loan or other extension of credit
hereunder. Without limitation of the foregoing, each Lender shall reimburse
Agent upon demand for such Lender’s ratable share of any costs or out of pocket
expenses (including attorneys, accountants, advisors, and consultants fees and
expenses) incurred by Agent in connection with the preparation, execution,
delivery, administration, modification, amendment, or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement or any other Loan
Document to the extent that Agent is not reimbursed for such expenses by or on
behalf of Borrowers. The undertaking in this Section shall survive the payment
of all Obligations hereunder and the resignation or replacement of Agent.

15.8. Agent in Individual Capacity. Wells Fargo and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
provide Bank Products to, acquire Equity Interests in, and generally engage in
any kind of banking, trust, financial advisory, underwriting, or other business
with Parent and its Subsidiaries and Affiliates and any other Person party to
any Loan Document as though Wells Fargo were not Agent hereunder, and, in each
case, without notice to or consent of the other members of the Lender Group. The
other members of the Lender Group acknowledge (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to acknowledge)
that, pursuant to such activities, Wells Fargo or its Affiliates may receive
information regarding Parent or its Affiliates or any other Person party to any
Loan Documents that is subject to confidentiality obligations in favor of Parent
or such other Person and that prohibit the disclosure of such information to the
Lenders (or Bank Product Providers), and the Lenders acknowledge (and by
entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to acknowledge) that, in such circumstances (and in the absence of a
waiver of such confidentiality obligations, which waiver Agent will use its
reasonable best efforts to obtain), Agent shall not be under any obligation to
provide such information to them. The terms “Lender” and “Lenders” include Wells
Fargo in its individual capacity.

 

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15.9. Successor Agent. Agent may resign as Agent upon 30 days (10 days if an
Event of Default has occurred and is continuing) prior written notice to the
Lenders (unless such notice is waived by the Required Lenders) and
Administrative Borrower (unless such notice is waived by Administrative
Borrower) and without any notice to the Bank Product Providers. If Agent resigns
under this Agreement, the Required Lenders shall be entitled, with (so long as
no Event of Default has occurred and is continuing) the consent of
Administrative Borrower (such consent not to be unreasonably withheld, delayed,
or conditioned), appoint a successor Agent for the Lenders (and the Bank Product
Providers). If, at the time that Agent’s resignation is effective, it is acting
as Issuing Lender or the Swing Lender, such resignation shall also operate to
effectuate its resignation as Issuing Lender or the Swing Lender, as applicable,
and it shall automatically be relieved of any further obligation to issue
Letters of Credit, to cause the Underlying Issuer to issue Letters of Credit, or
to make Swing Loans. If no successor Agent is appointed prior to the effective
date of the resignation of Agent, Agent may appoint, after consulting with the
Lenders and Administrative Borrower, a successor Agent. If Agent has materially
breached or failed to perform any material provision of this Agreement or of
applicable law, the Required Lenders may agree in writing to remove and replace
Agent with a successor Agent from among the Lenders with (so long as no Event of
Default has occurred and is continuing) the consent of Administrative Borrower
(such consent not to be unreasonably withheld, delayed, or conditioned). In any
such event, upon the acceptance of its appointment as successor Agent hereunder,
such successor Agent shall succeed to all the rights, powers, and duties of the
retiring Agent and the term “Agent” shall mean such successor Agent and the
retiring Agent’s appointment, powers, and duties as Agent shall be terminated.
After any retiring Agent’s resignation hereunder as Agent, the provisions of
this Section 15 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement. If no successor Agent
has accepted appointment as Agent by the date which is 30 days following a
retiring Agent’s notice of resignation, the retiring Agent’s resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Lenders appoint a
successor Agent as provided for above.

15.10. Lender in Individual Capacity. Any Lender and its respective Affiliates
may make loans to, issue letters of credit for the account of, accept deposits
from, provide Bank Products to, acquire Equity Interests in and generally engage
in any kind of banking, trust, financial advisory, underwriting, or other
business with Parent and its Subsidiaries and Affiliates and any other Person
party to any Loan Documents as though such Lender were not a Lender hereunder
without notice to or consent of the other members of the Lender Group (or the
Bank Product Providers). The other members of the Lender Group acknowledge (and
by entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to acknowledge) that, pursuant to such activities, such Lender and its
respective Affiliates may receive information regarding Parent or its Affiliates
or any other Person party to any Loan Documents that is subject to
confidentiality obligations in favor of Parent or such other Person and that
prohibit the disclosure of such information to the Lenders, and the Lenders
acknowledge (and by entering into a Bank Product Agreement, each Bank Product
Provider shall be deemed to acknowledge) that, in such circumstances (and in the
absence of a waiver of such confidentiality obligations, which waiver such
Lender will use its reasonable best efforts to obtain), such Lender shall not be
under any obligation to provide such information to them.

15.11. Collateral Matters.

(a) The Lenders hereby irrevocably authorize (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to authorize)
Agent to release any Lien on any Collateral (i) upon the termination of the
Commitments and payment and satisfaction in full by Borrowers of all of the
Obligations, (ii) constituting property being sold or disposed of if a release
is required or desirable in connection therewith and if Administrative Borrower
certifies to Agent that the sale or disposition is permitted under Section 6.4
(and Agent may rely conclusively on any such certificate,

 

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without further inquiry), (iii) constituting property in which Parent or its
Subsidiaries owned no interest at the time Agent’s Lien was granted nor at any
time thereafter, or (iv) constituting property leased to Parent or its
Subsidiaries under a lease that has expired or is terminated in a transaction
permitted under this Agreement. The Loan Parties and the Lenders hereby
irrevocably authorize (and by entering into a Bank Product Agreement, each Bank
Product Provider shall be deemed to authorize) Agent, based upon the instruction
of the Required Lenders, to (a) consent to, credit bid or purchase (either
directly or through one or more acquisition vehicles) all or any portion of the
Collateral at any sale thereof conducted under the provisions of the Bankruptcy
Code, including under Section 363 of the Bankruptcy Code, (b) credit bid or
purchase (either directly or through one or more acquisition vehicles) all or
any portion of the Collateral at any sale or other disposition thereof conducted
under the provisions of the Code, including pursuant to Sections 9-610 or 9-620
of the Code, or (c) credit bid or purchase (either directly or through one or
more acquisition vehicles) all or any portion of the Collateral at any other
sale or foreclosure conducted by Agent (whether by judicial action or otherwise)
in accordance with applicable law. In connection with any such credit bid or
purchase, (i) the Obligations owed to the Lenders and the Bank Product Providers
shall be entitled to be, and shall be, credit bid on a ratable basis (with
Obligations with respect to contingent or unliquidated claims being estimated
for such purpose if the fixing or liquidation thereof would not unduly delay the
ability of Agent to credit bid or purchase at such sale or other disposition of
the Collateral and, if such claims cannot be estimated without unduly delaying
the ability of Agent to credit bid, then such claims shall be disregarded, not
credit bid, and not entitled to any interest in the asset or assets purchased by
means of such credit bid) and the Lenders and the Bank Product Providers whose
Obligations are credit bid shall be entitled to receive interests (ratably based
upon the proportion of their Obligations credit bid in relation to the aggregate
amount of Obligations so credit bid) in the asset or assets so purchased (or in
the Equity Interests of the acquisition vehicle or vehicles that are used to
consummate such purchase), and (ii) Agent, based upon the instruction of the
Required Lenders, may accept non-cash consideration, including debt and equity
securities issued by such acquisition vehicle or vehicles and in connection
therewith Agent may reduce the Obligations owed to the Lenders and the Bank
Product Providers (ratably based upon the proportion of their Obligations credit
bid in relation to the aggregate amount of Obligations so credit bid) based upon
the value of such non-cash consideration. Except as provided above, Agent will
not execute and deliver a release of any Lien on any Collateral without the
prior written authorization of (y) if the release is of all or substantially all
of the Collateral, all of the Lenders (without requiring the authorization of
the Bank Product Providers), or (z) otherwise, the Required Lenders (without
requiring the authorization of the Bank Product Providers). Upon request by
Agent or Administrative Borrower at any time, the Lenders will (and if so
requested, the Bank Product Providers will) confirm in writing Agent’s authority
to release any such Liens on particular types or items of Collateral pursuant to
this Section 15.11; Administrative provided, that (1) Agent shall not be
required to execute any document necessary to evidence such release on terms
that, in Agent’s opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien without
recourse, representation, or warranty, and (2) such release shall not in any
manner discharge, affect, or impair the Obligations or any Liens (other than
those expressly being released) upon (or obligations of any Loan Party in
respect of) all interests retained by any Loan Party, including, the proceeds of
any sale, all of which shall continue to constitute part of the Collateral. The
Lenders further hereby irrevocably authorize (and by entering into a Bank
Product Agreement, each Bank Product Provider shall be deemed to authorize)
Agent, at its option and in its sole discretion, to subordinate any Lien granted
to or held by Agent under any Loan Document to the holder of any Permitted Lien
on such property if such Permitted Lien secures Permitted Purchase Money
Indebtedness.

(d) Agent shall have no obligation whatsoever to any of the Lenders (or the Bank
Product Providers) to assure that the Collateral exists or is owned by Parent or
its Subsidiaries or is cared for, protected, or insured or has been encumbered,
or that Agent’s Liens have been properly or sufficiently or lawfully created,
perfected, protected, or enforced or are entitled to any particular priority, or
that any particular items of Collateral meet the eligibility criteria applicable
in respect thereof or whether to

 

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impose, maintain, reduce, or eliminate any particular reserve hereunder or
whether the amount of any such reserve is appropriate or not, or to exercise at
all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent pursuant to any of the Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission,
or event related thereto, subject to the terms and conditions contained herein,
Agent may act in any manner it may deem appropriate, in its sole discretion
given Agent’s own interest in the Collateral in its capacity as one of the
Lenders and that Agent shall have no other duty or liability whatsoever to any
Lender (or Bank Product Provider) as to any of the foregoing, except as
otherwise provided herein.

15.12. Restrictions on Actions by Lenders; Sharing of Payments.

(a) Each of the Lenders agrees that it shall not, without the express written
consent of Agent, and that it shall, to the extent it is lawfully entitled to do
so, upon the written request of Agent, set off against the Obligations, any
amounts owing by such Lender to Parent or its Subsidiaries or any deposit
accounts of Parent or its Subsidiaries now or hereafter maintained with such
Lender. Each of the Lenders further agrees that it shall not, unless
specifically requested to do so in writing by Agent, take or cause to be taken
any action, including, the commencement of any legal or equitable proceedings to
enforce any Loan Document against any Borrower or any Guarantor or to foreclose
any Lien on, or otherwise enforce any security interest in, any of the
Collateral.

(b) If, at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender’s Pro Rata Share of all such
distributions by Agent, such Lender promptly shall (A) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in immediately available funds, as applicable, for the account
of all of the Lenders and for application to the Obligations in accordance with
the applicable provisions of this Agreement, or (B) purchase, without recourse
or warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably
as among the Lenders in accordance with their Pro Rata Shares; provided, that to
the extent that such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of the
purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.

15.13. Agency for Perfection. Agent hereby appoints each other Lender (and each
Bank Product Provider) as its agent (and each Lender hereby accepts (and by
entering into a Bank Product Agreement, each Bank Product Provider shall be
deemed to accept) such appointment) for the purpose of perfecting Agent’s Liens
in assets which, in accordance with Article 8 or Article 9, as applicable, of
the Code can be perfected by possession or control. Should any Lender obtain
possession or control of any such Collateral, such Lender shall notify Agent
thereof, and, promptly upon Agent’s request therefor shall deliver possession or
control of such Collateral to Agent or in accordance with Agent’s instructions.

15.14. Payments by Agent to the Lenders. All payments to be made by Agent to the
Lenders (or Bank Product Providers) shall be made by bank wire transfer of
immediately available funds pursuant to such wire transfer instructions as each
party may designate for itself by written notice to Agent. Concurrently with
each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium, fees, or interest of the Obligations.

 

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15.15. Concerning the Collateral and Related Loan Documents. Each member of the
Lender Group authorizes and directs Agent to enter into this Agreement and the
other Loan Documents. Each member of the Lender Group agrees (and by entering
into a Bank Product Agreement, each Bank Product Provider shall be deemed to
agree) that any action taken by Agent in accordance with the terms of this
Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Lenders (and such Bank Product Provider).

15.16. Field Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information. By becoming a party to this Agreement, each Lender:

(a) is deemed to have requested that Agent furnish such Lender, promptly after
it becomes available, a copy of each field examination report respecting Parent
or its Subsidiaries (each, a “Report”) prepared by or at the request of Agent,
and Agent shall so furnish each Lender with such Reports,

(b) expressly agrees and acknowledges that Agent does not (i) make any
representation or warranty as to the accuracy of any Report, and (ii) shall not
be liable for any information contained in any Report,

(c) expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that Agent or other party performing any field
examination will inspect only specific information regarding Parent and its
Subsidiaries and will rely significantly upon Parent’s and its Subsidiaries’
books and records, as well as on representations of each Borrower’s personnel,

(d) agrees to keep all Reports and other material, non-public information
regarding Parent and its Subsidiaries and their operations, assets, and existing
and contemplated business plans in a confidential manner in accordance with
Section 17.9, and

(e) without limiting the generality of any other indemnification provision
contained in this Agreement, agrees: (i) to hold Agent and any other Lender
preparing a Report harmless from any action the indemnifying Lender may take or
fail to take or any conclusion the indemnifying Lender may reach or draw from
any Report in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrowers, or the indemnifying
Lender’s participation in, or the indemnifying Lender’s purchase of, a loan or
loans of Borrowers, and (ii) to pay and protect, and indemnify, defend and hold
Agent, and any such other Lender preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses, and other amounts
(including, attorneys fees and costs) incurred by Agent and any such other
Lender preparing a Report as the direct or indirect result of any third parties
who might obtain all or part of any Report through the indemnifying Lender.

(f) In addition to the foregoing, (x) any Lender may from time to time request
of Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Parent or its Subsidiaries to Agent that has not been
contemporaneously provided by Parent or such Subsidiary to such Lender, and,
upon receipt of such request, Agent promptly shall provide a copy of same to
such Lender, (y) to the extent that Agent is entitled, under any provision of
the Loan Documents, to request additional reports or information from Parent or
its Subsidiaries, any Lender may, from time to time, reasonably request Agent to
exercise such right as specified in such Lender’s notice to Agent, whereupon
Agent promptly shall request of Administrative Borrower the additional reports
or information reasonably specified by such Lender, and, upon receipt thereof
from Parent or such Subsidiary, Agent promptly shall provide a copy of same to
such Lender, and (z) any time that Agent renders to any Borrower a statement
regarding the Loan Account, Agent shall send a copy of such statement to each
Lender.

 

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15.17. Several Obligations; No Liability. Notwithstanding that certain of the
Loan Documents now or hereafter may have been or will be executed only by or in
favor of Agent in its capacity as such, and not by or in favor of the Lenders,
any and all obligations on the part of Agent (if any) to make any credit
available hereunder shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such credit not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in Section 15.7, no member of the Lender Group shall have any
liability for the acts of any other member of the Lender Group. No Lender shall
be responsible to Borrowers or any other Person for any failure by any other
Lender (or Bank Product Provider) to fulfill its obligations to make credit
available hereunder, nor to advance for such Lender (or Bank Product Provider)
or on its behalf, nor to take any other action on behalf of such Lender (or Bank
Product Provider) hereunder or in connection with the financing contemplated
herein.

15.18. Lead Arrangers, Book Runners, Co-Syndication Agents, and Co-Documentation
Agents. Each of the Sole Lead Arranger, Sole Lead Book Runner, Co-Syndication
Agents, and Co-Documentation Agents, in such capacities, shall not have any
right, power, obligation, liability, responsibility, or duty under this
Agreement other than those applicable to it in its capacity as a Lender, as
Agent, as Swing Lender, or as Issuing Lender. Without limiting the foregoing,
each of the Sole Lead Arranger, Sole Lead Book Runner, Co-Syndication Agents,
and Co-Documentation Agents, in such capacities, shall not have or be deemed to
have any fiduciary relationship with any Lender or any Loan Party. Each Lender,
Agent, Swing Lender, Issuing Lender, and each Loan Party acknowledges that it
has not relied, and will not rely, on the Sole Lead Arranger, Sole Lead Book
Runner, Co-Syndication Agents, and Co-Documentation Agents in deciding to enter
into this Agreement or in taking or not taking action hereunder. Each of the
Sole Lead Arranger, Sole Lead Book Runner, Co-Syndication Agents, and
Co-Documentation Agents, in such capacities, shall be entitled to resign at any
time by giving notice to Agent and Administrative Borrower.

16. WITHHOLDING TAXES.

16.1. Payments. All payments made by any Loan Party hereunder or under any note
or other Loan Document will be made without setoff, counterclaim, or other
defense. In addition, all such payments will be made free and clear of, and
without deduction or withholding for, any present or future Indemnified Taxes,
and in the event any deduction or withholding of Indemnified Taxes is required,
Loan Parties shall comply with the next sentence of this Section 16.1. If any
Indemnified Taxes are so levied or imposed, Loan Parties agree to pay the full
amount of such Indemnified Taxes and such additional amounts as may be necessary
so that every payment of all amounts due under this Agreement, any note, or Loan
Document, including any amount paid pursuant to this Section 16.1 after
withholding or deduction for or on account of any Indemnified Taxes, will not be
less than the amount provided for herein; provided, that Loan Parties shall not
be required to increase any such amounts to the extent that the increase in such
amount payable results from Agent’s or such Lender’s own willful misconduct or
gross negligence (as finally determined by a court of competent jurisdiction).
Each Loan Party will furnish to Agent as promptly as possible after the date the
payment of any Indemnified Tax is due pursuant to applicable law, certified
copies of tax receipts evidencing such payment by such Loan Party. Loan Parties
agree to pay any present or future stamp, value added or documentary taxes or
any other excise or property taxes, charges, or similar levies that arise from
any payment made hereunder or from the execution, delivery, performance,
recordation, or filing of, or otherwise with respect to this Agreement or any
other Loan Document.

 

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16.2. Exemptions.

(a) If a Lender or Participant is entitled to claim an exemption or reduction
from United States withholding tax, such Lender or Participant agrees with and
in favor of Agent, to deliver to Agent (or, in the case of a Participant, to the
Lender granting the participation only) one of the following before receiving
its first payment under this Agreement:

(i) if such Lender or Participant is entitled to claim an exemption from United
States withholding tax pursuant to the portfolio interest exception, (A) a
statement of the Lender or Participant, signed under penalty of perjury, that it
is not a (I) a “bank” as described in Section 881(c)(3)(A) of the IRC, (II) a
10% shareholder of any Borrower (within the meaning of Section 871(h)(3)(B) of
the IRC), or (III) a controlled foreign corporation related to Borrower within
the meaning of Section 864(d)(4) of the IRC, and (B) a properly completed and
executed IRS Form W-8BEN or Form W-8IMY (with proper attachments);

(ii) if such Lender or Participant is entitled to claim an exemption from, or a
reduction of, withholding tax under a United States tax treaty, a properly
completed and executed copy of IRS Form W-8BEN;

(iii) if such Lender or Participant is entitled to claim that interest paid
under this Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender, a
properly completed and executed copy of IRS Form W-8ECI;

(iv) if such Lender or Participant is entitled to claim that interest paid under
this Agreement is exempt from United States withholding tax because such Lender
or Participant serves as an intermediary, a properly completed and executed copy
of IRS Form W-8IMY (with proper attachments); or

(v) a properly completed and executed copy of any other form or forms, including
IRS Form W-9, as may be required under the IRC or other laws of the United
States as a condition to exemption from, or reduction of, United States
withholding or backup withholding tax.

(b) Each Lender or Participant shall provide new forms (or successor forms) upon
the expiration or obsolescence of any previously delivered forms and to promptly
notify Agent (or, in the case of a Participant, to the Lender granting the
participation only) of any change in circumstances which would modify or render
invalid any claimed exemption or reduction.

(c) If a Lender or Participant claims an exemption from withholding tax in a
jurisdiction other than the United States, such Lender or such Participant
agrees with and in favor of Agent, to deliver to Agent (or, in the case of a
Participant, to the Lender granting the participation only) any such form or
forms, as may be required under the laws of such jurisdiction as a condition to
exemption from, or reduction of, foreign withholding or backup withholding tax
before receiving its first payment under this Agreement, but only if such Lender
or such Participant is legally able to deliver such forms, provided, that
nothing in this Section 16.2(c) shall require a Lender or Participant to
disclose any information that it deems to be confidential (including without
limitation, its tax returns). Each Lender and each Participant shall provide new
forms (or successor forms) upon the expiration or obsolescence of any previously
delivered forms and to promptly notify Agent (or, in the case of a Participant,
to the Lender granting the participation only) of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.

 

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(d) If a Lender or Participant claims exemption from, or reduction of,
withholding tax and such Lender or Participant sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrowers to such Lender or Participant, such Lender or Participant agrees to
notify Agent (or, in the case of a sale of a participation interest, to the
Lender granting the participation only) of the percentage amount in which it is
no longer the beneficial owner of Obligations of Borrowers to such Lender or
Participant. To the extent of such percentage amount, Agent will treat such
Lender’s or such Participant’s documentation provided pursuant to
Section 16.2(a) or 16.2(c) as no longer valid. With respect to such percentage
amount, such Participant or Assignee may provide new documentation, pursuant to
Section 16.2(a) or 16.2(c), if applicable. Each Borrower agrees that each
Participant shall be entitled to the benefits of this Section 16 with respect to
its participation in any portion of the Commitments and the Obligations so long
as such Participant complies with the obligations set forth in this Section 16
with respect thereto.

(e) If a payment made to Agent or any Lender hereunder or under any other Loan
Document would be subject to withholding tax imposed by FATCA if Agent or such
Lender fails to comply with applicable reporting and other requirements of
FATCA, Agent or such Lender shall deliver to Administrative Borrower and Agent,
at the time or times prescribed by applicable law or as reasonably requested by
Administrative Borrower or Agent, (1) two accurate, complete and signed
certifications prescribed by applicable law or reasonably satisfactory to
Administrative Borrower and Agent that establish that such payment is exempt
from withholding tax imposed by FATCA and (2) any other documentation reasonably
requested by Administrative Borrower or Agent sufficient for Administrative
Borrower and Agent to comply with their obligations under FATCA and to determine
that Agent or such Lender has complied with such applicable reporting and other
requirements of FATCA.

16.3. Reductions.

(a) If a Lender or a Participant is entitled to a reduction in the applicable
withholding tax, Agent (or, in the case of a Participant, to the Lender granting
the participation) may withhold from any interest payment to such Lender or such
Participant an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
Section 16.2(a) or 16.2(c) are not delivered to Agent (or, in the case of a
Participant, to the Lender granting the participation), then Agent (or, in the
case of a Participant, to the Lender granting the participation) may withhold
from any interest payment to such Lender or such Participant not providing such
forms or other documentation an amount equivalent to the applicable withholding
tax.

(b) If the IRS or any other Governmental Authority of the United States or other
jurisdiction asserts a claim that Agent (or, in the case of a Participant, to
the Lender granting the participation) did not properly withhold tax from
amounts paid to or for the account of any Lender or any Participant due to a
failure on the part of the Lender or any Participant (because the appropriate
form was not delivered, was not properly executed, or because such Lender failed
to notify Agent (or such Participant failed to notify the Lender granting the
participation) of a change in circumstances which rendered the exemption from,
or reduction of, withholding tax ineffective, or for any other reason) such
Lender shall indemnify and hold Agent harmless (or, in the case of a
Participant, such Participant shall indemnify and hold the Lender granting the
participation harmless) for all amounts paid, directly or indirectly, by Agent
(or, in the case of a Participant, to the Lender granting the participation), as
tax or otherwise, including penalties and interest, and including any taxes
imposed by any jurisdiction on the amounts payable to Agent (or, in the case of
a Participant, to the Lender granting the participation only) under this
Section 16, together with all costs and expenses (including attorneys fees and
expenses). The obligation of the Lenders and the Participants under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.

 

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16.4. Refunds. If Agent or a Lender determines, in its sole discretion, that it
has received a refund of any Indemnified Taxes to which Borrowers have paid
additional amounts pursuant to this Section 16, so long as no Default or Event
of Default has occurred and is continuing, it shall pay over such refund to
Borrowers (but only to the extent of payments made, or additional amounts paid,
by Borrowers under this Section 16 with respect to Indemnified Taxes giving rise
to such a refund), net of all out-of-pocket expenses of Agent or such Lender and
without interest (other than any interest paid by the applicable Governmental
Authority with respect to such a refund); provided, that Borrowers, upon the
request of Agent or such Lender, agrees to repay the amount paid over to
Borrowers (plus any penalties, interest or other charges, imposed by the
applicable Governmental Authority, other than such penalties, interest or other
charges imposed as a result of the willful misconduct or gross negligence of
Agent hereunder) to Agent or such Lender in the event Agent or such Lender is
required to repay such refund to such Governmental Authority. Notwithstanding
anything in this Agreement to the contrary, this Section 16 shall not be
construed to require Agent or any Lender to make available its tax returns (or
any other information which it deems confidential) to Borrowers or any other
Person.

17. GENERAL PROVISIONS.

17.1. Effectiveness. This Agreement shall be binding and deemed effective when
executed by each Loan Party, Agent, and each Lender whose signature is provided
for on the signature pages hereof.

17.2. Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each Section applies equally to this entire Agreement.

17.3. Interpretation. Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed against the Lender Group or the Loan Parties, whether
under any rule of construction or otherwise. On the contrary, this Agreement has
been reviewed by all parties and shall be construed and interpreted according to
the ordinary meaning of the words used so as to accomplish fairly the purposes
and intentions of all parties hereto.

17.4. Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

17.5. Bank Product Providers. Each Bank Product Provider shall be deemed a third
party beneficiary hereof and of the provisions of the other Loan Documents for
purposes of any reference in a Loan Document to the parties for whom Agent is
acting. Agent hereby agrees to act as agent for such Bank Product Providers and,
by virtue of entering into a Bank Product Agreement, the applicable Bank Product
Provider shall be automatically deemed to have appointed Agent as its agent and
to have accepted the benefits of the Loan Documents; it being understood and
agreed that the rights and benefits of each Bank Product Provider under the Loan
Documents consist exclusively of such Bank Product Provider’s being a
beneficiary of the Liens and security interests (and, if applicable, guarantees)
granted to Agent and the right to share in payments and collections out of the
Collateral as more fully set forth herein. In addition, each Bank Product
Provider, by virtue of entering into a Bank Product Agreement, shall be
automatically deemed to have agreed that Agent shall have the right, but shall
have no obligation, to establish, maintain, relax, or release reserves in
respect of the Bank Product Obligations and that if reserves are established
there is no obligation on the part of Agent to determine or insure whether the
amount of any such reserve is appropriate or not. In connection with any such
distribution of payments or proceeds of Collateral, Agent shall be entitled to
assume no amounts are due or owing to any Bank Product Provider unless such Bank
Product Provider has provided a written certification (setting forth a
reasonably detailed calculation) to Agent as to the amounts that are due and
owing to it and such written

 

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certification is received by Agent a reasonable period of time prior to the
making of such distribution. Agent shall have no obligation to calculate the
amount due and payable with respect to any Bank Products, but may rely upon the
written certification of the amount due and payable from the applicable Bank
Product Provider. In the absence of an updated certification, Agent shall be
entitled to assume that the amount due and payable to the applicable Bank
Product Provider is the amount last certified to Agent by such Bank Product
Provider as being due and payable (less any distributions made to such Bank
Product Provider on account thereof). Parent or its Subsidiaries may obtain Bank
Products from any Bank Product Provider, although neither Parent nor any of its
Subsidiaries required to do so. Each Loan Party acknowledges and agrees that no
Bank Product Provider has committed to provide any Bank Products and that the
providing of Bank Products by any Bank Product Provider is in the sole and
absolute discretion of such Bank Product Provider. Notwithstanding anything to
the contrary in this Agreement or any other Loan Document, no provider or holder
of any Bank Product shall have any voting or approval rights hereunder (or be
deemed a Lender) solely by virtue of its status as the provider or holder of
such agreements or products or the Obligations owing thereunder, nor shall the
consent of any such provider or holder be required (other than in their
capacities as Lenders, to the extent applicable) for any matter hereunder or
under any of the other Loan Documents, including as to any matter relating to
the Collateral or the release of Collateral or Guarantors.

17.6. Debtor-Creditor Relationship. The relationship between the Lenders and
Agent, on the one hand, and the Loan Parties, on the other hand, is solely that
of creditor and debtor. No member of the Lender Group has (or shall be deemed to
have) any fiduciary relationship or duty to any Loan Party arising out of or in
connection with the Loan Documents or the transactions contemplated thereby, and
there is no agency or joint venture relationship between the members of the
Lender Group, on the one hand, and the Loan Parties, on the other hand, by
virtue of any Loan Document or any transaction contemplated therein.

17.7. Counterparts; Electronic Execution. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile or
other electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.

17.8. Revival and Reinstatement of Obligations; Certain Waivers. If the
incurrence or payment of the Obligations by any Borrower or Guarantor or the
transfer to the Lender Group of any property should for any reason subsequently
be asserted, or declared, to be void or voidable under any state or federal law
relating to creditors’ rights, including provisions of the Bankruptcy Code
relating to fraudulent conveyances, preferences, or other voidable or
recoverable payments of money or transfers of property (each, a “Voidable
Transfer”), and if the Lender Group is required to repay or restore, in whole or
in part, any such Voidable Transfer, or elects to do so upon the advice of
counsel, then, as to any such Voidable Transfer, or the amount thereof that the
Lender Group is required or elects to repay or restore, and as to all reasonable
costs, expenses, and attorneys fees of the Lender Group related thereto, the
liability of Borrowers or Guarantors automatically shall be revived, reinstated,
and restored and shall exist as though such Voidable Transfer had never been
made.

 

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17.9. Confidentiality.

(a) Agent and Lenders each individually (and not jointly or jointly and
severally) agree that material, non-public information regarding Parent and its
Subsidiaries, their operations, assets, and existing and contemplated business
plans (“Confidential Information”) shall be treated by Agent and the Lenders in
a confidential manner, and shall not be disclosed by Agent and the Lenders to
Persons who are not parties to this Agreement, except: (i) to attorneys for and
other advisors, accountants, auditors, and consultants to any member of the
Lender Group and to employees, directors and officers of any member of the
Lender Group (the Persons in this clause (i), “Lender Group Representatives”) on
a “need to know” basis in connection with this Agreement and the transactions
contemplated hereby and on a confidential basis, (ii) to Subsidiaries and
Affiliates of any member of the Lender Group (including the Bank Product
Providers), provided that any such Subsidiary or Affiliate shall have agreed to
receive such information hereunder subject to the terms of this Section 17.9,
(iii) as may be required by regulatory authorities so long as such authorities
are informed of the confidential nature of such information, (iv) as may be
required by statute, decision, or judicial or administrative order, rule, or
regulation; provided that (x) prior to any disclosure under this clause (iv),
the disclosing party agrees to provide Administrative Borrower with prior notice
thereof, to the extent that it is practicable to do so and to the extent that
the disclosing party is permitted to provide such prior notice to Administrative
Borrower pursuant to the terms of the applicable statute, decision, or judicial
or administrative order, rule, or regulation and (y) any disclosure under this
clause (iv) shall be limited to the portion of the Confidential Information as
may be required by such statute, decision, or judicial or administrative order,
rule, or regulation, (v) as may be agreed to in advance in writing by
Administrative Borrower, (vi) as requested or required by any Governmental
Authority pursuant to any subpoena or other legal process, provided, that,
(x) prior to any disclosure under this clause (vi) the disclosing party agrees
to provide Administrative Borrower with prior written notice thereof, to the
extent that it is practicable to do so and to the extent that the disclosing
party is permitted to provide such prior written notice to Administrative
Borrower pursuant to the terms of the subpoena or other legal process and
(y) any disclosure under this clause (vi) shall be limited to the portion of the
Confidential Information as may be required by such Governmental Authority
pursuant to such subpoena or other legal process, (vii) as to any such
information that is or becomes generally available to the public (other than as
a result of prohibited disclosure by Agent or the Lenders or the Lender Group
Representatives), (viii) in connection with any assignment, participation or
pledge of any Lender’s interest under this Agreement, provided that prior to
receipt of Confidential Information any such assignee, participant, or pledgee
shall have agreed in writing to receive such Confidential Information hereunder
subject to the terms of this Section, (ix) in connection with any litigation or
other adversary proceeding involving parties hereto which such litigation or
adversary proceeding involves claims related to the rights or duties of such
parties under this Agreement or the other Loan Documents; provided, that, prior
to any disclosure to any Person (other than any Loan Party, Agent, any Lender,
any of their respective Affiliates, or their respective counsel) under this
clause (ix) with respect to litigation involving any Person (other than any Loan
Party, Agent, any Lender, any of their respective Affiliates, or their
respective counsel), the disclosing party agrees to provide Administrative
Borrower with prior written notice thereof, and (x) in connection with, and to
the extent reasonably necessary for, the exercise of any secured creditor remedy
under this Agreement or under any other Loan Document.

(b) Anything in this Agreement to the contrary notwithstanding, Agent may
disclose information concerning the terms and conditions of this Agreement and
the other Loan Documents to loan syndication and pricing reporting services or
in its marketing or promotional materials, with such information to consist of
deal terms and other information customarily found in such publications or
marketing or promotional materials and may otherwise use the name, logos, and
other insignia of Parent or the other Loan Parties and the Commitments provided
hereunder in any “tombstone” or other advertisements, on its website or in other
marketing materials of the Agent.

(c) The Loan Parties hereby acknowledge that Agent or its Affiliates may make
available to the Lenders materials or information provided by or on behalf of
any Loan Party hereunder (collectively,

 

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“Borrower Materials”) by posting the Borrower Materials on IntraLinks, SyndTrak
or another similar electronic system (the “Platform”) and certain of the Lenders
may be “public-side” Lenders (i.e., Lenders that do not wish to receive material
non-public information with respect to the Loan Parties or their securities)
(each, a “Public Lender”). The Loan Parties shall be deemed to have authorized
Agent and its Affiliates and the Lenders to treat Borrower Materials marked
“PUBLIC” or otherwise at any time filed with the SEC as not containing any
material non-public information with respect to the Loan Parties or their
securities for purposes of United States federal and state securities laws. All
Borrower Materials marked “PUBLIC” are permitted to be made available through a
portion of the Platform designated as “Public Investor” (or another similar
term). Agent and its Affiliates and the Lenders shall be entitled to treat any
Borrower Materials that are not marked “PUBLIC” or that are not at any time
filed with the SEC as being suitable only for posting on a portion of the
Platform not marked as “Public Investor” (or such other similar term).

17.10. Survival. All representations and warranties made by the Loan Parties in
the Loan Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of the Loan Documents and the making of any
Loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that Agent,
Issuing Lender, or any Lender may have had notice or knowledge of any Default or
Event of Default or incorrect representation or warranty at the time any credit
is extended hereunder, and shall continue in full force and effect as long as
the principal of, or any accrued interest on, any Loan or any fee or any other
amount payable under this Agreement is outstanding or unpaid or any Letter of
Credit is outstanding and so long as the Commitments have not expired or been
terminated.

17.11. Patriot Act. Each Lender that is subject to the requirements of the
Patriot Act hereby notifies Administrative Borrower that pursuant to the
requirements of the Act, it is required to obtain, verify and record information
that identifies each Loan Party, which information includes the name and address
of each Loan Party and other information that will allow such Lender to identify
each Loan Party in accordance with the Patriot Act. In addition, if Agent is
required by law or regulation or internal policies to do so, it shall have the
right to periodically conduct (a) Patriot Act searches, OFAC/PEP searches, and
customary individual background checks for the Loan Parties and (b) OFAC/PEP
searches and customary individual background checks for the Loan Parties’ senior
management and key principals, and each Loan Party agrees to cooperate in
respect of the conduct of such searches and further agrees that the reasonable
costs and charges for such searches shall constitute Lender Group Expenses
hereunder and be for the account of Borrowers.

17.12. Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof. The foregoing to
the contrary notwithstanding, all Bank Product Agreements, if any, are
independent agreements governed by the written provisions of such Bank Product
Agreements, which will remain in full force and effect, unaffected by any
repayment, prepayments, acceleration, reduction, increase, or change in the
terms of any credit extended hereunder, except as otherwise expressly provided
in such Bank Product Agreement.

17.13. Currency Indemnity. If, for the purposes of obtaining judgment in any
court in any jurisdiction with respect to this Agreement or any of the other
Loan Documents, it becomes necessary to convert into the currency of such
jurisdiction (the “Judgment Currency”) any amount due under this Agreement or
under any of the other Loan Documents in any currency other than the Judgment
Currency (the “Currency Due”), then conversion shall be made at the exchange
rate at which Agent is able, on the relevant date, to purchase the Currency Due
with the Judgment Currency prevailing on the Business Day

 

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before the day on which judgment is given. In the event that there is a change
in the rate of exchange rate prevailing between the Business Day before the day
on which the judgment is given and the date of receipt by Agent of the amount
due, Loan Parties will, on the date of receipt by Agent, pay such additional
amounts, if any, as may be necessary to ensure that the amount received by Agent
on such date is the amount in the Judgment Currency which when converted at the
rate of exchange prevailing on the date of receipt by Agent is the amount then
due under this Agreement or such other of the Loan Documents in the Currency
Due. If the amount of the Currency Due which Agent is able to purchase is less
than the amount of the Currency Due originally due to it, Loan Parties shall
indemnify and save Agent harmless from and against loss or damage arising as a
result of such deficiency. The indemnity contained herein shall constitute an
obligation separate and independent from the other obligations contained in this
Agreement and the other Loan Documents, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by any Agent from time to time and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated sum in respect of an
amount due under this Agreement or any of the other Loan Documents or under any
judgment or order.

17.14. Administrative Borrower as Agent for Borrowers.

(a) Each Loan Party hereby irrevocably appoints and constitutes Administrative
Borrower as its agent and attorney-in-fact to request and receive Loans and
Letters of Credit pursuant to this Agreement and the other Loan Documents from
Agent or any Lender or Issuing Lender in the name or on behalf of any Borrower.
Agent, Lenders and Issuing Lenders may disburse the Loans to such bank account
of Administrative Borrower or a Borrower or otherwise make such Loans to a
Borrower and provide such Letters of Credit to a Borrower as Administrative
Borrower may designate or direct, without notice to any other Loan Party.
Notwithstanding anything to the contrary contained herein, Agent may at any time
and from time to time require that Loans to or for the account of any Borrower
be disbursed directly to an operating account of such Borrower.

(b) Administrative Borrower hereby accepts the appointment by Loan Parties to
act as the agent and attorney-in-fact of Loan Parties pursuant to this
Section 17.14. Administrative Borrower shall ensure that the disbursement of any
Loans to each Borrower requested by or paid to or for the account of the
Borrowers, or the issuance of any Letter of Credit for a Borrower hereunder,
shall be paid to or for the account of such Borrower.

(c) Each Loan Party hereby irrevocably appoints and constitutes Administrative
Borrower as its agent to receive statements on account and all other notices
from Agent, Lenders and Issuing Lenders with respect to the Obligations or
otherwise under or in connection with this Agreement and the other Loan
Documents.

(d) Any notice, election, representation, warranty, agreement or undertaking by
or on behalf of any other Loan Party by Administrative Borrower shall be deemed
for all purposes to have been made by such Loan Party, as the case may be, and
shall be binding upon and enforceable against such Loan Party to the same extent
as if made directly by such Loan Party.

(e) No resignation or termination of the appointment of Administrative Borrower
as agent as aforesaid shall be effective, except after ten (10) Business Days’
prior written notice to Agent. If the Administrative Borrower resigns under this
Agreement, Loan Parties shall be entitled to appoint a successor Administrative
Borrower (which shall be a Borrower). Upon the acceptance of its appointment as
successor Administrative Borrower hereunder, such successor Administrative
Borrower shall succeed to all the rights, powers and duties of the retiring
Administrative Borrower and the term “Administrative Borrower” shall mean such
successor Administrative Borrower and the retiring or terminated Administrative
Borrower’s appointment, powers and duties as Administrative Borrower shall be
terminated.

[Signature pages to follow.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered as of the date first above written.

 

BORROWERS K•SWISS INC. By: /s/ George Powlick Name: George Powlick Title: Chief
Financial Officer  K-SWISS SALES CORP. By: /s/ George Powlick Name: George
Powlick Title: Vice President K-SWISS DIRECT INC. By: /s/ David Nichols Name:
David Nichols Title: President

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GUARANTORS K-SWISS PACIFIC INC. By: /s/ George Powlick Name: George Powlick
Title: Assistant Secretary ROYAL ELASTICS INC. By: /s/ David Nichols Name: David
Nichols Title: President ROYAL ELASTICS, LLC By its Manager: K•SWISS INC. By:
/s/ Steven Nichols Name: Steven Nichols Title: Management Committee By: /s/
David Nichols Name: David Nichols Title: Management Committee By: /s/ George
Powlick Name: George Powlick Title: Management Committee K-SWISS NS INC. By: /s/
Cheryl Kuchinka Name: Cheryl Kuchinka Title: President

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AGENT AND LENDERS WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent and a Lender
By: /s/ Grant Pritchard Name: Grant Pritchard Title: Vice President

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EXHIBIT A-1

FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (“Assignment Agreement”) is entered
into as of                                          between
                                         (“Assignor”) and
                                         (“Assignee”). Reference is made to the
Agreement described in Annex I hereto (the “Credit Agreement”). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Credit Agreement.

1. In accordance with the terms and conditions of Section 13 of the Credit
Agreement, the Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, that interest in and to
the Assignor’s rights and obligations under the Loan Documents as of the date
hereof with respect to the Obligations owing to the Assignor, and Assignor’s
portion of the Commitments, all to the extent specified on Annex I.

2. The Assignor (a) represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim and (ii) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Assignment Agreement and to consummate the transactions contemplated hereby;
(b) makes no representation or warranty and assumes no responsibility with
respect to (i) any statements, representations or warranties made in or in
connection with the Loan Documents, or (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Documents or any
other instrument or document furnished pursuant thereto; (c) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Loan Party or the performance or observance by any
Loan Party of any of their respective obligations under the Loan Documents or
any other instrument or document furnished pursuant thereto, and (d) represents
and warrants that the amount set forth as the Purchase Price on Annex I
represents the amount owed by Borrowers to Assignor with respect to Assignor’s
share of the Advances assigned hereunder, as reflected on Assignor’s books and
records.

3. The Assignee (a) confirms that it has received copies of the Credit Agreement
and the other Loan Documents, together with copies of the financial statements
referred to therein and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment Agreement; (b) agrees that it will, independently and without
reliance upon Agent, Assignor, or any other Lender, based upon such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under the Loan
Documents; (c) confirms that it is an Eligible Transferee; (d) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Loan Documents as are delegated to Agent by the terms
thereof, together with such powers as are reasonably incidental thereto;
(e) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender; and (f) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee’s
status for purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to the Assignee under the Credit
Agreement or such other documents as are necessary to indicate that all such
payments are subject to such rates at a rate reduced by an applicable tax
treaty.

4. Following the execution of this Assignment Agreement by the Assignor and
Assignee, the Assignor will deliver this Assignment Agreement to the Agent for
recording by the Agent. The effective date of this Assignment (the “Settlement
Date”) shall be the latest to occur of (a) the date of the execution and
delivery hereof by the Assignor and the Assignee, (b) the receipt by Agent for
its sole and separate account a processing fee in the amount of $3,500 (if
required by the Credit Agreement), (c) the receipt of any required consent of
the Agent, and (d) the Settlement Date specified in Annex I.

 

A-1

--------------------------------------------------------------------------------

5. As of the Settlement Date (a) the Assignee shall be a party to the Credit
Agreement and, to the extent of the interest assigned pursuant to this
Assignment Agreement, have the rights and obligations of a Lender thereunder and
under the other Loan Documents, and (b) the Assignor shall, to the extent of the
interest assigned pursuant to this Assignment Agreement, relinquish its rights
and be released from its obligations under the Credit Agreement and the other
Loan Documents, provided, however, that nothing contained herein shall release
any assigning Lender from obligations that survive the termination of this
Agreement, including such assigning Lender’s obligations under Article 15 and
Section 17.9(a) of the Credit Agreement.

6. Upon the Settlement Date, Assignee shall pay to Assignor the Purchase Price
(as set forth in Annex I). From and after the Settlement Date, Agent shall make
all payments that are due and payable to the holder of the interest assigned
hereunder (including payments of principal, interest, fees and other amounts) to
Assignor for amounts which have accrued up to but excluding the Settlement Date
and to Assignee for amounts which have accrued from and after the Settlement
Date. On the Settlement Date, Assignor shall pay to Assignee an amount equal to
the portion of any interest, fee, or any other charge that was paid to Assignor
prior to the Settlement Date on account of the interest assigned hereunder and
that are due and payable to Assignee with respect thereto, to the extent that
such interest, fee or other charge relates to the period of time from and after
the Settlement Date.

7. This Assignment Agreement may be executed in counterparts and by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all of which shall together constitute one and the
same instrument. This Assignment Agreement may be executed and delivered by
telecopier or other electronic transmission all with the same force and effect
as if the same were a fully executed and delivered original manual counterpart.

8. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement and
Annex I hereto to be executed by their respective officers, as of the first date
written above.

 

[NAME OF ASSIGNOR]  as Assignor By  

 

  Name:   Title:

 

A-2

--------------------------------------------------------------------------------

[NAME OF ASSIGNEE]  as Assignee By  

 

  Name:   Title:

 

ACCEPTED THIS      DAY OF                  WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Agent By  

 

  Name:   Title:

 

A-3

--------------------------------------------------------------------------------

ANNEX FOR ASSIGNMENT AND ACCEPTANCE

ANNEX I

1. Borrowers: KŸSwiss Inc. (“Parent”), K-Swiss Sales Corp. (“KS Sales”), K-Swiss
Direct Inc. (“KS Direct” and, together with Parent, KS Sales and any Person that
may from time to time become a borrower, each a “Borrower” and collectively,
“Borrowers”)

 

2. Name and Date of Credit Agreement:  

Credit Agreement, dated as of April 25, 2012, by and among Borrowers, certain of
their affiliates, as Guarantors, the lenders from time to time a party thereto
(the “Lenders”), Wells Fargo Bank, National Association, as the administrative
agent for the Lenders

3. Date of Assignment Agreement:   4. Amounts:       a.   Assigned Amount of    
    Revolver Commitment   $               b.   Assigned Amount of Revolving
Loans   $             5. Settlement Date:     6. Purchase Price    
$             7. Notice and Payment Instructions, etc.    

 

Assignee:    Assignor:   

 

  

 

  

 

  

 

  

 

  

 

  

 

A-4

--------------------------------------------------------------------------------

8. Agreed and Accepted:

 

[ASSIGNOR]   [ASSIGNEE]    By:  

 

      By:  

 

   Title:  

 

      Title:  

 

  

Accepted:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent By  

 

  Name:   Title:

 

A-5

--------------------------------------------------------------------------------

EXHIBIT B-1

FORM OF BORROWING BASE CERTIFICATE

--------------------------------------------------------------------------------

LOGO [g344467stamped-97.jpg]

 

KŸSwiss Inc.

Borrowing Base Report

- Submitted to Wells Fargo Bank N.A., as Administrative Agent

  

Certificate No.                    

Report Date                    

 

 

U.S. ACCOUNTS RECEIVABLE

                  

BALANCE PER AGINGS

   as of            0.00          

Less: Unapplied Cash

                  

Less: Ineligible Accounts Receivable

              0.00          

ELIGIBLE ACCOUNTS RECEIVABLE

              0.00          

Times: Accounts Receivable Advance Rate: 85%

              85 %        

ACCOUNTS RECEIVABLE AVAILABILITY

              0.00          

Dilution Reserve (Amount > 5%)

              0.00          

Other Reserve

              0.00          

Other Reserve

              0.00          

Other Reserve

              0.00                      

 

 

      

1.     

 

Total AR Availability

              0.00                      

 

 

        

U.S. AR AVAILABILITY:

   THE LESSER OF    $ 35,000,000.00         OR        Line 1         0.00     

U.S. INVENTORY

                  

Total Inventory

   as of    3/27/2012         0.00          

Less: Ineligible Inventory

              0.00          

ELIGIBLE INVENTORY:

              0.00          

INVENTORY AVAILABILITY (X% Advance)

              0.00          

Less: Appraisal Reserve (A minus B)

              0.00          

Less: Rent Reserves

              0.00          

Less: Royalty Reserves

              0.00          

Less: Other Reserves

              0.00                      

 

 

      

2.

 

Total Available Inventory

              0.00                      

 

 

        

U.S. INVENTORY AVAILABILITY:

   THE LESSER OF    $ 20,000,000.00         OR        Line 2         0.00     

AVAILABILITY BLOCK

                

3.

 

Total Availability Block

              (3,500,000.00 )                    

 

 

        

AVAILABILITY BLOCK

                   (3,500,000.00 )                    

 

 

   

AVAILABILITY: THE LESSER OF MAX. LOAN

      35,000,000      OR SUM OF LINES 1 through 3           (3,500,000.00 )   
                

 

 

   

AVAILABILITY

                  

Calculated Borrowing Base Availability

  

          (3,500,000.00 )   

Less: Ending Loan Balance (USD)

  

         

Less: Ending Loan Balance (USD equivalent of EUR loan)

  

         

Less: Ending Loan Balance (USD equivalent of GBP loan)

  

         

Less: Outstanding L/C Balance

  

         

Less: Outstanding L/C Balance (USD equivalent of EUR loan)

  

         

Less: Outstanding L/C Balance (USD equivalent of GBP loan)

  

                          

 

 

   

Net Excess Availability

  

          (3,500,000.00 )                    

 

 

 

 

Each of the undersigned, pursuant to that certain Credit Agreement dated as of
April     , 2012 (as amended, restated, modified, supplemented, refinanced,
renewed, or extended from time to time, the “Credit Agreement”), entered into
among K-Swiss Inc., K-Swiss Sales Corp., and K-Swiss Direct Inc. (each a
“Borrower,” and collectively, the “Borrowers”), certain of Borrowers’
affiliates, and the lenders signatory thereto from time to time, Wells Fargo
Bank, National Association, as administrative agent for the Lenders (in such
capacity, together with its successors and assigns, if any, in such capacity,
“Agent”), hereby certifies to Agent that the following items, calculated in
accordance with the terms and definitions set forth in the Credit Agreement for
such items are true and correct, and that Borrower is in compliance with and,
after giving effect to any currently requested Loans, will be in compliance
with, the terms, conditions, and provisions of the Credit
Agreement. Additionally, each Borrower hereby certifies and represents and
warrants to the Lender Group that (i) as of the date hereof, each representation
or warranty contained in or pursuant to any Loan Document, any agreement,
instrument, certificate, document or other writing furnished at any time under
or in connection with any Loan Document, and as of the effective date of any
advance, continuation or conversion requested above is true and correct in all
material respects (except to the extent any representation or warranty relates
solely to an earlier date, in which case such representation or warranty shall
be true and correct in all material respects as of such date (except that such
materiality qualifier shall not be applicable to any representation or warranty
that is already qualified or modified by materiality in the text thereof)), (ii)
each of the covenants and agreements contained in any Loan Document have been
performed (to the extent required to be performed on or before the date hereof
or each such effective date), (iii) no Default or Event of Default has occurred
and is continuing on the date hereof, nor will any thereof occur after giving
effect to the request above, and (iv) all of the foregoing is true and correct
as of the effective date of the calculations set forth above and that such
calculations have been made in accordance with the requirements of the Credit
Agreement.

 

KŸSwiss Inc.     K-Swiss Sales Corp.   K-Swiss Direct Inc.   As Borrower     As
Borrower   As Borrower   By:  

 

    By:  

 

    By:  

 

  Title:  

 

    Title:  

 

    Title:  

 

  Date:  

 

    Date:  

 

    Date:  

 

 

--------------------------------------------------------------------------------

AR Borrowing Base    KŸSwiss Inc.    Report #                         Date
Prepared    /  /            

 

     As of   /  /               Loan #          TBD        U.S.     Total  

Gross A/R Aging

     $ 0   

Less Ineligibles:

    

Delinquent A/R

     $ 0   

Credits in Prior

     $ 0   

50% Cross-Age

     $ 0   

Intercompany

     $ 0   

Consignment/Guaranteed/Bill-&-hold Sales

     $ 0   

Foreign

     $ 0   

Government

     $ 0   

COD

     $ 0   

Debit Memos

     $ 0   

Employee Sales

     $ 0   

Extended Terms

     $ 0   

Samples/Demos

     $ 0   

Non-Trade Sales

     $ 0   

Short Pays

     $ 0   

Contras

     $ 0   

Bankruptcy/Doubtful Customer

     $ 0   

Customer Deposits

     $ 0   

Credit Lag Ineligible

     $ 0   

Prebilled AR

     $ 0   

Sanctioned Customers

     $ 0   

Subject to Performance Bonds

     $ 0   

Concentration excess

     $ 0   

Other

     $ 0      

 

 

   

 

 

 

Total Ineligibles

   $ 0      $ 0   

Eligible A/R

   $ 0      $ 0   

Advance Rate

     85 %      85 %    

 

 

   

 

 

 

Available A/R

   $ 0      $ 0   

Less: Dilution Reserve

   $ 0      $ 0   

Less: Other

   $ 0      $ 0   

Less: Other

   $ 0      $ 0   

Subtotal Available

   $ 0      $ 0   

Line Sublimits

   $ 35,000,000      $ 35,000,000      

 

 

   

 

 

 

Revolver - Available A/R

   $ 0      $ 0   

The undersigned represents and warrants that the foregoing information is true,
complete and correct, and that the collateral and reserves reflected comply with
the terms, conditions, covenants & representations as set forth in the Credit
Agreement.

 

Authorized Signature:  

 

--------------------------------------------------------------------------------

Inventory Borrowing Base    KŸSwiss Inc.         /  /            

 

         As of / /   Loan #                      TBD            Footwear    
Apparel &
Accessories     Promotional     Total    

Gross Inventory

         $ 0     

Less Ineligibles:

          

Promo Items

         $ 0     

Retail Locations (not reported on perpetual)

         $ 0     

Locations with < $100,000 on hand

          

“Hash”

         $ 0     

“Closeouts”

         $ 0     

“Blemished”

         $ 0     

Consigned

         $ 0     

No bill of lading / title document

         $ 0     

Returns / rejected goods

         $ 0     

Slow Moving / Obsolete

         $ 0     

LCM Reserve

         $ 0     

Spare Parts

         $ 0     

Trademark/Licensing Restrictions (Ironman)

         $ 0     

Raw Materials

         $ 0     

WIP

         $ 0     

Packaging

         $ 0     

Outside processor

         $ 0     

Acquired, but no appraisal / exam

         $ 0     

In-transit (not reported on perpetual)

     N/A        N/A        N/A        N/A     

Other

         $ 0        

 

 

   

 

 

   

 

 

   

 

 

   

Total Ineligibles

   $ 0      $ 0      $ 0      $ 0     

Eligible Inventory

   $ 0      $ 0      $ 0      $ 0     

Advance Rate

     65 %      65 %      65 %      #DIV/0!        

 

 

   

 

 

   

 

 

   

 

 

 

(A)

 

Available Inventory

   $ 0      $ 0      $ 0      $ 0     

Eligible Inventory

   $ 0      $ 0      $ 0      $ 0     

Appraised NOLV

     69.7 %      69.7 %      69.7 %     

85% of NOLV

     59.2 %      59.2 %      59.2 %        

 

 

   

 

 

   

 

 

   

 

 

 

(B)

 

Available Inventory

   $ 0      $ 0      $ 0      $ 0     

Less: Appraisal Reserve (A minus B)

   $ 0      $ 0      $ 0      $ 0     

Less: Rent Reserves

         $ 0     

Less: Royalty Reserves

         $ 0     

Less: Other Reserves

         $ 0        

 

 

   

 

 

   

 

 

   

 

 

   

Subtotal Availability

   $ 0      $ 0      $ 0      $ 0     

Line Sublimit

         $ 20,000,000     

REVOLVER AVAILABLE INVENTORY

         $ 0   

The undersigned represents and warrants that the foregoing information is true,
complete & correct, and the collateral and reserves reflected comply with the
terms, conditions, covenants & representations as set forth in the Credit
Agreement.

 

Authorized Signature:   

 

  

--------------------------------------------------------------------------------

EXHIBIT C-1

FORM OF COMPLIANCE CERTIFICATE

[on Administrative Borrower’s letterhead]

 

To: Wells Fargo Bank, National Association, as Agent

2450 Colorado Avenue, Suite 3000W

Santa Monica, California 90404

Attn: Business Finance Manager

 

  Re: Compliance Certificate dated                             

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement (the “Credit Agreement”)
dated as of April 25, 2012 by and among the lenders identified on the signature
pages thereof (such lenders, together with their respective successors and
permitted assigns, are referred to hereinafter each individually as a “Lender”
and collectively as the “Lenders”), Wells Fargo Bank, National Association, as
the administrative agent for the Lenders (“Agent”), KŸSwiss Inc. (“Parent”),
K-Swiss Sales Corp. (“KS Sales”), K-Swiss Direct Inc. (“KS Direct” and, together
with Parent, KS Sales and any Person that may from time to time become a
borrower, each a “Borrower” and collectively, “Borrowers”) and certain
affiliates of Borrowers. Capitalized terms used in this Compliance Certificate
have the meanings set forth in the Credit Agreement unless specifically defined
herein.

Pursuant to Schedule 5.1 of the Credit Agreement, the undersigned officer of
Administrative Borrower hereby certifies that:

1. The financial information of Parent and its Subsidiaries furnished in
Schedule 1 attached hereto, has been prepared in accordance with GAAP (except,
in the case of unaudited financial statements, for year-end adjustments and the
lack of footnotes), and fairly presents in all material respects the financial
condition of Parent and its Subsidiaries.

2. Such officer has reviewed the terms of the Credit Agreement and has made, or
caused to be made under his/her supervision, a review in reasonable detail of
the transactions and condition of Parent and its Subsidiaries during the
accounting period covered by the financial statements delivered pursuant to
Schedule 5.1 of the Credit Agreement.

3. Such review has not disclosed the existence on and as of the date hereof, and
the undersigned does not have knowledge of the existence as of the date hereof,
of any event or condition that constitutes a Default or Event of Default, except
for such conditions or events listed on Schedule 2 attached hereto, specifying
the nature and period of existence thereof and what action Parent and its
Subsidiaries have taken, are taking, or propose to take with respect thereto.

4. The representations and warranties of Parent and its Subsidiaries set forth
in the Credit Agreement and the other Loan Documents are true and correct in all
material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof) on and as of the date hereof
(except to the extent they relate to a specified date, in which case such
representations and warranties are true and correct as of such date), except as
set forth on Schedule 3 attached hereto.

--------------------------------------------------------------------------------

5. Attached hereto on Schedule 4 hereof are the calculations used in determining
whether Parent and its Subsidiaries are in compliance with each covenant set
forth in Section 7 of the Credit Agreement for the test period set forth on
Schedule 4 hereof (which calculations shall be provided to Agent whether or not
a Compliance Period exists and irrespective of the amount of Excess
Availability).

IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned
this              day of             ,             .

 

K•SWISS INC., as Administrative Borrower By:  

 

Name:  

 

Title:  

 

--------------------------------------------------------------------------------

SCHEDULE 1

Financial Information

--------------------------------------------------------------------------------

SCHEDULE 2

Default or Event of Default

--------------------------------------------------------------------------------

SCHEDULE 3

Representations and Warranties

--------------------------------------------------------------------------------

SCHEDULE 4

Financial Covenants

--------------------------------------------------------------------------------

EXHIBIT L-1

FORM OF INTEREST ELECTION REQUEST

Wells Fargo Bank National Association, as Agent

2450 Colorado Avenue, Suite 3000W

Santa Monica, CA 90404

Ladies and Gentlemen:

Reference hereby is made to that certain Credit Agreement, dated as of April 25,
2012 (the “Credit Agreement”), among K•Swiss Inc. (“Parent”), K-Swiss Sales
Corp. (“KS Sales”), K-Swiss Direct Inc. (“KS Direct” and, together with Parent,
KS Sales and any other Person that becomes a borrower, each a “Borrower” and
collectively, “Borrowers”), certain affiliates of Borrowers, the lenders
signatory thereto (the “Lenders”), and Wells Fargo Bank, National Association,
as the administrative agent for the Lenders (“Agent”). Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Credit Agreement.

This Interest Election Request [which is a written confirmation of the
telephonic request for the same], represents the Borrowers request to:

1. borrow [a Dollar Denominated Loan which is [a Base Rate Loan] [a LIBOR Rate
Loan]] [a Euro Denominated Loan] [a Sterling Denominated Loan] in the amount of
                     (the “Requested Borrowing”);

2. the date of the Requested Borrowing is                     ; and

3. if the Requested Borrowing is a Loan other than a Dollar Denominated Loan
which is a Base Rate Loan, the Requested Borrowing shall have an Interest Period
of [1] [2] [3] months commencing on                     .

This Interest Election Request further confirms Borrowers’ acceptance, for
purposes of determining the rate of interest based on [the Base Rate] [LIBOR
Rate] [EURIBOR] under the Credit Agreement, of [the Base Rate] [LIBOR Rate]
[EURIBOR] as determined pursuant to the Credit Agreement.

Administrative Borrower represents and warrants that (i) as of the date hereof,
each representation or warranty contained in or pursuant to any Loan Document
and as of the effective date of any advance, continuation or conversion
requested above, is true and correct in all material respects (except to the
extent any representation or warranty expressly related to an earlier date and
except that such materiality qualifier shall not be applicable to any
representation or warranty that already is qualified or modified by materiality
in the text thereof), and (ii) no Default or Event of Default has occurred and
is continuing on the date hereof, nor will any thereof occur after giving effect
to the request above.

 

L-1

--------------------------------------------------------------------------------

Dated:  

 

K•SWISS INC.,

as Administrative Borrower

By  

 

Name:  

 

Title:  

 

Acknowledged by:

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Agent

By:  

 

Name:  

 

Title:  

 

 

L-2

--------------------------------------------------------------------------------

Schedule A-1

to

Credit Agreement

Agent’s Account

Previously Provided to Agent

--------------------------------------------------------------------------------

SCHEDULE A-2

AUTHORIZED PERSONS

On behalf of Parent, KS Sales, KS Pacific, RE LLC, KS NS:

 

1) Steven Nichols

 

2) George Powlick

On behalf of KS Direct and RE Inc.:

 

1) David Nichols

 

2) Cheryl Kuchinka

--------------------------------------------------------------------------------

Schedule C-1

to

Credit Agreement

Revolver Commitments

 

Lender

   Revolver Commitment  

Wells Fargo Bank, National Association

   $ 35,000,000   

--------------------------------------------------------------------------------

SCHEDULE D-1

DESIGNATED ACCOUNT

Previously Provided to Agent

--------------------------------------------------------------------------------

SCHEDULE E-2

EXISTING LETTERS OF CREDIT

None.

--------------------------------------------------------------------------------

SCHEDULE P-1

PERMITTED INVESTMENTS

Previously Provided to Agent

--------------------------------------------------------------------------------

SCHEDULE P-2

PERMITTED LIENS

Previously Provided to Agent

--------------------------------------------------------------------------------

SCHEDULE R-1

REAL PROPERTY COLLATERAL

31248 Oak Crest Drive

Westlake Village, CA 91361

LOT 11 OF TRACT NO. 43744, IN THE CITY OF WESTLAKE VILLAGE, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 1100 PAGES 11 TO 14
INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEPT ALL THE OIL, GAS AND OTHER HYDROCARBON SUBSTANCES LYING BELOW A DEPTH OF
500 FEET MEASURED VERTICALLY, FROM THE SURFACE OF SAID LAND WITHOUT, HOWEVER,
ANY RIGHT TO ENTER UPON THE SURFACE OF SAID LAND NOR INTO THAT PORTION OF THE
SUBSURFACE THEREOF LYING ABOVE A DEPTH OF 500 FEET, MEASURED VERTICALLY FROM
SAID SURFACE, AS GRANTED TO AMERICAN-HAWAIIAN STEAMSHIP COMPANY, BY DEED
RECORDED APRIL 5, 1966 IN BOOK D-3261 PAGE 937, OFFICIAL RECORDS.

--------------------------------------------------------------------------------

Schedule 1-1

to

Credit Agreement

Definitions

As used in the Agreement, the following terms shall have the following
definitions:

“Account” means an account (as that term is defined in the Code).

“Account Debtor” means any Person who is obligated on an Account, chattel paper,
or a general intangible.

“Accounting Changes” means changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions).

“Acquired Indebtedness” means Indebtedness of a Person whose assets or Equity
Interests are acquired by Parent or any of its Subsidiaries in a Permitted
Acquisition; provided, that such Indebtedness (f) is either purchase money
Indebtedness or a Capital Lease with respect to Equipment or mortgage financing
with respect to Real Property, (g) was in existence prior to the date of such
Permitted Acquisition, and (h) was not incurred in connection with, or in
contemplation of, such Permitted Acquisition.

“Acquisition” means (a) the purchase or other acquisition by a Person or its
Subsidiaries of all or substantially all of the assets of (or any division or
business line of) any other Person, or (b) the purchase or other acquisition
(whether by means of a merger, consolidation, or otherwise) by a Person or its
Subsidiaries of all or substantially all of the Equity Interests of any other
Person.

“Additional Documents” has the meaning specified therefor in Section 5.12 of the
Agreement.

“Administrative Questionnaire” has the meaning specified therefor in
Section 13.1(a).

“Administrative Borrower” means Parent, in its capacity as Administrative
Borrower on behalf of itself, Borrowers and the other Loan Parties pursuant to
Section 17.14 of the Agreement and its successors and assigns in such capacity.

“Affected Lender” has the meaning specified therefor in Section 2.13(b) of the
Agreement.

“Affiliate” means, as applied to any Person, any other Person who controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, “control” means the possession, directly or indirectly through
one or more intermediaries, of the power to direct the management and policies
of a Person, whether through the ownership of Equity Interests, by contract, or
otherwise; provided, that, for purposes of the definition of Eligible Accounts
and Section 6.10 of the Agreement: (a) any Person which owns directly or
indirectly 10% or more of the Equity Interests having ordinary voting power for
the election of directors or other members of the governing body of a Person or
10% or more of the partnership or other ownership interests of a Person (other
than as a limited partner of such Person) shall be deemed an Affiliate of such
Person, (b) each director (or comparable manager) of a Person shall be deemed to
be an Affiliate of such Person, and (c) each partnership in which a Person is a
general partner shall be deemed an Affiliate of such Person.

 

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“Agent” has the meaning specified therefor in the preamble to the Agreement.

“Agent-Related Persons” means Agent, together with its Affiliates, officers,
directors, employees, attorneys, and agents.

“Agent’s Account” means the Deposit Account of Agent identified on Schedule A-1
(or such other Deposit Account of Agent that has been designated as such, in
writing, by Agent to Administrative Borrower and the Lenders).

“Agent’s Liens” means the Liens granted by Parent or its Subsidiaries to Agent
under the Loan Documents and securing the Obligations.

“Agreement” means the Credit Agreement to which this Schedule 1.1 is attached.

“Applicable Margin” means, as of any date of determination and with respect to
each Type of Loan, as applicable, the applicable margin set forth in the
following table that corresponds to the Average Revolver Usage for the most
recently completed fiscal quarter; provided, that for the period from the
Closing Date through and including June 30, 2012, the Applicable Margin shall be
set at Level I; provided further, that any time an Event of Default has occurred
and is continuing, the Applicable Margin shall be set at the margin in the row
styled “Level II”:

 

Level

  

Average

Revolver

Usage

   Applicable
Margin for Dollar
Denominated
Loans that are
Base Rate Loans     Applicable Margin
for Dollar
Denominated
Loans that are
Libor Rate Loans     Applicable
Margin for
Euro
Denominated
Loans     Applicable
Margin for
Sterling
Denominated
Loans  

I

  

Less than 50% of the Maximum Revolver Amount

     1.25 %      2.25 %      3.00 %      3.00 % 

II

  

Greater than of equal to 50% of the Maximum Revolver Amount

     1.50 %      2.50 %      3.25 %      3.25 % 

The Applicable Margin shall be re-determined as of the first day of each fiscal
quarter.

“Application Event” means the occurrence of (a) a failure by Borrowers to repay
all of the Obligations in full on the Maturity Date, or (b) an Event of Default
and the election by Agent or the Required Lenders to require that payments and
proceeds of Collateral be applied pursuant to Section 2.4(b)(ii) of the
Agreement.

 

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“Assignee” has the meaning specified therefor in Section 13.1(a) of the
Agreement.

“Assignment and Acceptance” means an Assignment and Acceptance Agreement
substantially in the form of Exhibit A-1 to the Agreement.

“Authorized Person” means any one of the individuals identified on Schedule A-2
to the Agreement, as such schedule is updated from time to time by written
notice from Administrative Borrower to Agent.

“Availability” means, as of any date of determination, the amount that Borrowers
are entitled to borrow as Revolving Loans under Section 2.1 of the Agreement
(after giving effect to the then outstanding Revolver Usage).

“Availability Block” means a reserve at all times in an amount equal to
$3,500,000.

“Average Availability” means, with respect to any period, the sum of the
aggregate amount of Availability for each Business Day in such period
(calculated as of the end of each respective Business Day) divided by the number
of Business Days in such period.

“Average Excess Availability” means, with respect to any period, the sum of the
aggregate amount of Excess Availability for each Business Day in such period
(calculated as of the end of each respective Business Day) divided by the number
of Business Days in such period.

“Average Revolver Usage” means, with respect to any period, the sum of the
aggregate amount of Revolver Usage for each Business Day in such period
(calculated as of the end of each respective Business Day) divided by the number
of Business Days in such period.

“Bank Product” means any one or more of the following financial products or
accommodations extended to Parent or its Subsidiaries (including, without
limitation, the Specified Foreign Subsidiaries) by a Bank Product Provider:
(a) credit cards (including commercial credit cards (including so-called
“procurement cards” or “P-cards”)), (b) credit card processing services,
(c) debit cards, (d) stored value cards, (e) Cash Management Services, or
(f) transactions under Hedge Agreements.

“Bank Product Agreements” means those agreements entered into from time to time
by Parent or its Subsidiaries (including, without limitation, the Specified
Foreign Subsidiaries) with a Bank Product Provider in connection with the
obtaining of any of the Bank Products.

“Bank Product Collateralization” means providing cash collateral (pursuant to
documentation reasonably satisfactory to Agent) to be held by Agent for the
benefit of the Bank Product Providers (other than the Hedge Providers) in an
amount determined by Agent as sufficient to satisfy the reasonably estimated
credit exposure with respect to the then existing Bank Product Obligations
(other than Hedge Obligations).

“Bank Product Obligations” means (a) all obligations, liabilities, reimbursement
obligations, fees, or expenses owing by Parent or its Subsidiaries (including,
without limitation, the Specified Foreign Subsidiaries) to any Bank Product
Provider pursuant to or evidenced by a Bank Product Agreement and irrespective
of whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, (b) all
Hedge Obligations, and (c) all amounts that Agent or any Lender is obligated to
pay to a Bank Product Provider as a result of Agent or such Lender purchasing
participations from, or executing guarantees or indemnities or reimbursement
obligations to, a Bank Product Provider with respect to the Bank Products
provided by such Bank Product Provider to Parent or its Subsidiaries (including,
without limitation, the Specified Foreign Subsidiaries).

 

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“Bank Product Provider” means Wells Fargo or any of its Affiliates, including
each of the foregoing in its capacity, if applicable, as a Hedge Provider.

“Bank Product Provider Agreement” means an agreement between a Bank Product
Provider and Agent in form and substance satisfactory to Agent.

“Bank Product Reserves” means, as of any date of determination, those reserves
that Agent deems necessary or appropriate to establish (based upon the Bank
Product Providers’ determination of the liabilities and obligations of Parent
and its Subsidiaries (including, without limitation, the Specified Foreign
Subsidiaries) in respect of Bank Product Obligations) in respect of Bank
Products then provided or outstanding.

“Bankruptcy Code” means title 11 of the United States Code, as in effect from
time to time.

“Base Rate” means the greatest of (a) the Federal Funds Rate plus  1/2%, (b) the
LIBOR Rate (which rate shall be calculated based upon an Interest Period of 1
month and shall be determined on a daily basis), plus 1 percentage point, and
(c) the rate of interest announced, from time to time, within Wells Fargo at its
principal office in San Francisco as its “prime rate”, with the understanding
that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the
lowest of such rates) and serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto and is
evidenced by the recording thereof after its announcement in such internal
publications as Wells Fargo may designate.

“Base Rate Loan” means each portion of a Dollar Denominated Loan that bears
interest at a rate determined by reference to the Base Rate.

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) for which Parent or any of its Subsidiaries or ERISA Affiliates has been
an “employer” (as defined in Section 3(5) of ERISA) within the past six years.

“Board of Directors” means, as to any Person, the board of directors (or
comparable managers) of such Person, or any committee thereof duly authorized to
act on behalf of the board of directors (or comparable managers).

“Board of Governors” means the Board of Governors of the Federal Reserve System
of the United States (or any successor).

“Borrowers” means, collectively, the following (together with their respective
successors and assigns): (a) K•Swiss Inc., a Delaware corporation; (b) K-Swiss
Sales Corp., a Delaware corporation; (c) K-Swiss Direct Inc., a California
corporation; and (d) each other Person that becomes a borrower after the Closing
Date pursuant to Section 5.11 of the Agreement.

“Borrower Materials” has the meaning specified therefor in Section 17.9(c) of
the Agreement.

“Borrowing” means a borrowing consisting of Revolving Loans made on the same day
by the Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a
Swing Loan, or by Agent in the case of an Extraordinary Advance.

 

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“Borrowing Base” means, as of any date of determination, the result of:

(a) (i) 85% of the amount of Eligible Accounts (other than Eligible Accounts
consisting of Extended Pay Accounts) plus (ii) the lesser of (1) 85% of the
amount of Eligible Accounts consisting of Extended Pay Accounts and
(2) $1,500,000, minus (iii) the amount, if any, of the Dilution Reserve, plus

(b) the lesser of

(i) $20,000,000, or

(ii) the amount equal to:

(A) the lesser of (1) the product of 65% multiplied by the value (calculated at
the lower of cost or market on a basis consistent with Borrowers’ historical
accounting practices) of Eligible Inventory at such time, and (2) the product of
85% multiplied by the Net Recovery Percentage identified in the most recent
inventory appraisal ordered and obtained by Agent multiplied by the value
(calculated at the lower of cost or market on a basis consistent with the
Borrowers’ historical accounting practices) of Eligible Inventory (such
determination may be made as to different categories of Eligible Inventory based
upon the Net Recovery Percentage applicable to such categories) at such time,
minus

(B) the Availability Block, minus

(C) the aggregate amount of reserves, if any, established by Agent under
Section 2.1(c) of the Agreement.

“Borrowing Base Certificate” means a certificate in the form of Exhibit B-1.

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in Los Angeles, California are authorized or required by
law to remain closed; provided that, (i) when used in connection with a
Eurocurrency Base Rate Loan, the term “Business Day” shall also exclude any day
on which banks are not open for dealings in deposits in the applicable currency
in which interest on such Eurocurrency Base Rate Loan is calculated based on
LIBOR, (ii) when used in connection with a Eurocurrency Base Rate Loan
denominated in Euros, the term “Business Day” shall also exclude any day which
is not a TARGET Day (as determined by the Agent in good faith), and (iii) when
used in connection with any LIBOR Rate Loan, the term “Business Day” shall
exclude any day on which banks are not open for dealings in Dollar deposits in
the London interbank market.

“Capital Expenditures” means, with respect to any Person for any period, the
amount of all expenditures by such Person and its Subsidiaries during such
period that are capital expenditures as determined in accordance with GAAP,
whether such expenditures are paid in cash or financed, but excluding, without
duplication (a) with respect to the purchase price of assets that are purchased
substantially contemporaneously with the trade-in of existing assets during such
period, the amount that the gross amount of such purchase price is reduced by
the credit granted by the seller of such assets for the assets being traded in
at such time, (b) expenditures made during such period to consummate one or more
Permitted Acquisitions, (c) expenditures made during such period to the extent
made with the identifiable proceeds of Indebtedness permitted under clause
(c) of the definition of “Permitted Indebtedness”, (d) capitalized software
development costs to the extent such costs are deducted from net earnings under
the definition of EBITDA for such period, and (e) expenditures during such
period that, pursuant to a written agreement, are reimbursed by a third Person
(excluding Parent or any of its Affiliates).

 

5

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“Capitalized Lease Obligation” means that portion of the obligations under a
Capital Lease that is required to be capitalized in accordance with GAAP.

“Capital Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

“Cash Dominion Period” has the meaning specified therefor in the Guaranty and
Security Agreement.

“Cash Equivalents” means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 2 years from the date of acquisition thereof, (b) marketable
direct obligations issued or fully guaranteed by any state of the United States
or any political subdivision of any such state or any public instrumentality
thereof maturing within 2 years from the date of acquisition thereof and, at the
time of acquisition, having one of the two highest ratings obtainable from
either Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service, Inc.
(“Moody’s”), (c) commercial paper maturing no more than 2 years from the date of
creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit, time
deposits, overnight bank deposits or bankers’ acceptances maturing within 2
years from the date of acquisition thereof issued by any bank organized under
the laws of the United States or any state thereof or the District of Columbia
or any United States branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $1,000,000,000,
(e) Deposit Accounts maintained with (i) any bank that satisfies the criteria
described in clause (d) above, or (ii) any other bank organized under the laws
of the United States or any state thereof so long as the full amount maintained
with any such other bank is insured by the Federal Deposit Insurance
Corporation, (f) repurchase obligations of any commercial bank satisfying the
requirements of clause (d) of this definition or recognized securities dealer
having combined capital and surplus of not less than $1,000,000,000, having a
term of not more than seven days, with respect to securities satisfying the
criteria in clauses (a) or (d) above, (g) debt securities with maturities of 2
years or less from the date of acquisition backed by standby letters of credit
issued by any commercial bank satisfying the criteria described in clause
(d) above, and (h) Investments in money market funds substantially all of whose
assets are invested in the types of assets described in clauses (a) through
(g) above.

“Cash Management Services” means any cash management or related services
including treasury, depository, return items, overdraft, controlled
disbursement, merchant store value cards, e-payables services, electronic funds
transfer, interstate depository network, automatic clearing house transfer
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) and other cash management
arrangements.

“CFC” means a controlled foreign corporation (as that term is defined in the
IRC).

“Change in Control” means that:

(a) any Person or two or more Persons acting in concert (other than Permitted
Holders), shall have acquired beneficial ownership, directly or indirectly, of
Equity Interests of Parent (or other securities convertible into such Equity
Interests) representing 50% or more of the combined voting power of all Equity
Interests of Parent entitled (without regard to the occurrence of any
contingency) to vote for the election of members of the Board of Directors of
Parent;

(b) any Person or two or more Persons acting in concert (other than Permitted
Holders), shall have acquired by contract or otherwise, or shall have entered
into a contract or arrangement that, upon

 

6

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consummation thereof, will result in its or their acquisition of the power to
exercise, directly or indirectly, a controlling influence over the management or
policies of Parent or control over the Equity Interests of such Person entitled
to vote for members of the Board of Directors of Parent on a fully-diluted basis
(and taking into account all such Equity Interests that such Person or group has
the right to acquire pursuant to any option right) representing 50% or more of
the combined voting power of such Equity Interests; or

(c) during any period of 24 consecutive months commencing on or after the
Closing Date, the occurrence of a change in the composition of the Board of
Directors of Parent such that a majority of the members of such Board of
Directors are not Continuing Directors; or

(d) Parent fails to own and control, directly or indirectly, 100% of the Equity
Interests of each other Loan Party, except as a result of a transaction
permitted by Section 6.3 of the Agreement.

“Closing Date” means the date of the making of the initial Revolving Loan (or
other extension of credit) under the Agreement.

“Code” means the California Uniform Commercial Code, as in effect from time to
time.

“Collateral” means all assets and interests in assets and proceeds thereof now
owned or hereafter acquired by Parent or its Subsidiaries in or upon which a
Lien is granted by such Person in favor of Agent or the Lenders under any of the
Loan Documents.

“Collateral Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee,
customs broker or other Person in possession of, having a Lien upon, or having
rights or interests in Parent’s or its Subsidiaries’ books and records,
Equipment, or Inventory, in each case, in form and substance reasonably
satisfactory to Agent.

“Collections” means all cash, checks, notes, instruments, and other items of
payment (including insurance proceeds, cash proceeds of asset sales, rental
proceeds, and tax refunds).

“Commitment” means, with respect to each Lender, its Revolver Commitment and,
with respect to all Lenders, their Revolver Commitments.

“Competitor” means any Person which is a direct competitor of Parent or its
Subsidiaries if, at the time of a proposed assignment, Agent and the assigning
Lender have actual knowledge that such Person is a direct competitor of Parent
or its Subsidiaries; provided, that in connection with any assignment or
participation, the Assignee or Participant with respect to such proposed
assignment or participation that is an investment bank, a commercial bank, a
finance company, a fund, or other Person which merely has an economic interest
in any such direct competitor, and is not itself such a direct competitor of
Parent or its Subsidiaries, shall not be deemed to be a direct competitor for
the purposes of this definition.

“Compliance Certificate” means a certificate substantially in the form of
Exhibit C-1 to the Agreement delivered by the chief financial officer of Parent
to Agent.

“Compliance Period” means any period commencing on the date that Excess
Availability has fallen below 20% of the Maximum Revolver Amount and ending on
the date that Excess Availability has been greater than 20% of the Maximum
Revolver Amount for any period of thirty (30) consecutive days thereafter.

“Confidential Information” has the meaning specified therefor in Section 17.9(a)
of the Agreement.

 

7

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“Continuing Director” means (a) any member of the Board of Directors who was a
director (or comparable manager) of Parent on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors after the Closing Date
if such individual was approved, appointed or nominated for election to the
Board of Directors by either the Permitted Holders or a majority of the
Continuing Directors, but excluding any such individual originally proposed for
election in opposition to the Board of Directors in office at the Closing Date
in an actual or threatened election contest relating to the election of the
directors (or comparable managers) of Parent and whose initial assumption of
office resulted from such contest or the settlement thereof.

“Control Agreement” means a control agreement, in form and substance reasonably
satisfactory to Agent, executed and delivered by Parent or one of its
Subsidiaries, Agent, and the applicable securities intermediary (with respect to
a Securities Account) or bank (with respect to a Deposit Account).

“Controlled Account Agreements” has the meaning specified therefor in the
Guaranty and Security Agreement.

“Copyright Security Agreement” has the meaning specified therefor in the
Guaranty and Security Agreement.

“Currency Due” has the meaning specified in Section 17.13 of this Agreement.

“Default” means an event, condition, or default that, with the giving of notice,
the passage of time, or both, would be an Event of Default.

“Defaulting Lender” means any Lender that (a) has failed to fund any amounts
required to be funded by it under the Agreement within 1 Business Day of the
date that it is required to do so under the Agreement (including the failure to
make available to Agent amounts required pursuant to a Settlement or to make a
required payment in connection with a Letter of Credit Disbursement),
(b) notified the Administrative Borrower, Agent, or any Lender in writing that
it does not intend to comply with all or any portion of its funding obligations
under the Agreement, (c) has made a public statement to the effect that it does
not intend to comply with its funding obligations under the Agreement or under
other agreements generally (as reasonably determined by Agent) under which it
has committed to extend credit, (d) failed, within 1 Business Day after written
request by Agent, to confirm that it will comply with the terms of the Agreement
relating to its obligations to fund any amounts required to be funded by it
under the Agreement, (e) otherwise failed to pay over to Agent or any other
Lender any other amount required to be paid by it under the Agreement within 1
Business Day of the date that it is required to do so under the Agreement, or
(f) (i) becomes or is insolvent or has a parent company that has become or is
insolvent or (ii) becomes the subject of a bankruptcy or insolvency proceeding,
or has had a receiver, conservator, trustee, or custodian or appointed for it,
or has taken any action in furtherance of, or indicating its consent to,
approval of or acquiescence in any such proceeding or appointment or has a
parent company that has become the subject of a bankruptcy or insolvency
proceeding, or has had a receiver, conservator, trustee, or custodian appointed
for it, or has taken any action in furtherance of, or indicating its consent to,
approval of or acquiescence in any such proceeding or appointment.

“Defaulting Lender Rate” means (a) for the first 3 days from and after the date
the relevant payment is due, the Base Rate, and (b) thereafter, the interest
rate then applicable to Dollar Denominated Loans that are Base Rate Loans
(inclusive of the Applicable Margin applicable thereto).

“Deposit Account” means any deposit account (as that term is defined in the
Code).

 

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“Designated Account” means the Deposit Account of Administrative Borrower or a
foreign subsidiary identified on Schedule D-1 to the Agreement (or such other
Deposit Account of Administrative Borrower or a foreign subsidiary located at
Designated Account Bank that has been designated as such, in writing, by
Administrative Borrower to Agent).

“Designated Account Bank” has the meaning specified therefor in Schedule D-1 to
the Agreement (or such other bank that is located within the United States or in
London, England that has been designated as such, in writing, by Administrative
Borrower to Agent).

“Dilution” means, as of any date of determination, a percentage, based upon the
experience of the immediately prior 6 months, that is the result of dividing the
Dollar amount of (a) bad debt write-downs, discounts, advertising allowances,
credits, or other dilutive items with respect to Borrower’s Accounts during such
period, by (b) Borrower’s billings with respect to Accounts during such period.

“Dilution Reserve” means, as of any date of determination, an amount sufficient
to reduce the advance rate against Eligible Accounts by 1 percentage point for
each percentage point by which Dilution is in excess of 5%.

“Disqualified Equity Interests” means any Equity Interest that, by its terms (or
by the terms of any security or other Equity Interests into which it is
convertible or for which it is exchangeable), or upon the happening of any event
or condition (a) matures or is mandatorily redeemable (other than solely for
Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise
(except as a result of a change of control or asset sale so long as any rights
of the holders thereof upon the occurrence of a change of control or asset sale
event shall be subject to the prior repayment in full of the Loans and all other
Obligations that are accrued and payable and the termination of the
Commitments), (b) is redeemable at the option of the holder thereof (other than
solely for Qualified Equity Interests), in whole or in part, (c) provides for
the scheduled payments of dividends in cash, or (d) is or becomes convertible
into or exchangeable for Indebtedness or any other Equity Interests that would
constitute Disqualified Equity Interests, in each case, prior to the date that
is 180 days after the Maturity Date.

“Dollar Denominated Loan” means a Loan denominated in Dollars.

“Dollars” or “$” means United States dollars.

“Earn-Outs” means any portion of the purchase consideration which is payable in
respect of any Permitted Acquisition after the closing date for such Permitted
Acquisition

“EBITDA” means, with respect to any fiscal period:

(a) consolidated net earnings (or loss) of Parent and its Subsidiaries,

plus

(b) without duplication, the sum of the following amounts of Parent and its
Subsidiaries for such period to the extent included in determining consolidated
net earnings (or loss) for such period:

(i) depreciation and amortization,

(ii) interest expense,

(iii) income taxes,

 

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(iv) non-cash compensation expense (including deferred non-cash compensation
expense), or other non-cash expenses or charges, arising from the sale or
issuance of Equity Interests, the granting of stock options, and the granting of
stock appreciation rights and similar arrangements (including any repricing,
amendment, modification, substitution, or change of any such Equity Interests,
stock option, stock appreciation rights, or similar arrangements) minus the
amount of any such expenses or charges when paid in cash to the extent not
deducted in the computation of net earnings (or loss), in each case for Parent
and its Subsidiaries on a consolidated basis for such period as determined in
accordance with GAAP, and

(v) non-recurring, non-cash charges (including impairments to goodwill).

For the purposes of calculating EBITDA for any period (each, a “Reference
Period”), if at any time during such Reference Period (and after the Closing
Date), Parent or any of its Subsidiaries shall have made a Permitted
Acquisition, EBITDA for such Reference Period shall be calculated after giving
pro forma effect thereto (including pro forma adjustments arising out of events
which are directly attributable to such Permitted Acquisition, are factually
supportable, and are expected to have a continuing impact, in each case to be
mutually and reasonably agreed upon by Parent and Agent or in such other manner
acceptable to Agent as if any such Permitted Acquisition or adjustment occurred
on the first day of such Reference Period.

“Eligible Accounts” means those Accounts created by a Borrower in the ordinary
course of its business, that arise out of a Borrower’s sale of goods or
rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made in the Loan Documents, and that are
not excluded as ineligible by virtue of one or more of the excluding criteria
set forth below; provided, that such criteria may be revised from time to time
by Agent in Agent’s Permitted Discretion to address the results of any field
examination performed by (or on behalf of) Agent from time to time after the
Closing Date. In determining the amount to be included, Eligible Accounts shall
be calculated net of customer deposits, unapplied cash, taxes, discounts,
credits, allowances, and rebates. Eligible Accounts shall not include the
following:

(a) Accounts that the Account Debtor has failed to pay within 90 days of
original invoice date or within 60 days of the original due date or, solely in
the case of Extended Pay Accounts, within 120 days of the original invoice date
or 90 days of the original due date.

(b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of
all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above,

(c) Accounts with respect to which the Account Debtor is an Affiliate of a
Borrower or an employee or agent of a Borrower or any Affiliate of a Borrower,

(d) Accounts arising in a transaction wherein goods are placed on consignment or
are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a
bill and hold, or any other terms by reason of which the payment by the Account
Debtor may be conditional,

(e) Accounts that are not payable in Dollars,

(f) Accounts with respect to which the Account Debtor either (i) does not
maintain its chief executive office in the United States, or (ii) is not
organized under the laws of the United States or any state thereof, or (iii) is
the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless
(A) the Account is supported by an irrevocable letter of credit

 

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reasonably satisfactory to Agent (as to form, substance, and issuer or domestic
confirming bank) that has been delivered to Agent and is directly drawable by
Agent, or (B) the Account is covered by credit insurance in form, substance, and
amount, and by an insurer, reasonably satisfactory to Agent,

(g) Accounts with respect to which the Account Debtor is either (i) the United
States or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which Borrower has complied, to
the reasonable satisfaction of Agent, with the Assignment of Claims Act, 31 USC
§3727), or (ii) any state of the United States,

(h) Accounts with respect to which the Account Debtor is a creditor of a
Borrower, has or has asserted a right of recoupment or setoff, or has disputed
its obligation to pay all or any portion of the Account, to the extent of such
claim, right of recoupment or setoff, or dispute,

(i) (i) Accounts with respect to any of Famous Footwear, Shoe Show, Foot Locker
Inc., Zalda Corp. or Shoe Carnival Inc. whose total obligations owing to
Borrowers exceed 20% of all Eligible Accounts, to the extent of the obligations
owing by such Account Debtor in excess of such percentage, (ii) Accounts with
respect to Ross Stores Inc. whose total obligations owing to Borrowers exceed
15% of all Eligible Accounts, to the extent of the obligations owing by Ross
Stores Inc. in excess of such percentage, or (iii) Accounts with respect to an
Account Debtor (other than Famous Footwear, Shoe Show, Foot Locker Inc., Zalda
Corp., Shoe Carnival Inc. or Ross Stores Inc.) whose total obligations owing to
Borrowers exceed 10% of all Eligible Accounts, to the extent of the obligations
owing by such Account Debtor in excess of such percentage; provided, that,
(A) in each case, the amount of Eligible Accounts that are excluded because they
exceed the foregoing percentage shall be determined by Agent based on all of the
otherwise Eligible Accounts prior to giving effect to any eliminations based
upon the foregoing concentration limit, (B) any of the foregoing percentages, as
applied to a particular Account Debtor, are subject to reduction by Agent in its
Permitted Discretion if the creditworthiness of such Account Debtor
deteriorates, and (C) solely for purposes of this clause (i), Accounts with
respect to an Account Debtor and Accounts constituting Eligible Accounts shall,
in each case, exclude any Accounts supported by an irrevocable Letter of Credit
reasonably satisfactory to Agent that has been delivered to Agent and is
directly drawable by Agent,

(j) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as to which
a Borrower has received notice of an imminent Insolvency Proceeding or a
material impairment of the financial condition of such Account Debtor,

(k) Accounts, the collection of which, Agent, in its Permitted Discretion,
believes to be doubtful, including by reason of the Account Debtor’s financial
condition,

(l) Accounts that are not subject to a valid and perfected first priority
Agent’s Lien,

(m) Accounts with respect to which (i) the goods giving rise to such Account
have not been shipped and billed to the Account Debtor, or (ii) the services
giving rise to such Account have not been performed and billed to the Account
Debtor,

(n) Accounts with respect to which the Account Debtor is a Sanctioned Person or
Sanctioned Entity,

(o) Accounts that represent the right to receive progress payments or other
advance billings that are due prior to the completion of performance by
Borrowers of the subject contract for goods or services,

 

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(p) Accounts if the sale of goods or the rendition of services giving rise to
such Accounts is supported by a performance bond, surety bond or similar
instrument, unless the issuer of such bond or instrument shall have waived any
rights or interests in and to the Collateral pursuant to an agreement in form
and substance reasonably satisfactory to Agent, or

(q) Accounts owned by a target acquired in connection with a Permitted
Acquisition, until the completion of an appraisal and field examination with
respect to such target, in each case, reasonably satisfactory to Agent (which
appraisal and field examination may be conducted prior to the closing of such
Permitted Acquisition).

“Eligible Inventory” means Inventory of Borrower consisting of first quality
finished goods held for resale in the ordinary course of Borrowers’ business
that complies with each of the representations and warranties respecting
Eligible Inventory made in the Loan Documents, and that is not excluded as
ineligible by virtue of one or more of the excluding criteria set forth below;
provided, that such criteria may be revised from time to time by Agent in
Agent’s Permitted Discretion to address the results of any field examination or
appraisal performed by Agent from time to time after the Closing Date. In
determining the amount to be so included, Inventory shall be valued at the lower
of cost or market on a basis consistent with Borrowers’ historical accounting
practices. An item of Inventory shall not be included in Eligible Inventory if:

(a) a Borrower does not have good, valid, and marketable title thereto,

(b) a Borrower does not have actual and exclusive possession thereof (either
directly or through a bailee or agent of Borrower),

(c) it is not located at one of the locations in the continental United States
set forth on Schedule 4-24 to the Agreement (or in-transit from one such
location to another such location),

(d) it is in-transit to or from a location of Borrower (other than in-transit
from one location set forth on Schedule 4-24 to the Agreement to another
location set forth on Schedule 4-24 to the Agreement),

(e) it is located on real property leased by a Borrower or in a contract
warehouse or in the possession or control of a third party, in each case, unless
it is subject to a Collateral Access Agreement executed by the lessor,
warehouseman or other third party, as the case may be or Agent has established a
reserve with respect thereto, and unless it is segregated or otherwise
separately identifiable from goods of others, if any, stored on the premises,

(f) it is the subject of a bill of lading or other document of title,

(g) it is not subject to a valid and perfected first priority Agent’s Lien,

(h) it consists of goods returned or rejected by Borrower’s customers (other
than returned Inventory which is first quality and non-defective and which is
held for sale in the ordinary course of business),

(i) it consists of goods that are obsolete or slow moving, restrictive or custom
items, raw materials, work-in-process, or goods that constitute spare parts,
packaging and shipping materials, supplies used or consumed in Borrower’s
business, bill and hold goods, defective goods, “seconds,” or Inventory acquired
on consignment,

 

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(j) it is subject to third party trademark, licensing or other proprietary
rights, unless Agent is satisfied that such Inventory can be freely sold by
Agent on and after the occurrence of an Event of a Default despite such third
party rights,

(k) it was acquired in connection with a Permitted Acquisition, until the
completion of an appraisal and field examination of such Inventory, in each
case, reasonably satisfactory to Agent (which appraisal and field examination
may be conducted prior to the closing of such Permitted Acquisition), or

(l) it is located at either (i) a retail store location or (ii) any other
location having Inventory with an aggregate book value of less than $100,000.

“Eligible Transferee” means (a) any Lender (other than a Defaulting Lender), any
Affiliate of any Lender and any Related Fund of any Lender; and (b) (i) a
commercial bank organized under the laws of the United States or any state
thereof, and having total assets in excess of $1,000,000,000; (ii) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof, and having total assets in excess of $1,000,000,000; (iii)
a commercial bank organized under the laws of any other country or a political
subdivision thereof; provided that (A) (x) such bank is acting through a branch
or agency located in the United States or (y) such bank is organized under the
laws of a country that is a member of the Organization for Economic Cooperation
and Development or a political subdivision of such country, and (B) such bank
has total assets in excess of $1,000,000,000; (d) any other entity (other than a
natural person) that is an “accredited investor” (as defined in Regulation D
under the Securities Act) that extends credit or buys loans as one of its
businesses including insurance companies, investment or mutual funds and lease
financing companies, and having total assets in excess of $1,000,000,000; and
(f) during the continuation of an Event of Default, any other Person approved by
Agent; provided, that, no Loan Party or Affiliate of a Loan Party shall qualify
as an Eligible Transferee.

“Employee Benefit Plan” means any employee benefit plan within the meaning of
Section 3(3) of ERISA (a) that is maintained for employees of any Loan Party or
any ERISA Affiliate, (b) that has at any time within the preceding six (6) years
been maintained for the employees of any Loan Party or any current or former
ERISA Affiliate, (c) to which any Loan Party or any ERISA Affiliate makes
contributions or is required to make contributions, (d) to which any Loan Party
or any ERISA Affiliate has made or has been required to make contributions at
any time within the preceding six (6) years or (e) to which any Loan Party to
any ERISA Affiliate has, or has had at any time within the preceding six
(6) years, any liability, contingent or otherwise.

“EMU Legislation” means the legislative measures of the European Council for the
introduction of, changeover to or operation of a single or unified European
currency.

“Environmental Action” means any written complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other written communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or releases of Hazardous Materials (a) from any assets, properties, or
businesses of any Borrower, any Subsidiary of a Borrower, or any of their
predecessors in interest, (b) from adjoining properties or businesses, or
(c) from or onto any facilities which received Hazardous Materials generated by
any Borrower, any Subsidiary of a Borrower, or any of their predecessors in
interest.

“Environmental Law” means any applicable federal, state, provincial, foreign or
local statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy, or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case, to the extent binding on Parent
or its Subsidiaries, relating to the environment, the effect of the environment
on employee health, or Hazardous Materials, in each case as amended from time to
time.

 

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“Environmental Liabilities” means all liabilities, monetary obligations, losses,
damages, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts, or consultants, and costs of investigation and
feasibility studies), fines, penalties, sanctions, and interest incurred as a
result of any claim or demand, or Remedial Action required, by any Governmental
Authority or any third party, and which relate to any Environmental Action.

“Environmental Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities.

“Equipment” means equipment (as that term is defined in the Code).

“Equity Interest” means, with respect to a Person, all of the shares, options,
warrants, interests, participations, or other equivalents (regardless of how
designated) of or in such Person, whether voting or nonvoting, including capital
stock (or other ownership or profit interests or units), preferred stock, or any
other “equity security” (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the SEC under the Exchange Act).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute thereto.

“ERISA Affiliate” means (a) any Person subject to ERISA whose employees are
treated as employed by the same employer as the employees of Parent or its
Subsidiaries under IRC Section 414(b), (b) any trade or business subject to
ERISA whose employees are treated as employed by the same employer as the
employees of Parent or its Subsidiaries under IRC Section 414(c), (c) solely for
purposes of Section 302 of ERISA and Section 412 of the IRC, any organization
subject to ERISA that is a member of an affiliated service group of which Parent
or any of its Subsidiaries is a member under IRC Section 414(m), or (d) solely
for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person
subject to ERISA that is a party to an arrangement with Parent or any of its
Subsidiaries and whose employees are aggregated with the employees of Parent or
its Subsidiaries under IRC Section 414(o).

“EURIBOR” means, in relation to any Euro Denominated Loan and for the relevant
Interest Period, the percentage rate per annum determined by the Banking
Federation of the European Union for the duration of the applicable Interest
Period denominated in Euro, taken at or about 12:00 noon (Brussels time) on the
date which is two (2) Business Days prior to the commencement of such Interest
Period. In the event that such rate is not available at such time for any
reason, then “EURIBOR” with respect to such Euro Denominated Loan for such
Interest Period shall be at the rate at which deposits in Euros of $5,000,000
(or the US Dollar Equivalent thereof) and for a maturity comparable to such
Interest Period are offered by the principal London office of the Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m. London time on the date which is 2 Business Days prior to the
commencement of such Interest Period.

“Euro” or “€” refers to the single currency of the Participating Member States.

“Euro Denominated Letter of Credit” means each Letter of Credit denominated in
Euros at the time of the issuance thereof.

 

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“Euro Denominated Loan” means each Loan denominated in Euros at the time of the
incurrence thereof.

“Eurocurrency Base Rate” means, in relation to Loans denominated in (a) Euros,
EURIBOR, or (b) Sterling, the LIBOR Rate.

“Eurocurrency Base Rate Loans” means European Denominated Loans which bear
interest at the applicable Eurocurrency Base Rate.

“European Denominated Letter of Credit” means each Euro Denominated Letter of
Credit or Sterling Denominated Letter of Credit.

“European Denominated Loan” means each Euro Denominated Loan or Sterling
Denominated Loan.

“Event of Default” has the meaning specified therefor in Section 8 of the
Agreement.

“Excess Availability” means, as of any date of determination, the amount equal
to Availability minus the aggregate amount, if any, of all trade payables of
Loan Parties aged in excess of historical levels with respect thereto and all
book overdrafts of Loan Parties in excess of historical practices with respect
thereto, in each case as determined by Agent in its Permitted Discretion.

“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time
to time.

“Exchange Rate” means on any date, as determined by the Agent, the spot selling
rate posted by Reuters on its website for the sale of the applicable currency
for US Dollars at approximately 11:00 a.m., Local Time, on such date; provided,
that if, for any reason, no such spot rate is being quoted, the spot selling
rate shall be determined by reference to such publicly available service for
displaying exchange rates as may be reasonably selected by the Agent, or, in the
event no such service is available, such spot selling rate shall instead be the
rate reasonably determined by the Agent as the spot rate of exchange in the
market where its foreign currency exchange operations in respect of the
applicable currency are then being conducted, at or about 11:00 a.m., Local
Time, on the applicable date for the purchase of the relevant currency for
delivery two (2) Business Days later.

“Excluded Taxes” means (i) any tax imposed on the net income or net profits of
any Lender or any Participant (including any branch profits taxes), in each case
imposed by the jurisdiction (or by any political subdivision or taxing authority
thereof) in which such Lender or such Participant is organized or the
jurisdiction (or by any political subdivision or taxing authority thereof) in
which such Lender’s or such Participant’s principal office is located in each
case as a result of a present or former connection between such Lender or such
Participant and the jurisdiction or taxing authority imposing the tax (other
than any such connection arising solely from such Lender or such Participant
having executed, delivered or performed its obligations or received payment
under, or enforced its rights or remedies under the Agreement or any other Loan
Document); (ii) taxes resulting from a Lender’s or a Participant’s failure to
comply with the requirements of Section 16.2 of the Agreement, and (iii) any
United States federal withholding taxes that would be imposed on amounts payable
to a Foreign Lender based upon the applicable withholding rate in effect at the
time such Foreign Lender becomes a party to the Agreement (or designates a new
lending office), except that Taxes shall include (A) any amount that such
Foreign Lender (or its assignor, if any) was previously entitled to receive
pursuant to Section 16.1 of the Agreement, if any, with respect to such
withholding tax at the time such Foreign Lender becomes a party to the Agreement
(or designates a new lending office), and (B) additional United States federal
withholding taxes that may be imposed after the time such Foreign Lender becomes
a party to the Agreement (or designates a new lending office), as a result of a
change in law, rule, regulation, order or other decision with respect to any of
the foregoing by any Governmental Authority.

 

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“Existing Credit Facility” means the Loan Agreement, dated as of June 30, 2010,
by and among Parent, KS Sales and Bank of America, N.A., as amended,
supplemented, amended and restated, or otherwise modified, together with all
agreements, documents and instruments entered into in connection therewith.

“Existing Letters of Credit” means those letters of credit which are issued by
Wells Fargo and are described on Schedule E-2 to the Agreement.

“Existing Permitted Intercompany Indebtedness” means the Indebtedness existing
on the Closing Date which is set forth on Schedule 4.14 to the Agreement and
which is owing to a Loan Party by a Subsidiary of Parent that is not a Loan
Party.

“Extended Pay Accounts” means Accounts created by a Borrower which the Account
Debtor has failed to pay (a) within 90 days (but not more than 120 days) of the
original invoice date or (b) within 60 days (but not more than 90 days) of the
original due date.

“Extraordinary Advances” has the meaning specified therefor in
Section 2.3(d)(iii) of the Agreement.

“FATCA” means Sections 1471 through 1474 of the IRC and any regulations or
official interpretations thereof (including any Revenue Ruling, Revenue
Procedure, Notice or similar guidance issued by the U.S. Internal Revenue
Service thereunder as a precondition to relief or exemption from taxes under
such provisions).

“Fee Letter” means that certain fee letter, dated as of even date with the
Agreement, among Borrowers and Agent, in form and substance reasonably
satisfactory to Agent.

“Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal to, for each day during such period, 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 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 which is a Business Day, the average of the
quotations for such day on such transactions received by Agent from three
Federal funds brokers of recognized standing selected by it.

“Fixed Charges” means, with respect to any fiscal period and with respect to
Parent determined on a consolidated basis in accordance with GAAP, the sum,
without duplication, of (a) Interest Expense paid in cash (other than interest
paid-in-kind, amortization of financing fees, and other non-cash Interest
Expense) during such period, (b) principal payments in respect of Indebtedness
that are required to be paid in cash during such period, and (c) all federal,
state, and local income taxes paid in cash during such period and (d) all
Restricted Payments paid in cash during such period.

“Fixed Charge Coverage Ratio” means, with respect to Parent and its Subsidiaries
on a consolidated basis for any period, the ratio of (i) EBITDA for such period
minus Capital Expenditures made (to the extent not already incurred in a prior
period) or incurred during such period, to (ii) Fixed Charges for such period.

“Flow of Funds Agreement” means a flow of funds agreement, dated as of even date
herewith, in form and substance reasonably satisfactory to Agent, executed and
delivered by each Borrower and Agent.

 

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“Foreign Lender” means any Lender or Participant that is not a United States
person within the meaning of IRC section 7701(a)(30).

“Foreign Subsidiary Designated Account” means a Deposit Account of Subsidiary of
Parent which is not a Loan Party, which Deposit Account constitutes a Designated
Account.

“Funding Date” means the date on which a Borrowing occurs.

“Funding Losses” has the meaning specified therefor in Section 2.12(f) of the
Agreement.

“GAAP” means generally accepted accounting principles as in effect from time to
time in the United States, consistently applied.

“Governing Documents” means, with respect to any Person, the certificate or
articles of incorporation, by-laws, or other organizational documents of such
Person.

“Governmental Authority” means any federal, state, local, or other governmental
or administrative body, instrumentality, board, department, or agency or any
court, tribunal, administrative hearing body, arbitration panel, commission, or
other similar dispute-resolving panel or body.

“Guarantor” means, collectively, the following (together with their respective
successors and assigns): (a) K-Swiss Pacific Inc., a Massachusetts corporation;
(b) Royal Elastics Inc., a California corporation; (c) Royal Elastics, LLC, a
Delaware limited liability company; (d) K-Swiss NS Inc., a Delaware corporation;
and (e) each other Person that becomes a guarantor after the Closing Date
pursuant to Section 5.11 of the Agreement.

“Guaranty and Security Agreement” means a guaranty and security agreement, dated
as of even date with the Agreement, in form and substance reasonably
satisfactory to Agent, executed and delivered by each Loan Party to Agent.

“Hazardous Materials” means (a) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable laws or regulations as
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic
substances,” or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP
toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.

“Hedge Agreement” means a “swap agreement” as that term is defined in
Section 101(53B)(A) of the Bankruptcy Code.

“Hedge Obligations” means any and all obligations or liabilities, whether
absolute or contingent, due or to become due, now existing or hereafter arising,
of Parent or its Subsidiaries (including, without limitation, the Specified
Foreign Subsidiaries) arising under, owing pursuant to, or existing in respect
of Hedge Agreements entered into with one or more of the Hedge Providers.

“Hedge Provider” means Wells Fargo or any of its Affiliates.

 

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“Indebtedness” as to any Person means (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, or other
financial products, (c) all obligations of such Person as a lessee under Capital
Leases, (d) all obligations or liabilities of others secured by a Lien on any
asset of such Person, irrespective of whether such obligation or liability is
assumed, (e) all obligations of such Person to pay the deferred purchase price
of assets (other than trade payables incurred in the ordinary course of business
and repayable in accordance with customary trade practices and, for the
avoidance of doubt, other than royalty payments payable in the ordinary course
of business in respect of non-exclusive licenses), (f) all monetary obligations
of such Person owing under Hedge Agreements (which amount shall be calculated
based on the amount that would be payable by such Person if the Hedge Agreement
were terminated on the date of determination), (g) any Disqualified Equity
Interests of such Person, and (h) any obligation of such Person guaranteeing or
intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse) any obligation of any other Person
that constitutes Indebtedness under any of clauses (a) through (g) above. For
purposes of this definition, (i) the amount of any Indebtedness represented by a
guaranty or other similar instrument shall be the lesser of the principal amount
of the obligations guaranteed and still outstanding and the maximum amount for
which the guaranteeing Person may be liable pursuant to the terms of the
instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness
which is limited or is non-recourse to a Person or for which recourse is limited
to an identified asset shall be valued at the lesser of (A) if applicable, the
limited amount of such obligations, and (B) if applicable, the fair market value
of such assets securing such obligation.

“Indemnified Liabilities” has the meaning specified therefor in Section 10.3 of
the Agreement.

“Indemnified Person” has the meaning specified therefor in Section 10.3 of the
Agreement.

“Indemnified Taxes” means, any Taxes other than Excluded Taxes.

“Ineligible Institution” shall mean the Persons identified in writing to Agent
by Borrower on or prior to the Closing Date, which list of Persons is consented
to in writing by Agent (such consent not to be unreasonably withheld or
delayed).

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.

“Interest Election Request” means each request by any Borrower (or
Administrative Borrower on behalf of such Borrower) to Borrow LIBOR Rate Loans
or European Denominated Loans or to convert Loans into LIBOR Rate Loans or
European Denominated Loans, in each case pursuant to Section 2.12 of the
Agreement, which request shall be in the form of Exhibit L-1 or otherwise as
mutually agreed upon by Parent and Agent.

“Interest Expense” means, for any period, the aggregate of the interest expense
of Parent and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP.

“Interest Period” means, (a) with respect to each European Denominated Loan, a
period commencing on the date of the making of such Loan (or the continuation of
a Eurocurrency Base Rate Loan or the conversion of a Base Rate Loan to a
Eurocurrency Loan) and ending 1, 2 or 3 months thereafter and (b) with respect
to each Libor Rate Loan, a period commencing on the date of making of such Loan
(or the continuation of a Loan as a Libor Rate Loan or the conversion of a Loan
to a Libor Rate

 

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Loan and ending 1, 2 or 3 months thereafter; provided, that, in each case,
(i) interest shall accrue at the applicable rate based upon the Eurocurrency
Base Rate or the Libor Rate, as applicable from and including the first day of
each Interest Period to, but excluding, the day on which any Interest Period
expires, (ii) any Interest Period that would end on a day that is not a Business
Day shall be extended to the next succeeding Business Day unless such Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding Business Day, (iii) with respect to an Interest Period
that begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period), the Interest Period shall end on the last Business Day of
the calendar month that is 1, 2 or 3 months after the date on which the Interest
Period began, as applicable, and (iv) Borrowers may not elect an Interest Period
which will end after the Maturity Date.

“Inventory” means inventory (as that term is defined in the Code).

“Inventory Reserves” means, as of any date of determination, (a) Landlord
Reserves and (b) those reserves that Agent deems necessary or appropriate, in
its Permitted Discretion and subject to Section 2.1(c), to establish and
maintain (including reserves for slow moving Inventory and Inventory shrinkage)
with respect to Eligible Inventory or the Maximum Revolver Amount.

“Investment” means, with respect to any Person, any investment by such Person in
any other Person (including Affiliates) in the form of loans, guarantees,
advances, capital contributions (excluding (a) commission, travel, and similar
advances to officers and employees of such Person made in the ordinary course of
business, and (b) bona fide accounts receivable arising in the ordinary course
of business), or acquisitions of Indebtedness, Equity Interests, or all or
substantially all of the assets of such other Person (or of any division or
business line of such other Person), and any other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustment for increases or
decreases in value, or write-ups, write-downs, or write-offs with respect to
such Investment.

“IRC” means the Internal Revenue Code of 1986, as in effect from time to time.

“ISP” means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of
issuance).

“Issuer Document” means, with respect to any Letter of Credit, a letter of
credit application, a letter of credit agreement, or any other document,
agreement or instrument entered into (or to be entered into) by a Borrower in
favor of Issuing Lender or Underlying Issuer and relating to such Letter of
Credit.

“Issuing Lender” means Wells Fargo or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent, agrees, in such Lender’s
sole discretion, to become an Issuing Lender for the purpose of issuing Letters
of Credit or Reimbursement Undertakings pursuant to Section 2.11 of the
Agreement and Issuing Lender shall be a Lender.

“Judgment Currency” has the meaning specified in Section 17.13 of the Agreement.

“Landlord Reserve” means, as to each location at which a Borrower has Inventory
or books and records located and as to which a Collateral Access Agreement has
not been received by Agent, a reserve in an amount equal to the greater of
(a) the number of months rent for which the landlord will have, under applicable
law, a Lien in the Inventory of Borrower to secure the payment of rent or other
amounts under the lease relative to such location, or (b) 3 months rent under
the lease relative to such location.

 

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“Lender” has the meaning set forth in the preamble to the Agreement, shall
include Issuing Lender and the Swing Lender, and shall also include any other
Person made a party to the Agreement pursuant to the provisions of Section 13.1
of the Agreement and “Lenders” means each of the Lenders or any one or more of
them.

“Lender Group” means each of the Lenders (including Issuing Lender and the Swing
Lender) and Agent, or any one or more of them.

“Lender Group Expenses” means all (a) costs or expenses (including taxes and
insurance premiums) required to be paid by Parent or its Subsidiaries under any
of the Loan Documents that are paid, advanced, or incurred by the Lender Group,
(b) documented out-of-pocket fees or charges paid or incurred by Agent in
connection with the Lender Group’s transactions with Parent or its Subsidiaries
under any of the Loan Documents, including, fees or charges for background
checks, OFAC/PEP searches, photocopying, notarization, couriers and messengers,
telecommunication, public record searches, filing fees, recording fees,
publication, appraisal (including periodic collateral appraisals or business
valuations to the extent of the fees and charges (and up to the amount of any
limitation) contained in the Agreement or the Fee Letter), real estate surveys,
real estate title policies and endorsements, and environmental audits,
(c) Agent’s customary fees and charges (as adjusted from time to time) with
respect to the disbursement of funds (or the receipt of funds) to or for the
account of Borrowers (whether by wire transfer or otherwise), together with any
out-of-pocket costs and expenses incurred in connection therewith, (d) customary
charges imposed or incurred by Agent resulting from the dishonor of checks
payable by or to any Loan Party, (e) reasonable documented out-of-pocket costs
and expenses paid or incurred by the Lender Group to correct any default or
enforce any provision of the Loan Documents, or during the continuance of an
Event of Default, in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated, (f) field examination, appraisal, and valuation fees and expenses
of Agent related to any field examinations, appraisals, or valuation to the
extent of the fees and charges (and up to the amount of any limitation) provided
in Section 2.10 of the Agreement, (g) Agent’s reasonable costs and expenses
(including reasonable documented attorneys fees and expenses) relative to third
party claims or any other lawsuit or adverse proceeding paid or incurred,
whether in enforcing or defending the Loan Documents or otherwise in connection
with the transactions contemplated by the Loan Documents, Agent’s Liens in and
to the Collateral, or the Lender Group’s relationship with Parent or any of its
Subsidiaries, (h) Agent’s reasonable documented costs and expenses (including
reasonable documented attorneys fees and due diligence expenses) incurred in
advising, structuring, drafting, reviewing, administering (including travel,
meals, and lodging), syndicating (including reasonable costs and expenses
relative to CUSIP, DXSyndicate™, SyndTrak or other communication costs incurred
in connection with a syndication of the loan facilities), or amending, waiving,
or modifying the Loan Documents, (i) Agent’s and each Lender’s reasonable
documented costs and expenses (including reasonable documented attorneys,
accountants, consultants, and other advisors fees and expenses) incurred in
terminating, enforcing (including attorneys, accountants, consultants, and other
advisors fees and expenses incurred in connection with a “workout,” a
“restructuring,” or an Insolvency Proceeding concerning Parent or any of its
Subsidiaries or in exercising rights or remedies under the Loan Documents), or
defending the Loan Documents, irrespective of whether a lawsuit or other adverse
proceeding is brought, or in taking any enforcement action or any Remedial
Action with respect to the Collateral, and (j) the fees, charges, commissions
and costs provided for in Section 2.11(j) of the Agreement (including any
fronting fees) and all other fees, charges, commissions, costs and expenses for
amendments, renewals, extensions, transfers, or drawings from time to time
charged by the Underlying Issuer or incurred or charged by Issuing Lender in
respect of Letters of Credit and out-of-pocket fees,

 

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costs, and expenses charged by the Underlying Issuer or incurred or charged by
Issuing Lender in connection with the issuance, amendment, renewal, extension,
or transfer of, or drawing under, any Letter of Credit or any demand for payment
thereunder.

“Lender Group Representatives” has the meaning specified therefor in
Section 17.9 of the Agreement.

“Lender-Related Person” means, with respect to any Lender, such Lender, together
with such Lender’s Affiliates, officers, directors, employees, attorneys, and
agents.

“Letter of Credit” means a letter of credit (as that term is defined in the
Code) issued by Issuing Lender or a letter of credit (as that term is defined in
the Code) issued by Underlying Issuer, as the context requires.

“Letter of Credit Collateralization” means either (a) providing cash collateral
(pursuant to documentation reasonably satisfactory to Agent, including
provisions that specify that the Letter of Credit Fees and all fees, charges and
commissions provided for in Section 2.11(j) of the Agreement (including any
fronting fees) will continue to accrue while the Letters of Credit are
outstanding) to be held by Agent for the benefit of the Revolving Lenders in an
amount equal to 105% (or, in the case of Foreign Denominated Letters of Credit,
115%) of the then existing Letter of Credit Usage, (b) delivering to Agent
documentation executed by all beneficiaries under the Letters of Credit, in form
and substance reasonably satisfactory to Agent and Issuing Lender, terminating
all of such beneficiaries’ rights under the Letters of Credit, or (c) providing
Agent with a standby letter of credit, in form and substance reasonably
satisfactory to Agent, from a commercial bank acceptable to Agent (in its sole
discretion) in an amount equal to 105% (or, in the case of Foreign Denominated
Letters of Credit, 115%) of the then existing Letter of Credit Usage (it being
understood that the Letter of Credit Fee and all fronting fees set forth in the
Agreement will continue to accrue while the Letters of Credit are outstanding
and that any such fees that accrue must be an amount that can be drawn under any
such standby letter of credit).

“Letter of Credit Disbursement” means a payment made by Issuing Lender or
Underlying Issuer pursuant to a Letter of Credit.

“Letter of Credit Exposure” means, as of any date of determination with respect
to any Lender, such Lender’s Pro Rata Share of the Letter of Credit Usage on
such date.

“Letter of Credit Fee” has the meaning specified therefor in Section 2.6(b) of
the Agreement.

“Letter of Credit Usage” means, as of the date of determination, the sum of
(a) 100% of the aggregate undrawn amount of all outstanding Letters of Credit,
plus (b) 100% of the amount of outstanding time drafts accepted by an Underlying
Issuer as a result of drawings under Underlying Letters of Credit.

“LIBOR Rate” means (a) when used in relation to a LIBOR Rate Loan, the rate per
annum rate appearing on Bloomberg’s L.P.’s (the “Service”) Page BBAM1/(Official
BBA USD Dollar Libor Fixings) (or on any successor or substitute page of such
Service, or any successor to or substitute for such Service) 2 Business Days
prior to the commencement of the requested Interest Period, for a term and in an
amount comparable to the Interest Period and the amount of the Libor Rate Loan
requested (whether as an initial LIBOR Rate Loan or as a continuation of a LIBOR
Rate Loan or as a conversion of a Base Rate Loan, a Euro Denominated Loan or a
Sterling Denominated Loan to a LIBOR Rate Loan) by Borrowers in accordance with
the Agreement, which determination shall be conclusive in the absence of
manifest error; provided, that, in the event that such rate is not available at
such time for any reason, then the

 

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“LIBOR Rate” with respect to such LIBOR Rate Loan for such Interest Period shall
be the rate at which deposits in US Dollars of $5,000,000 and for a maturity
comparable to such Interest Period are offered by the principal London office of
the Agent in immediately available funds in the London interbank market at
approximately 11:00 a.m. London time on the day which is 2 Business Days prior
to the commencement of such Interest Period, and (b) when used in relation to a
Sterling Denominated Loan, the rate per annum equal to the British Bankers’
Association Interest Settlement Rate for the duration of the applicable Interest
Period denominated in Sterling taken at or about 11:00 a.m. (London time) on the
date which is 2 Business Days prior to the commencement of such Interest Period
as determined by the Agent, from time to time for purposes of providing
quotations of interest rates applicable to deposits in Sterling in the London
interbank market); provided, that, in the event that such rate is not available
at such time for any reason, then the “LIBOR Rate” with respect to such Sterling
Denominated Loan for such Interest Period shall be the rate at which deposits in
Sterling of $5,000,000 (or the US Dollar Equivalent thereof) and for a maturity
comparable to such Interest Period are offered by the principal London office of
the Agent in immediately available funds in the London interbank market at
approximately 11:00 a.m. London time on the day which is 2 Business Days prior
to the commencement of such Interest Period.

“LIBOR Rate Loan” means each portion of a Dollar Denominated Loan that bears
interest at a rate determined by reference to the LIBOR Rate.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, easement, lien (statutory or other),
security interest, or other security arrangement and any other preference,
priority, or preferential arrangement of any kind or nature whatsoever,
including any conditional sale contract or other title retention agreement, the
interest of a lessor under a Capital Lease and any synthetic or other financing
lease having substantially the same economic effect as any of the foregoing.

“Loan” shall mean any Revolving Loan, Swing Loan, or Extraordinary Advance made
(or to be made) hereunder.

“Loan Account” has the meaning specified therefor in Section 2.9 of the
Agreement.

“Loan Documents” means the Agreement, the Control Agreements, the Controlled
Account Agreements, any Copyright Security Agreement, any Borrowing Base
Certificate, the Fee Letter, the Guaranty and Security Agreements, any Issuer
Documents, the Letters of Credit, the Mortgages, any Patent Security Agreement,
any Trademark Security Agreement, any note or notes executed by a Borrower in
connection with the Agreement and payable to any member of the Lender Group, and
any other instrument or agreement entered into, now or in the future, by Parent
or any of its Subsidiaries and any member of the Lender Group in connection with
the Agreement.

“Loan Party” means any Borrower or Guarantor.

“Local Time” means (a) local time in London, with respect to the terms for the
receipt of a request to borrow European Denominated Loans or for the issuance of
European Denominated Letters of Credit, the payment by Loan Parties in respect
of European Denominated Loans or European Denominated Letters of Credit, and the
reimbursement obligations in respect of European Denominated Letters of Credit,
and (b) California time, with respect to all other matters.

“Mandatory Cost” shall mean the cost imputed to each Lender in compliance with
any reserve asset requirements of the European Central Bank.

 

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“Margin Stock” as defined in Regulation U of the Board of Governors as in effect
from time to time.

“Material Adverse Effect” means (a) a material adverse effect in the business,
operations, results of operations, assets, liabilities or financial condition of
Parent and its Subsidiaries, taken as a whole, (b) a material impairment of
Parent’s and its Subsidiaries ability to perform their obligations under the
Loan Documents to which they are parties or of the Lender Group’s ability to
enforce the Obligations or realize upon the Collateral (other than as a result
of as a result of an action taken or not taken that is solely in the control of
Agent), or (c) a material impairment of the enforceability or priority of
Agent’s Liens with respect to all or a material portion of the Collateral as a
result of an action or failure to act on the part of Parent or its Subsidiaries.

“Maturity Date” means April 23, 2016.

“Maximum Revolver Amount” means $35,000,000 decreased by the amount of
reductions in the Revolver Commitments made in accordance with Section 2.4(c) of
the Agreement.

“Moody’s” has the meaning specified therefor in the definition of Cash
Equivalents.

“Mortgages” means, individually and collectively, one or more mortgages, deeds
of trust, or deeds to secure debt, executed and delivered by Parent or its
Subsidiaries in favor of Agent, in form and substance reasonably satisfactory to
Agent, that encumber the Real Property Collateral.

“Multiemployer Plan” means any multiemployer plan within the meaning of
Section 3(37) of ERISA with respect to which any Loan Party, any of their
Subsidiaries, or any of their ERISA Affiliates has an obligation to contribute
or otherwise has any liability.

“Net Recovery Percentage” means, as of any date of determination, the percentage
of the book value of Borrowers’ Inventory that is estimated to be recoverable in
an orderly liquidation of such Inventory net of all associated costs and
expenses of such liquidation, such percentage to be determined as to each
category of Inventory and to be as specified in the most recent appraisal
received by Agent from an appraisal company selected by Agent.

“Non-Consenting Lender” has the meaning specified therefor in Section 14.2(a) of
the Agreement.

“Non-Defaulting Lender” means each Lender other than a Defaulting Lender.

“Obligations” means (a) all loans (including the Revolving Loans (inclusive of
Extraordinary Advances and Swing Loans)), debts, principal, interest (including
any interest that accrues after the commencement of an Insolvency Proceeding,
regardless of whether allowed or allowable in whole or in part as a claim in any
such Insolvency Proceeding), reimbursement or indemnification obligations with
respect to Reimbursement Undertakings or with respect to Letters of Credit
(irrespective of whether contingent), premiums, liabilities (including all
amounts charged to the Loan Account pursuant to the Agreement), obligations
(including indemnification obligations), fees (including the fees provided for
in the Fee Letter), Lender Group Expenses (including any fees or expenses that
accrue after the commencement of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any such Insolvency
Proceeding), guaranties, and all covenants and duties of any other kind and
description owing by any Loan Party arising out of, under, pursuant to, in
connection with, or evidenced by the Agreement or any of the other Loan
Documents and irrespective of whether for the payment of money, whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including all interest not paid when due and all other
expenses or other amounts

 

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that Borrower is required to pay or reimburse by the Loan Documents or by law or
otherwise in connection with the Loan Documents, (b) all debts, liabilities, or
obligations (including reimbursement obligations, irrespective of whether
contingent) owing by any Borrower or any other Loan Party to an Underlying
Issuer now or hereafter arising from or in respect of an Underlying Letters of
Credit, and (c) all Bank Product Obligations. Without limiting the generality of
the foregoing, the Obligations of Borrowers under the Loan Documents include the
obligation to pay (i) the principal of the Revolving Loans, (ii) interest
accrued on the Revolving Loans, (iii) the amount necessary to reimburse Issuing
Lender for amounts paid or payable pursuant to Letters of Credit or
Reimbursement Undertakings and the amount necessary to reimburse Underlying
Issuer for amounts paid or payable pursuant to Letters of Credit, (iv) Letter of
Credit commissions, charges, expenses, and fees, (v) Lender Group Expenses,
(vi) fees payable under the Agreement or any of the other Loan Documents, and
(vii) indemnities and other amounts payable by any Loan Party under any Loan
Document. Any reference in the Agreement or in the Loan Documents to the
Obligations shall include all or any portion thereof and any extensions,
modifications, renewals, or alterations thereof, both prior and subsequent to
any Insolvency Proceeding.

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the
Treasury.

“Originating Lender” has the meaning specified therefor in Section 13.1(e) of
the Agreement.

“Overadvance” means, as of any date of determination, that the Revolver Usage is
greater than any of the limitations set forth in Section 2.1 or Section 2.11.

“Parent” has the meaning specified therefor in the preamble to the Agreement.

“Participant” has the meaning specified therefor in Section 13.1(e) of the
Agreement.

“Participant Register” has the meaning set forth in Section 13.1(i) of the
Agreement.

“Participating Member State” means each State so described in any EMU
Legislation, and includes, without limitation, each member State of the European
Community that adopts or has adopted the Euro as its lawful currency in
accordance with EMU Legislation.

“Patent Security Agreement” has the meaning specified therefor in the Guaranty
and Security Agreement.

“Patriot Act” has the meaning specified therefor in Section 4.13 of the
Agreement.

“PBGC” means the Pension Benefit Guaranty Corporation or any successor agency.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan,
which is subject to the provisions of Title IV of ERISA or Section 412 of the
Code.

“Permitted Acquisition” means any Acquisition so long as:

(a) no Default or Event of Default shall have occurred and be continuing or
would result from the consummation of the proposed Acquisition and the proposed
Acquisition is consensual,

(b) no Indebtedness will be incurred, assumed, or would exist with respect to
Parent or its Subsidiaries as a result of such Acquisition, other than
Indebtedness permitted under clauses (f), (g) or (m) of the definition of
Permitted Indebtedness and no Liens will be incurred, assumed, or would exist
with respect to the assets of Parent or its Subsidiaries as a result or such
Acquisition other than Permitted Liens,

 

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(c) Administrative Borrower has provided Agent with written confirmation,
supported by reasonably detailed calculations, that on a pro forma basis
(including pro forma adjustments arising out of events which are directly
attributable to such proposed Acquisition, are factually supportable, and are
expected to have a continuing impact, in each case, determined as if the
combination had been accomplished at the beginning of the relevant period; such
eliminations and inclusions to be mutually and reasonably agreed upon by Parent
and Agent created by adding the historical combined financial statements of
Parent (including the combined financial statements of any other Person or
assets that were the subject of a prior Permitted Acquisition during the
relevant period) to the historical consolidated financial statements of the
Person to be acquired (or the historical financial statements related to the
assets to be acquired) pursuant to the proposed Acquisition, Parent and its
Subsidiaries (i) would have been in compliance with the financial covenants in
Section 7 of the Agreement and would have had a Fixed Charge Coverage Ratio of
not less than 1.0:1.0, in each case for the twelve month period ended
immediately prior to the proposed date of consummation of such proposed
Acquisition, (ii) are projected to be in compliance with the financial covenants
in Section 7 of the Agreement for the twelve month period ended for the twelve
month period immediately after the proposed date of consummation of such
proposed Acquisition,

(d) Administrative Borrower has provided Agent with its due diligence package
relative to the proposed Acquisition, including forecasted balance sheets,
profit and loss statements, and cash flow statements of the Person or assets to
be acquired, all prepared on a basis consistent with such Person’s (or assets’)
historical financial statements, together with appropriate supporting details
and a statement of underlying assumptions for the 1 year period following the
date of the proposed Acquisition, on a quarter by quarter basis), in form and
substance (including as to scope and underlying assumptions) reasonably
satisfactory to Agent,

(e) Borrowers shall have Availability in an amount equal to or greater than
$10,000,000 immediately after giving effect to the consummation of the proposed
Acquisition,

(f) the assets being acquired or the Person whose Equity Interests are being
acquired did not have negative EBITDA during the 12 consecutive month period
most recently concluded prior to the date of the proposed Acquisition,

(g) Administrative Borrower has provided Agent with written notice of the
proposed Acquisition at least 15 Business Days prior to the anticipated closing
date of the proposed Acquisition and, not later than 5 Business Days prior to
the anticipated closing date of the proposed Acquisition, copies of the
acquisition agreement and other material documents relative to the proposed
Acquisition, which agreement and documents must be reasonably acceptable to
Agent,

(h) the assets being acquired (other than a de minimis amount of assets in
relation to Parent’s and its Subsidiaries’ total assets), or the Person whose
Equity Interests are being acquired, are useful in or engaged in, as applicable,
the business of Parent and its Subsidiaries or a business reasonably related
thereto,

(i) the assets being acquired (other than a de minimis amount of assets in
relation to the assets being acquired) are located within the United States or
the Person whose Equity Interests are being acquired is organized in a
jurisdiction located within the United States,

 

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(j) the subject assets or Equity Interests, as applicable, are being acquired
directly by a Borrower or one of its Subsidiaries that is a Loan Party, and, in
connection therewith, such Borrower or the applicable Loan Party shall have
complied with Section 5.11 or 5.12 of the Agreement, as applicable, of the
Agreement and, in the case of an acquisition of Equity Interests, such Borrower
or the applicable Loan Party shall have demonstrated to Agent that the new Loan
Parties have received consideration sufficient to make the joinder documents
binding and enforceable against such new Loan Parties, and

(k) the purchase consideration payable in respect of all Permitted Acquisitions
(including the proposed Acquisition and including deferred payment obligations)
shall not exceed $5,000,000 during any fiscal year.

“Permitted Discretion” means a determination made in the exercise of reasonable
(from the perspective of a secured asset-based lender) business judgment based
on how an asset-based lender with similar rights providing a credit facility of
the type provided under this Agreement would act in similar circumstances at the
time with the information then available to it.

“Permitted Dispositions” means:

(a) sales, abandonment, or other dispositions of Equipment that is substantially
worn, damaged, or obsolete or no longer used or useful in the ordinary course of
business and leases or subleases of Real Property not useful in the conduct of
the business of Parent and its Subsidiaries,

(b) sales of Inventory to buyers in the ordinary course of business,

(c) the use or transfer of money or Cash Equivalents in a manner that is not
prohibited by the terms of the Agreement or the other Loan Documents,

(d) the licensing of patents, trademarks, copyrights, and other intellectual
property rights in the ordinary course of business so long as any such
transaction shall not adversely affect, limit or restrict the rights of Agent to
use any Intellectual Property to sell or otherwise dispose of any Inventory or
other Collateral in the United States,

(e) the granting of Permitted Liens,

(f) the sale or discount, in each case without recourse, of accounts receivable
arising in the ordinary course of business, but only in connection with the
compromise or collection thereof,

(g) any involuntary loss, damage or destruction of property,

(h) any involuntary condemnation, seizure or taking, by exercise of the power of
eminent domain or otherwise, or confiscation or requisition of use of property,

(i) the leasing or subleasing of assets of Parent or its Subsidiaries in the
ordinary course of business,

(j) the sale or issuance of Equity Interests (other than Disqualified Equity
Interests) of Parent,

(k) (i) the lapse of registered patents, trademarks, copyrights and other
intellectual property of Parent and its Subsidiaries to the extent not
economically desirable in the conduct of their business or (ii) the abandonment
of patents, trademarks, copyrights, or other intellectual property rights in the
ordinary course of business so long as (in each case under clauses (i) and
(ii)), (A) with respect to copyrights, such copyrights are not material revenue
generating copyrights, and (B) such lapse is not materially adverse to the
interests of the Lender Group,

 

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(l) the making of Restricted Payments that are expressly permitted to be made
pursuant to the Agreement,

(m) the making of Permitted Investments,

(n) the sale or other disposition of property by a Loan Party to a Loan Party,
by a Subsidiary of Parent that is not a Loan Party to a Subsidiary of Parent
that is not a Loan Party Subsidiary, or by a Subsidiary of Parent that is not a
Loan Party to a Loan Party; provided, that, (i) if such transaction constitutes
an Investment, such transaction is permitted under Section 6.9 of the Agreement
and (ii) to the extent of any security interests and lien of Agent with respect
to such property prior to its sale or other disposition, the security interest
and lien of Agent on such property shall continue in all respects and shall not
be deemed released or terminated as a result of such sale or other disposition
and Borrowers and Guarantors shall execute and deliver such agreements,
documents and instruments as Agent may request with respect thereto;

(o) dispositions of assets acquired by Parent and its Subsidiaries pursuant to a
Permitted Acquisition consummated within 12 months of the date of the proposed
disposition so long as (i) the consideration received for the assets to be so
disposed is at least equal to the fair market value of such assets, (ii) the
assets to be so disposed are not necessary or economically desirable in
connection with the business of Parent and its Subsidiaries, (iii) the assets to
be so disposed are readily identifiable as assets acquired pursuant to the
subject Permitted Acquisition and (iv) no Event of Default shall have occurred
and be continuing or would result therefrom, and

(p) sales or dispositions of assets (other than Accounts and Inventory) so long
as (i) the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof, (ii) no less than 50% thereof shall be
paid in cash, (iii) no Event of Default shall have occurred and be continuing or
would result therefrom and (iv) the aggregate book value of all such assets
shall not exceed $1,500,000 during any fiscal year.

“Permitted Holder” means the collective reference to (a) Steven Nichols, (b) the
heirs, executors, administrators, testamentary trustees, legatees or
beneficiaries of Steven Nichols and (c) a trust, the beneficiaries which, or a
corporation, partnership or limited liability company, the stockholders or
general or limited partners or members of which, include only Steven Nichols or
his spouse or lineal descendants, in each case to whom any Person set forth in
(a) or (b) or any such trust, corporation, partnership or limited liability
company has transferred the beneficial ownership of any Equity Interest of
Parent.

“Permitted Indebtedness” means:

(a) Indebtedness evidenced by the Agreement or the other Loan Documents, as well
as Indebtedness owed to Underlying Issuers with respect to Underlying Letters of
Credit,

(b) Indebtedness set forth on Schedule 4.14 to the Agreement (including, without
limitation, the existing letters of credit issued by Bank of America and the
Existing Permitted Intercompany Indebtedness, which in each case are listed on
such Schedule) and, except in the case of such letters of credit, any
Refinancing Indebtedness in respect of such Indebtedness,

(c) Permitted Purchase Money Indebtedness and any Refinancing Indebtedness in
respect of such Indebtedness,

 

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(d) endorsement of instruments or other payment items for deposit,

(e) Indebtedness consisting of (i) unsecured guarantees incurred in the ordinary
course of business with respect to surety and appeal bonds, performance bonds,
bid bonds, appeal bonds, completion guarantee and similar obligations;
(ii) unsecured guarantees arising with respect to customary indemnification
obligations to purchasers in connection with Permitted Dispositions; and
(iii) unsecured guarantees with respect to Indebtedness of Loan Parties to the
extent that the Person that is obligated under such guaranty could have incurred
such underlying Indebtedness,

(f) unsecured Indebtedness of Parent that is incurred on the date of the
consummation of a Permitted Acquisition solely for the purpose of consummating
such Permitted Acquisition so long as (i) no Event of Default has occurred and
is continuing or would result therefrom, (ii) such unsecured Indebtedness is not
incurred for working capital purposes, (iii) such unsecured Indebtedness does
not mature prior to the date that is 12 months after the Maturity Date,
(iv) such unsecured Indebtedness does not amortize until 12 months after the
Maturity Date, and (v) such Indebtedness is subordinated in right of payment to
the Obligations on terms and conditions reasonably satisfactory to Agent,

(g) Acquired Indebtedness in an amount not to exceed $500,000 outstanding at any
one time,

(h) Indebtedness incurred in the ordinary course of business under performance,
surety, statutory, or appeal bonds,

(i) Indebtedness owed to any Person providing property, casualty, liability, or
other insurance to Parent or any of its Subsidiaries, so long as the amount of
such Indebtedness is not in excess of the amount of the unpaid cost of, and
shall be incurred only to defer the cost of, such insurance for the year in
which such Indebtedness is incurred and such Indebtedness is outstanding only
during such year,

(j) the incurrence by Parent or its Subsidiaries of Indebtedness under Hedge
Agreements that are incurred for the bona fide purpose of hedging the interest
rate, commodity, or foreign currency risks associated with Parent’s and its
Subsidiaries’ operations and not for speculative purposes,

(k) Indebtedness incurred in the ordinary course of business in respect of
credit cards, credit card processing services, debit cards, stored value cards,
purchase cards (including so-called “procurement cards” or “P-cards”), or Cash
Management Services, ,

(l) unsecured Indebtedness of Parent owing to former employees, officers, or
directors (or any spouses, ex-spouses, or estates of any of the foregoing)
incurred in connection with the repurchase or redemption by Parent of the Equity
Interests of Parent that has been issued to such Persons, so long as (i) no
Default or Event of Default has occurred and is continuing or would result from
the incurrence of such Indebtedness, (ii) the aggregate amount of all such
Indebtedness outstanding at any one time does not exceed $500,000, and
(iii) such Indebtedness is subordinated to the Obligations on terms and
conditions reasonably acceptable to Agent,

(m) unsecured Indebtedness owing to sellers of assets or Equity Interests to a
Loan Party that is incurred by the applicable Loan Party in connection with the
consummation of one or more Permitted Acquisitions so long as (i) the aggregate
principal amount for all such unsecured Indebtedness does not exceed $500,000 at
any one time outstanding, (ii) is subordinated to the Obligations on terms and
conditions reasonably acceptable to Agent, and (iii) is otherwise on terms and
conditions (including all economic terms and the absence of covenants)
reasonably acceptable to Agent,

 

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(n) contingent liabilities in respect of any indemnification obligation,
adjustment of purchase price, non-compete, or similar obligation of Parent or
the applicable Loan Party incurred in connection with the consummation of one or
more Permitted Acquisitions,

(o) Indebtedness composing Permitted Investments,

(p) unsecured Indebtedness incurred in respect of netting services, overdraft
protection, and other like services, in each case, incurred in the ordinary
course of business,

(q) in addition to any Indebtedness permitted under clause (o) of this
definition, other indebtedness in an aggregate outstanding principal amount not
to exceed $1,000,000 at any time outstanding for all Subsidiaries of Parent that
are not Loan Parties; provided, that such Indebtedness is not directly or
indirectly recourse to any of the Loan Parties or of their respective assets,

(r) accrual of interest, accretion or amortization of original issue discount,
or the payment of interest in kind, in each case, on Indebtedness that otherwise
constitutes Permitted Indebtedness,

(s) unsecured subordinated Indebtedness, the aggregate outstanding amount of
which does not exceed $500,000 so long as (i) such unsecured Indebtedness is
subordinated in right of payment to the Obligations on terms and conditions
reasonably acceptable to Agent, and (ii) such unsecured Indebtedness is
otherwise on terms and conditions reasonably acceptable to Agent, and

(t) any other unsecured Indebtedness incurred by Parent or any of its
Subsidiaries in an aggregate outstanding amount not to exceed $5,000,000 at any
one time; provided, that, (i) such Indebtedness shall be on terms and conditions
reasonably acceptable to Agent; (ii) as of the date of the incurrence of any
such Indebtedness and immediately after giving effect thereto, no Event of
Default has occurred and is continuing, and (iii) the Loan Parties shall be in
pro forma compliance with each financial covenant in Section 7 of the Agreement
for the test period most recently ended prior to such incurrence, determined as
if such Indebtedness was incurred on the first day of such test period.

Notwithstanding anything to the contrary contained on any of the Loan Documents,
Permitted Indebtedness shall not include (1) any guarantees by a Loan Party of
any Indebtedness of any Subsidiary of Parent that is not a Loan Party, except
(x) guaranties by a Loan Party of Indebtedness of such Subsidiary consisting of
Bank Product Obligations and (y) as otherwise agreed in writing by Agent or
(2) any Indebtedness of a Loan Party owing to a Subsidiary of Parent that is not
a Loan Party.

“Permitted Intercompany Advances” means loans made by (a) a Loan Party to
another Loan Party, (b) a Subsidiary of Parent that is not a Loan Party to
another Subsidiary of Parent that is not a Loan Party, (c) [Reserved], and (d) a
Loan Party to a Subsidiary of Parent that is not a Loan Party so long as, in the
case of this clause (d), (i) at the time of the making of such loan under this
clause (d), no Event of Default has occurred and is continuing or would result
therefrom, (ii) Borrowers have Excess Availability of $10,000,000 or greater
immediately after giving effect to each such loan, (iii) the aggregate
outstanding principal amount of all such loans under this clause (d) at any
time, plus the aggregate outstanding principal amount of all Existing Permitted
Intercompany Indebtedness, shall not exceed $30,000,000 and (iv) the Loan
Parties shall be in pro forma compliance with each financial covenant in
Section 7 of the Agreement for the tested period most recently ended prior to
the making of any such loan under this clause (d) determined as if such loan was
made on the first day of such period.

“Permitted Investments” means:

(a) Investments in cash and Cash Equivalents,

 

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(b) Investments in negotiable instruments deposited or to be deposited for
collection in the ordinary course of business,

(c) advances made in connection with purchases of goods or services in the
ordinary course of business,

(d) Investments received in settlement of amounts due to any Loan Party or any
of its Subsidiaries effected in the ordinary course of business or owing to any
Loan Party or any of its Subsidiaries as a result of Insolvency Proceedings
involving an account debtor or upon the foreclosure or enforcement of any Lien
in favor of a Loan Party or its Subsidiaries,

(e) Investments owned by any Loan Party or any of its Subsidiaries on the
Closing Date and set forth on Schedule P-1 to the Agreement (including, without
limitation, Investments consisting of Existing Permitted Intercompany
Indebtedness),

(f) guarantees permitted under the definition of Permitted Indebtedness,

(g) Permitted Intercompany Advances,

(h) Equity Interests or other securities acquired in connection with the
satisfaction or enforcement of Indebtedness or claims due or owing to a Loan
Party or its Subsidiaries (in bankruptcy of customers or suppliers or otherwise
outside the ordinary course of business) or as security for any such
Indebtedness or claims,

(i) deposits of cash made in the ordinary course of business to secure
performance of operating leases,

(j) (i) non-cash loans and advances to employees, officers, and directors of
Parent or any of its Subsidiaries for the purpose of purchasing Equity Interests
in Parent so long as the proceeds of such loans are used in their entirety to
purchase such Equity Interests in Parent, and (ii) loans and advances to
employees and officers of Parent or any of its Subsidiaries in the ordinary
course of business for any other business purpose and in an aggregate amount not
to exceed $500,000 at any one time,

(k) Permitted Acquisitions,

(l) Investments in the form of capital contributions and the acquisition of
Equity Interests made by any Loan Party in any other Loan Party (other than
capital contributions to or the acquisition of Equity Interests of Parent),

(m) Investments resulting from entering into (i) Bank Product Agreements, or
(ii) agreements relative to Indebtedness that is permitted under clause (j) of
the definition of Permitted Indebtedness,

(n) equity Investments by any Loan Party in any Subsidiary of such Loan Party
which is required by law to maintain a minimum net capital requirement or as may
be otherwise required by applicable law,

(o) Investments held by a Person acquired in a Permitted Acquisition to the
extent that such Investments were not made in contemplation of or in connection
with such Permitted Acquisition and were in existence on the date of such
Permitted Acquisition,

 

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(p) so long as no Event of Default has occurred and is continuing or would
result therefrom, Excess Availability will be $10,000,000 or greater immediately
after giving effect to each such Investment, and the Loan Parties shall be in
pro forma compliance with each financial covenant in Section 7 of the Agreement
for the applicable test period most recently ended prior to the making of any
such Investment determined as if such Investment was made on the first day of
such period, any other Investments in an aggregate amount not to exceed
$3,000,000 during the term of the Agreement.

“Permitted Liens” means

(a) Liens granted to, or for the benefit of, Agent to secure the Obligations,

(b) Liens for unpaid taxes, assessments, or other governmental charges or levies
that either (i) are not yet delinquent, or (ii) do not have priority over
Agent’s Liens and the underlying taxes, assessments, or charges or levies are
the subject of Permitted Protests,

(c) judgment Liens arising solely as a result of the existence of judgments,
orders, or awards that do not constitute an Event of Default under Section 8.3
of the Agreement,

(d) Liens set forth on Schedule P-2 to the Agreement; provided, that to qualify
as a Permitted Lien, any such Lien described on Schedule P-2 to the Agreement
shall only secure the Indebtedness that it secures on the Closing Date and any
Refinancing Indebtedness in respect thereof,

(e) the interests of lessors under operating leases and non-exclusive licensors
under license agreements,

(f) purchase money Liens or the interests of lessors under Capital Leases to the
extent that such Liens or interests secure Permitted Purchase Money Indebtedness
and so long as (i) such Lien attaches only to the asset purchased or acquired
and the proceeds thereof, and (ii) such Lien only secures the Indebtedness that
was incurred to acquire the asset purchased or acquired or any Refinancing
Indebtedness in respect thereof,

(g) Liens arising by operation of law in favor of warehousemen, landlords,
carriers, mechanics, materialmen, laborers, or suppliers, incurred in the
ordinary course of business and not in connection with the borrowing of money,
and which Liens either (i) are for sums not yet delinquent, or (ii) are the
subject of Permitted Protests,

(h) Liens on amounts deposited to secure Parent’s and its Subsidiaries
obligations in connection with worker’s compensation or other unemployment
insurance,

(i) Liens on amounts deposited to secure Parent’s and its Subsidiaries
obligations in connection with the making or entering into of bids, tenders, or
leases in the ordinary course of business and not in connection with the
borrowing of money,

(j) Liens on amounts deposited to secure Parent’s and its Subsidiaries
reimbursement obligations with respect to surety or appeal bonds obtained in the
ordinary course of business,

(k) with respect to any Real Property, easements, rights of way, and zoning
restrictions that do not materially interfere with or impair the use or
operation thereof,

(l) licenses of patents, trademarks, copyrights, and other intellectual property
rights in the ordinary course of business so long as any such transaction shall
not adversely affect, limit or restrict the rights of Agent to use any
Intellectual Property to sell or otherwise dispose of any Inventory or other
Collateral in the United States,

 

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(m) Liens that are replacements of Permitted Liens to the extent that the
original Indebtedness is the subject of permitted Refinancing Indebtedness and
so long as the replacement Liens only encumber those assets that secured the
original Indebtedness,

(n) rights of setoff or bankers’ liens upon deposits of funds in favor of banks
or other depository institutions, solely to the extent incurred in connection
with the maintenance of such Deposit Accounts in the ordinary course of
business,

(o) Liens granted in the ordinary course of business on the unearned portion of
insurance premiums securing the financing of insurance premiums to the extent
the financing is permitted under the definition of Permitted Indebtedness,

(p) Liens in favor of customs and revenue authorities arising as a matter of law
to secure payment of customs duties in connection with the importation of goods,

(q) Liens solely on any cash earnest money deposits made by Parent or any of its
Subsidiaries in connection with any letter of intent or purchase agreement with
respect to a Permitted Acquisition,

(r) Liens on Equipment or Real Property assumed by Parent or its Subsidiaries in
connection with a Permitted Acquisition that secure Acquired Indebtedness,

(s) Lien on assets of Subsidiaries of Parent that are not Loan Parties securing
Indebtedness permitted by clause (q) of the definition of Permitted
Indebtedness, and

(t) other Liens on assets which do not secure Indebtedness for borrowed money or
letters of credit and as to which the aggregate amount of the obligations
secured thereby does not exceed $500,000; provided, that, (i) no Event of
Default has occurred and is continuing or would result therefrom and (ii) such
Liens shall be subordinated on terms and pursuant to documentation reasonably
satisfactory to Agent.

Notwithstanding anything to the contrary contained in any of the Loan Documents,
Permitted Liens shall not include any Liens on assets of any Loan Party which
secure any Indebtedness or other obligations of any Subsidiary of Parent that is
not a Loan Party, except for Indebtedness of such Subsidiary consisting of Bank
Product Obligations or as otherwise agreed in writing by Agent.

“Permitted Protest” means the right of Parent or any of its Subsidiaries to
protest any Lien (other than any Lien that secures the Obligations), taxes
(other than payroll taxes or taxes that are the subject of a United States
federal tax lien), or rental payment, provided that (a) a reserve with respect
to such obligation is established on Parent’s or its Subsidiaries’ books and
records in such amount as is required under GAAP, (b) any such protest is
instituted promptly and prosecuted diligently by Parent or its Subsidiary, as
applicable, in good faith, and (c) Agent is satisfied that, while any such
protest is pending, there will be no impairment of the enforceability, validity,
or priority of any of Agent’s Liens.

“Permitted Purchase Money Indebtedness” means, as of any date of determination,
Indebtedness (other than the Obligations, but including Capitalized Lease
Obligations), incurred after the Closing Date and at the time of, or within 20
days after, the acquisition of any fixed assets for the purpose of financing all
or any part of the acquisition cost thereof, in an aggregate principal amount
outstanding at any one time not in excess of $2,000,000.

 

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“Person” means natural persons, corporations, limited liability companies,
limited partnerships, general partnerships, limited liability partnerships,
joint ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.

“Platform” has the meaning specified therefor in Section 17.9(c) of the
Agreement.

“Primary Syndication” has the meaning ascribed thereto in the Fee Letter.

“Projections” means Parent’s forecasted (a) balance sheets, (b) profit and loss
statements, and (c) cash flow statements, all prepared on a basis consistent
with Parent’s historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.

“Pro Rata Share” means, as of any date of determination:

(a) with respect to a Lender’s obligation to make all or a portion of the Loans,
with respect to such Lender’s right to receive payments of interest, fees, and
principal with respect to the Loans, and with respect to all other computations
and other matters related to the Commitments or the Loans, the percentage
obtained by dividing (i) the Revolving Loan Exposure of such Lender by (ii) the
aggregate Revolving Loan Exposure of all Lenders,

(b) with respect to a Lender’s obligation to participate in the Letters of
Credit, with respect to such Lender’s obligation to reimburse Issuing Lender,
and with respect to such Lender’s right to receive payments of Letter of Credit
fees, and with respect to all other computations and other matters related to
the Letters of Credit, the percentage obtained by dividing (i) the Revolving
Loan Exposure of such Lender by (ii) the aggregate Revolving Loan Exposure of
all Lenders; provided, that if all of the Revolving Loans have been repaid in
full and all Revolver Commitments have been terminated, but Letters of Credit
remain outstanding, Pro Rata Share under this clause shall be determined as if
the Revolver Commitments had not been terminated and based upon the Revolver
Commitments as they existed immediately prior to their termination, and

(c) with respect to all other matters and for all other matters as to a
particular Lender (including the indemnification obligations arising under
Section 15.7 of the Agreement), the percentage obtained by dividing (i) the
Revolving Loan Exposure of such Lender by (ii) the aggregate Revolving Loan
Exposure of all Lenders, in any such case as the applicable percentage may be
adjusted by assignments permitted pursuant to Section 13.1; provided, that if
all of the Loans have been repaid in full, all Letters of Credit have been made
the subject of Letter of Credit Collateralization, and all Commitments have been
terminated, Pro Rata Share under this clause shall be determined as if the
Revolving Loan Exposures had not been repaid, collateralized, or terminated and
shall be based upon the Revolving Loan Exposures as they existed immediately
prior to their repayment, collateralization, or termination.

“Protective Advances” has the meaning specified therefor in Section 2.3(d)(i) of
the Agreement.

“Public Lender” has the meaning specified therefor in Section 17.9(c) of the
Agreement.

“Purchase Price” means, with respect to any Acquisition, an amount equal to the
aggregate consideration, whether cash, property or securities (including the
fair market value of any Equity Interests of Parent issued in connection with
such Acquisition and including the maximum amount of Earn-Outs), paid or
delivered by Parent or one of its Subsidiaries in connection with such
Acquisition (whether paid at the closing thereof or payable thereafter and
whether fixed or contingent), but excluding therefrom (a) any cash of the seller
and its Affiliates used to fund any portion of such consideration and (b) any
cash or Cash Equivalents acquired in connection with such Acquisition.

 

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“Qualified Affiliate Transactions” means transactions in which employees of
Subsidiaries of Parent which are not Loan Parties perform services solely for
the benefit of Borrowers in exchange for payments by Borrowers to such
Subsidiaries in amounts necessary to enable such Subsidiaries to pay the
reasonable salaries of such employees; provided, that, (a) the aggregate amount
of all such payments by Borrowers shall not exceed $750,000 during any month and
(b) such transactions (including such payments) are in the ordinary course of
business and consistent with past practice.

“Qualified Equity Interest” means and refers to any Equity Interests issued by
Parent (and not by one or more of its Subsidiaries) that is not a Disqualified
Equity Interest.

“Real Property” means any estates or interests in real property now owned or
hereafter acquired by Parent or its Subsidiaries and the improvements thereto.

“Real Property Collateral” means the Real Property identified on Schedule R-1 to
the Agreement and any Real Property hereafter acquired by Parent or its
Subsidiaries.

“Receivable Reserves” means, as of any date of determination, those reserves
that Agent deems necessary or appropriate, in its Permitted Discretion and
subject to Section 2.1(c), to establish and maintain (including reserves for
rebates, discounts, warranty claims, and returns) with respect to the Eligible
Accounts or the Maximum Revolver Amount.

“Record” means information that is inscribed on a tangible medium or that is
stored in an electronic or other medium and is retrievable in perceivable form.

“Reference Period” has the meaning set forth in the definition of EBITDA.

“Refinancing Indebtedness” means refinancings, renewals, or extensions of
Indebtedness so long as:

(a) such refinancings, renewals, or extensions do not result in an increase in
the principal amount of the Indebtedness so refinanced, renewed, or extended,
other than by the amount of premiums paid thereon and the fees and expenses
incurred in connection therewith and by the amount of unfunded commitments with
respect thereto,

(b) such refinancings, renewals, or extensions do not result in a shortening of
the average weighted maturity (measured as of the refinancing, renewal, or
extension) of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions that, taken as a whole, are or could reasonably be
expected to be materially adverse to the interests of the Lenders,

(c) if the Indebtedness that is refinanced, renewed, or extended was
subordinated in right of payment to the Obligations, then the terms and
conditions of the refinancing, renewal, or extension must include subordination
terms and conditions that are at least as favorable to the Lender Group as those
that were applicable to the refinanced, renewed, or extended Indebtedness, and

(d) the Indebtedness that is refinanced, renewed, or extended is not recourse to
any Person that is liable on account of the Obligations other than those Persons
which were obligated with respect to the Indebtedness that was refinanced,
renewed, or extended.

 

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“Register” has the meaning set forth in Section 13.1(h) of the Agreement.

“Registered Loan” has the meaning set forth in Section 13.1(h) of the Agreement.

“Reimbursement Undertaking” has the meaning specified therefor in
Section 2.11(a) of the Agreement.

“Related Fund” means any Person (other than a natural person) that is engaged in
making, purchasing, holding or investing in bank loans and similar extensions of
credit in the ordinary course and that is administered, advised or managed by
(a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of
an entity that administers, advises or manages a Lender.

“Remedial Action” means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address Hazardous
Materials in the indoor or outdoor environment, (b) prevent or minimize a
release or threatened release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) restore or reclaim natural resources or the
environment, (d) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (e) conduct any other
actions with respect to Hazardous Materials required by Environmental Laws.

“Replacement Lender” has the meaning specified therefor in Section 2.13(b) of
the Agreement.

“Report” has the meaning specified therefor in Section 15.16 of the Agreement.

“Required Availability” means that Excess Availability exceeds $15,000,000.

“Required Lenders” means, at any time, Lenders having or holding more than 50%
of the aggregate Revolving Loan Exposure of all Lenders; provided, that (i) the
Revolving Loan Exposure of any Defaulting Lender shall be disregarded in the
determination of the Required Lenders, and (ii) at any time there are 2 or more
Lenders, “Required Lenders” must include at least 2 Lenders (who are not
Affiliates of one another).

“Reserves” means, as of any date of determination, those reserves (other than
Receivable Reserves, Bank Product Reserves, and Inventory Reserves) with respect
to the Borrowing Base or the Maximum Revolver Amount that Agent deems necessary
or appropriate, in its Permitted Discretion and subject to Section 2.1(c), to
establish and maintain (including reserves with respect to (a) sums that Parent
or its Subsidiaries are required to pay under any Section of the Agreement or
any other Loan Document (such as taxes, assessments, insurance premiums, or, in
the case of leased assets, rents or other amounts payable under such leases) and
has failed to pay, (b) amounts owing by Parent or its Subsidiaries to any Person
to the extent secured by a Lien on, or trust over, any of the Collateral (other
than a Permitted Lien), which Lien or trust, in the Permitted Discretion of
Agent likely would have a priority superior to the Agent’s Liens (such as Liens
or trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen,
laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item of
the Collateral and (c) fluctuations in the Exchange Rate of Euros or Sterling
into U.S. Dollars.

“Restricted Payment” means to (a) declare or pay any dividend or make any other
payment or distribution, directly or indirectly, on account of Equity Interests
issued by Parent (including any payment in connection with any merger or
consolidation involving Parent) or to the direct or indirect holders of Equity
Interests issued by Parent in their capacity as such (other than dividends or
distributions payable in Qualified Equity Interests issued by Parent, or
(b) purchase, redeem, make any sinking fund or similar

 

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payment, or otherwise acquire or retire for value (including in connection with
any merger or consolidation involving Parent) any Equity Interests issued by
Parent, (c) make any payment to retire, or to obtain the surrender of, any
outstanding warrants, options, or other rights to acquire Equity Interests of
Parent now or hereafter outstanding, and (d) make, or cause or suffer to permit
any of Parent’s Subsidiaries to make, any payment or prepayment of principal of,
premium, if any, or interest on, or redemption, purchase, retirement, defeasance
(including in-substance or legal defeasance), sinking fund or similar payment
with respect to, any Subordinated Indebtedness.

“Revolver Commitment” means, with respect to each Revolving Lender, its Revolver
Commitment, and, with respect to all Revolving Lenders, their Revolver
Commitments, in each case as such Dollar amounts are set forth beside such
Revolving Lender’s name under the applicable heading on Schedule C-1 to the
Agreement or in the Assignment and Acceptance pursuant to which such Revolving
Lender became a Revolving Lender under the Agreement, as such amounts may be
reduced or increased from time to time pursuant to assignments made in
accordance with the provisions of Section 13.1 of the Agreement.

“Revolver Usage” means, as of any date of determination, the sum of (a) the
amount of outstanding Revolving Loans (inclusive of Swing Loans and Protective
Advances), plus (b) the amount of the Letter of Credit Usage.

“Revolving Lender” means a Lender that has a Revolving Loan Commitment or that
has an outstanding Revolving Loan.

“Revolving Loan Exposure” means, with respect to any Revolving Lender, as of any
date of determination (a) prior to the termination of the Revolver Commitments,
the amount of such Lender’s Revolver Commitment, and (b) after the termination
of the Revolver Commitments, the aggregate outstanding principal amount of the
Revolving Loans of such Lender.

“Revolving Loans” has the meaning specified therefor in Section 2.1(a) of the
Agreement.

“Sanctioned Entity” means (a) a country or a government of a country, (b) an
agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, (d) a Person resident in
or determined to be resident in a country, in each case, that is subject to a
country sanctions program administered and enforced by OFAC.

“Sanctioned Person” means a person named on the list of Specially Designated
Nationals maintained by OFAC.

“S&P” has the meaning specified therefor in the definition of Cash Equivalents.

“SEC” means the United States Securities and Exchange Commission and any
successor thereto.

“Securities Account” means a securities account (as that term is defined in the
Code).

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and any successor statute.

“Settlement” has the meaning specified therefor in Section 2.3(e)(i) of the
Agreement.

“Settlement Date” has the meaning specified therefor in Section 2.3(e)(i) of the
Agreement.

 

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“Sole Lead Arranger” means Wells Fargo Capital Finance, LLC in its capacity as
sole lead arranger.

“Sole Lead Bookrunner” means Wells Fargo Capital Finance, LLC in its capacity as
sole lead bookrunner.

“Solvent” means, with respect to any Person as of any date of determination,
that (a) at fair valuations, the sum of such Person’s debts (including
contingent liabilities) is less than all of such Person’s assets, (b) such
Person is not engaged or about to engage in a business or transaction for which
the remaining assets of such Person are unreasonably small in relation to the
business or transaction or for which the property remaining with such Person is
an unreasonably small capital, and (c) such Person has not incurred and does not
intend to incur, or reasonably believe that it will incur, debts beyond its
ability to pay such debts as they become due (whether at maturity or otherwise),
and (d) such Person is “solvent” or not “insolvent”, as applicable within the
meaning given those terms and similar terms under applicable laws relating to
fraudulent transfers and conveyances. For purposes of this definition, the
amount of any contingent liability at any time shall be computed as the amount
that, in light of all of the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability (irrespective of whether such contingent liabilities meet the
criteria for accrual under Statement of Financial Accounting Standard No. 5).

“Specified Foreign Subsidiaries” means K-Swiss International, Ltd. and K-Swiss
International Manufacturing, Ltd.

“Specified Permitted Intercompany Advances” means, collectively, the Permitted
Intercompany Advances made in accordance with clause (d) of the definition of
Permitted Intercompany Advances.

“Sterling” or “£” refers to the lawful currency of the United Kingdom.

“Sterling Denominated Letter of Credit” means each Letter of Credit denominated
in Sterling at the time of the issuance thereof.

“Sterling Denominated Loans” means each Loan denominated in Sterling at the time
of the incurrence thereof.

“Subordinated Indebtedness” means any unsecured Indebtedness of Parent or its
Subsidiaries incurred from time to time that is subordinated in right of payment
to the Obligations.

“Subsidiary” of a Person means a corporation, partnership, limited liability
company, or other entity in which that Person directly or indirectly owns or
controls the Equity Interests having ordinary voting power to elect a majority
of the Board of Directors of such corporation, partnership, limited liability
company, or other entity.

“Supermajority Lenders” means, at any time, Lenders having or holding more than
66 2/3% of the aggregate Revolving Loan Exposure of all Lenders; provided, that
(i) the Revolving Loan Exposure of any Defaulting Lender shall be disregarded in
the determination of the Required Lenders, (ii) at any time there are 2 or more
Lenders, “Supermajority Lenders” must include at least 2 Lenders (who are not
Affiliates of one another).

“Swing Lender” means Wells Fargo or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent agrees, in such Lender’s
sole discretion, to become the Swing Lender under Section 2.3(b) of the
Agreement.

 

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“Swing Loan” has the meaning specified therefor in Section 2.3(b) of the
Agreement.

“Swing Loan Exposure” means, as of any date of determination with respect to any
Lender, such Lender’s Pro Rata Share of the Swing Loans on such date.

“TARGET Day” means any day on which the Trans-European Automated Real-time Gross
Settlement Express Transfer payment system is open for the settlement of
payments denominated in Euros.

“Taxes” means any taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction or by
any political subdivision or taxing authority thereof or therein, and all
interest, penalties or similar liabilities with respect thereto.

“Tax Lender” has the meaning specified therefor in Section 14.2(a) of the
Agreement.

“Termination Event” means (a) a “Reportable Event” described in Section 4043 of
ERISA for which the notice requirement has not been waived by the PBGC, (b) the
withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan during a
plan year in which it was a “substantial employer” as defined in
Section 4001(a)(2) of ERISA, (c) the termination of a Pension Plan, the filing
of a notice of intent to terminate a Pension Plan or the treatment of a Pension
Plan amendment as a termination, under Section 4041 of ERISA, if the plan assets
are not sufficient to pay all plan liabilities, (d) the institution of
proceedings to terminate, or the appointment of a trustee with respect to, any
Pension Plan by the PBGC, (e) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan, (f) the imposition of
a Lien pursuant to Section 412 or 430 of the IRC or Section 302 or 4068 of
ERISA, (g) the partial or complete withdrawal of any Loan Party or any ERISA
Affiliate from a Multiemployer Plan (other than any complete withdrawal that
would not constitute an Event of Default under Section 8.12), (h) any event or
condition which results in the reorganization or insolvency of a Multiemployer
Plan under Sections 4241 or 4245 of ERISA, (i) any event or condition which
results in the termination of a Multiemployer Plan under Section 4041A of ERISA
or the institution by the PBGC of proceedings to terminate or to appoint a
trustee to administer a Multiemployer Plan under Section 4042 of ERISA, (j) any
Pension Plan being in “at risk status” within the meaning of IRC Section 430(i),
(k) any Multiemployer Plan being in “endangered status” or “critical status”
within the meaning of IRC Section 432(b), (l) with respect to any Pension Plan,
any Loan Party or any ERISA Affiliate incurring a substantial cessation of
operations within the meaning of ERISA Section 4062(e); or (m) any event that
causes any Loan Party or any of their ERISA Affiliates to incur liability under
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 4971 or 4975 of the IRC.

“Trademark Security Agreement” has the meaning specified therefor in the
Guaranty and Security Agreement.

“Type” means, when used in reference to any Loan or borrowing thereof, refers to
whether such Loan is a Base Rate Loan, LIBOR Rate Loan, Euro Denominated Loan or
Sterling Denominated Loan.

“UCP 600” means the rules of the Uniform Customs and Practice for Documentary
Credits, as most recently published by the International Chamber of Commerce and
in effect as of July 1, 2007 (or such later version thereof as may be in effect
at the time of issuance).

“Underlying Issuer” means Wells Fargo or one of its Affiliates.

 

38

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“Underlying Letter of Credit” means a Letter of Credit that has been issued by
an Underlying Issuer.

“United States” means the United States of America.

“Unused Line Fee” has the meaning specified therefor in Section 2.10(b) of the
Agreement.

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

“Voidable Transfer” has the meaning specified therefor in Section 17.8 of the
Agreement.

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking
association.

 

39

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Schedule 3.1

to

Credit Agreement

Conditions Precedent

The obligation of each Lender to make its initial extension of credit provided
for in the Agreement is subject to the fulfillment, to the satisfaction of each
Lender (the making of such initial extension of credit by any Lender being
conclusively deemed to be its satisfaction or waiver of the following), of each
of the following conditions precedent:

(a) the Closing Date shall occur on or before April 27, 2012;

(b) Agent shall have received a letter duly executed by each Borrower and each
Guarantor authorizing Agent to file appropriate financing statements in such
office or offices as may be necessary or, in the opinion of Agent, desirable to
perfect the security interests to be created by the Loan Documents;

(c) Agent shall have received evidence that appropriate financing statements
have been duly filed in such office or offices as may be necessary or, in the
opinion of Agent, desirable to perfect Agent’s Liens in and to the Collateral,
and Agent shall have received searches reflecting the filing of all such
financing statements;

(d) Agent shall have received each of the following documents, in form and
substance reasonably satisfactory to Agent, duly executed, and each such
document shall be in full force and effect:

(i) the Controlled Account Agreements,

(ii) the Control Agreements,

(iii) the Guaranty and Security Agreement,

(iv) Trademark Security Agreements, Patent Security Agreements and Copyright
Security Agreements (as applicable),

(v) a disbursement letter executed and delivered by each Borrower to Agent
regarding the extensions of credit to be made on the Closing Date, the form and
substance of which is satisfactory to Agent,

(vi) the Fee Letter,

(vii) [Reserved],

(viii) the Mortgages,

(ix) a Borrowing Base Certificate,

(x) a letter, in form and substance reasonably satisfactory to Agent, from Bank
of America, N.A. (“Existing Lender”) to Agent respecting the amount necessary to
repay in full all of the

 

40

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obligations of each Loan Party and its Subsidiaries owing to Existing Lender
under the Existing Credit Facility and obtain a release of all of the Liens
existing in favor of Existing Lender in and to the assets of such Loan Party and
its Subsidiaries, together with termination statements and other documentation
evidencing the termination by Existing Lender of its Liens in and to the
properties and assets of such Loan Party and its Subsidiaries, and

(xi) a standing wire transfer instruction, in form and substance reasonably
satisfactory, duly executed and delivered by Parent and Existing Lender.

(e) Loan Parties shall have made arrangements for the termination of their
existing domestic cash management arrangements at Bank of America within one
hundred eighty (180) days from the date hereof; except, that, such existing
domestic cash management arrangements may remain in effect from the date hereof
up to the date that is one hundred eighty (180) days from the date hereof with
respect to any deposit accounts maintained at Bank of America so long as Agent
shall have received, in form and substance reasonably satisfactory to Agent, a
letter agreement duly authorized, executed and delivered by Borrowers and Bank
of America;

(f) Agent shall have received originals of the shares of the stock certificates
(if any) representing all of the issued and outstanding shares of the Equity
Interests of each Borrower and Guarantor (other than Parent) and owned by any
Borrower or Guarantor, in each case together with stock powers, as applicable,
duly executed in blank with respect thereto;

(g) Agent shall have received a certificate from the Secretary of each Borrower
and Guarantor (i) attesting to the resolutions of such Borrower’s or
Guarantor’s, as applicable, Board of Directors or equivalent governing body,
authorizing its execution, delivery, and performance of the Agreement and the
other Loan Documents to which such Borrower or Guarantor, as applicable, is a
party, (ii) authorizing specific officers of such Borrower or Guarantor, as
applicable, to execute the same, and (iii) attesting to the incumbency and
signatures of such specific officers of such Borrower or Guarantor, as
applicable;

(h) Agent shall have received copies of each Borrower’s and each Guarantor’s
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of such Borrower or Guarantor, as applicable;

(i) Agent shall have received a certificate of status with respect to each
Borrower and Guarantor, dated within ten (10) days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of such Borrower or Guarantor, as applicable, which certificate
shall indicate that such Borrower or Guarantor, as applicable, is in good
standing in such jurisdiction;

(j) Agent shall have received certificates of status with respect to each
Borrower and Guarantor, each dated within thirty (30) days of the Closing Date,
such certificates to be issued by the appropriate officer of the jurisdictions
(other than the jurisdiction of organization of such Borrower or Guarantor) in
which its failure to be duly qualified or licensed could result in a Material
Adverse Effect, which certificates shall indicate that such Borrower or
Guarantor, as applicable, is in good standing in such jurisdictions;

(k) Agent shall have received certificates of insurance, together with the
endorsements thereto, as are required by Section 5.6, the form and substance of
which shall be satisfactory to Agent;

(l) Agent shall have received Collateral Access Agreements with respect to the
following locations: distribution center located at 3177 Space Center Court,
Mira Loma, California;

 

41

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(m) Agent shall have received a legal opinion from each of California and
Massachusetts counsel to the Loan Parties, each in form and substance reasonably
satisfactory to Agent;

(n) Borrowers shall have the Required Availability, after giving effect to the
initial extensions of credit hereunder and the payment of all fees and expenses
required to be paid by Loan Parties on the Closing Date under the Agreement or
the other Loan Documents;

(o) Agent shall have completed its business, legal, and collateral due
diligence, including (i) a collateral audit and review of each Loan Party’s
books and records and verification of such Borrower’s representations and
warranties to Lender Group, the results of which shall be satisfactory to Agent,
and (ii) an inspection of each of the locations where each Loan Party’s
Inventory is located, the results of which shall be satisfactory to Agent;

(p) Agent shall have completed (i) Patriot Act searches, OFAC/PEP searches and
customary individual background checks for each Borrower and Guarantor, and
(ii) OFAC/PEP searches and customary individual background searches for each
Borrower’s and Guarantor’s senior management and key principals, the results of
which shall be satisfactory to Agent;

(q) Agent shall have received an appraisal, by an appraiser acceptable to Agent
and addressed to Agent and upon which Agent is authorized to rely, with respect
to each Borrower’s Inventory, the results of which shall be satisfactory to
Agent;

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

(s) Agent shall have received a set of Projections of Loan Parties for the 1
year period following the Closing Date on a month-by-month basis, in form and
substance (including as to scope and underlying assumptions) satisfactory to
Agent;

(t) Borrowers shall have paid all Lender Group Expenses incurred in connection
with the transactions evidenced by the Agreement;

(u) Agent shall have received and reviewed lien and judgment search results for
the jurisdiction of organization of each Borrower and Guarantor, the
jurisdiction of the chief executive office of each Borrower and Guarantor and
all jurisdictions in which material assets of Borrowers and Guarantors are
located, which search results shall be in form and substance satisfactory to
Agent;

(v) Each Loan Party shall have received all licenses, approvals or evidence of
other actions required by any Governmental Authority in connection with the
execution and delivery by Loan Parties of the Loan Documents or with the
consummation of the transactions contemplated thereby; and

(w) all other documents and legal matters in connection with the transactions
contemplated by the Agreement shall have been delivered, executed, or recorded
and shall be in form and substance reasonably satisfactory to Agent.

 

42

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Schedule 3.6

to

Credit Agreement

Conditions Subsequent

Loan Parties shall deliver or cause to be delivered to Agent, in form and
substance reasonably satisfactory to Agent, as promptly as possible following
the Closing Date, but in any event no later than the dates referred to below
with respect to each such item (or such later date as Agent shall agree in
writing subject to the terms of Section 5.16), the items set forth below:

1. on or before the date that is thirty (30) days after the Closing Date,
deliver or cause to be delivered evidence reasonably satisfactory to Agent that
the liens described below have been terminated and released of record:

 

  •  

Certificate of Tax Lien (Filing No. 20110781849) in the amount of $11,993.72
filed on June 8, 2011, by the Los Angeles County Tax Collector against Parent in
the Recorder’s Office of Los Angeles County, California

 

  •  

Certificate of Tax Lien (Filing No. 20110781850) in the amount of $18,996.37
filed on June 8, 2011, by the Los Angeles County Tax Collector against Parent in
the Recorder’s Office of Los Angeles County, California

2. on or before the date that is forty-five (45) days after the Closing Date,
deliver or cause to be delivered tax status certificates for the Loan Parties
set forth below in each of the respective jurisdictions set forth below:

 

Loan Party   Jurisdiction K•Swiss Inc.   Arizona, Illinois, Kansas, Michigan,
New York, K-Swiss Sales Corp.   Alabama, Arkansas, Connecticut, Florida,
Indiana, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, Pennsylvania,
South Carolina, Virginia, West Virginia K-Swiss Direct Inc.   Arizona, Illinois,
Kansas, Michigan, New York, Texas

3. on or before the date that is sixty (60) days after the Closing Date, deliver
or cause to be delivered the Mortgage and UCC fixture filing with respect to the
Real Property located at 31248 Oak Crest Drive, Westlake Village, California,
together with flood certificates and flood insurance (if the property is in a
flood plain requiring such insurance pursuant to federal regulation) in form and
substance reasonably satisfactory to Agent; and

 

43

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4. on or before the date that is sixty (60) days after the Closing Date, a valid
and effective title insurance policy or unconditional commitment therefor issued
by a title insurance company reasonably acceptable to Agent: (a) insuring the
priority, amount and sufficiency of the Mortgage, (b) insuring against matters
that would be disclosed by surveys and (c) containing any legally available
endorsements, assurances or affirmative coverage reasonably requested by Agent
for protection of its interests.

 

44

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SCHEDULE 4.1(b)

CAPITALIZATION OF BORROWER

Previously Provided to Agent

 

45

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SCHEDULE 4.1(c)

CAPITALIZATION OF BORROWERS’ SUBSIDIARIES

Previously Provided to Agent

 

46

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SCHEDULE 4.6(b)

LITIGATION

Previously Provided to Agent

 

47

--------------------------------------------------------------------------------

SCHEDULE 4.10

BENEFIT PLANS

K-Swiss Inc. 401(k) and Profit Sharing Plan

K-Swiss Inc. 1999 Stock Option Plan

 

48

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SCHEDULE 4.11

ENVIRONMENTAL MATTERS

None.

 

49

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SCHEDULE 4.14

PERMITTED INDEBTEDNESS

Previously Provided to Agent

 

50

--------------------------------------------------------------------------------

SCHEDULE 4.24

LOCATION OF INVENTORY

 

(1) 3177 Space Center Ct.

Mira Loma, CA

 

51

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Schedule 5.1

to

Credit Agreement

Financial Statements, Reports, Certificates

Deliver to Agent, with copies to each Lender, each of the financial statements,
reports, or other items set forth set forth below at the following times in form
satisfactory to Agent:

 

as soon as available, but in any event within thirty five (35 ) days after end
of each of Parent’s fiscal months   (a)    an unaudited consolidated balance
sheet, income statement, and statement of stockholders’ equity covering Parent’s
and its Subsidiaries’ operations during such period, in each case on a monthly
and year-to- date basis together with a comparison against the corresponding
figures for the corresponding period of the prior fiscal year; and   (b)    a
Compliance Certificate. as soon as available, but in any event within ninety
(90) days after end of Parent’s fiscal years   (c)    Consolidated financial
statements of Parent’s and its Subsidiaries’ for each such fiscal year, audited
by independent certified public accountants reasonably acceptable to Agent and
certified, without any qualifications and an unaudited consolidated financial
statement of Parent’s and its Subsidiaries’ operations during such period
(including any (A) “going concern” or like qualification or exception, or (B)
qualification or exception as to the scope of such audit), by such accountants
to have been prepared in accordance with GAAP (such audited financial statements
to include a balance sheet, income statement, statement of stockholders’ equity
and statement of cash flow and, if prepared, such accountants’ letter to
management) and a comparison against the corresponding figures for the prior
fiscal year; and   (d)    a Compliance Certificate. as soon as available, but in
any event within forty five (45 ) days after end of each of Parent’s fiscal
quarter   (e)    an unaudited statement of cash flow covering Parent’s and its
Subsidiaries’ operations during such period, in each case on a quarterly and
year-to- date basis together with a comparison against the corresponding figures
for the corresponding period of the prior fiscal year; as soon as available, but
in any event within forty-five (45) days after the start of each of Parent’s
fiscal year   (f)    copies of Parent’s and its Subsidiaries’ Projections, in
form and substance (including as to scope and underlying assumptions)
satisfactory to Agent, in its Permitted Discretion, for the forthcoming fiscal
year, month by month, certified by the chief financial officer of Parent as
being such officer’s good faith estimate of the financial performance of Parent
and its Subsidiaries during the period covered thereby. if and when filed by any
Loan Party   (g)    Form 10-Q quarterly reports, Form 10-K annual reports, and
Form 8-K current reports;

 

52

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  (h)    any other filings made by any Loan Party or its Subsidiaries with the
SEC; and   (i)    any other formal financial reporting information that is
provided by any Loan Party or any of its Subsidiaries to their shareholders
generally.

 

53

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Schedule 5.2

to

Credit Agreement

Collateral Reporting

Provide Agent (and if so requested by Agent, with copies for each Lender) with
each of the documents set forth below at the following times in form reasonably
satisfactory to Agent:

 

Monthly (no later than the fifteenth (15th) day of each month), or, if Revolver
Usage exceeds $0, weekly (no later than Wednesday of the immediately succeeding
week)   (a)   

an Account roll-forward with supporting details supplied from sales journals,
collection journals, credit registers and any other records;

 

  (b)   

notice of all material claims, offsets, or disputes asserted by Account Debtors
with respect to Borrowers’ Accounts;

 

  (c)   

Inventory system/perpetual reports specifying the cost of Borrowers’ Inventory,
by category (delivered electronically in an acceptable format, if Borrowers have
implemented electronic reporting), and reports detailing the in-transit
Inventory of Borrowers, by category;

 

  (d)   

a Borrowing Base Certificate;

 

  (e)   

a detailed aging, by total, of Borrowers’ Accounts (delivered electronically in
an acceptable format, if Borrowers have implemented electronic reporting);

 

  (f)   

a detailed calculation of those Accounts that are not eligible for the Borrowing
Base;

 

  (g)   

[reserved];

 

  (h)   

a detailed calculation of Inventory categories that are not eligible for the
Borrowing Base;

 

  (i)   

a detailed report of aging, by vendor, of Borrowers’ accounts payable (delivered
electronically in an acceptable format, if Borrowers have implemented electronic
reporting); and

 

  (j)    a monthly Account roll-forward, in a format acceptable to Agent, tied
to the beginning and ending account receivable balances of Borrowers’ general
ledger.

 

54

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Monthly (no later than the thirtieth (30th) day of each month)   (k)    (i) a
reconciliation of Accounts, trade accounts payable, and Inventory of Borrowers’
general ledger accounts to its monthly financial statements including any book
reserves related to each category, and (ii) a detailed report of aging, by
vendor, of any book overdrafts, including accruals with respect thereto
(delivered electronically in an acceptable format, if Borrowers have implemented
electronic reporting), and an aging, by vendor, of any held checks.   (l)   
data files required to calculate the amount of slow moving and excess Inventory,
to calculate Borrowing Base reserves for Inventory on a lower of cost to market
basis, and to calculate any Reserve with respect to royalties.   (m)    a report
of Specified Permitted Intercompany Advances made and repaid during such month,
and of the outstanding principal amount of all Specified Permitted Intercompany
Advances as of the last day of such month. Annually   (n)    a detailed list of
Borrowers’ material customers, with address and contact information. Promptly
upon request by Agent   (o)    copies of purchase orders and invoices for
Inventory and Equipment acquired by any Borrower;   (p)    such other reports as
to the Collateral or the financial condition of any Borrower, as Agent may
reasonably request; and   (q)    copies of invoices together with corresponding
shipping and delivery documents, and credit memos together with corresponding
supporting documentation, with respect to invoices and credit memos in excess of
an amount determined in the sole discretion of Agent, from time to time.   (r)
   such reports as Agent may reasonably request as to withholding taxes withheld
by licensees and other Persons from amounts otherwise payable to any Borrower.

 

55

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SCHEDULE 6.5

NATURE OF BUSINESS

Manufacture, marketing, distribution and sale of footwear products, apparel
products, and products accessory to footwear and apparel, including but not
limited to socks, caps, visors, bags, sunglasses, and watches.

In addition to trading under their legal names and under the name “K-Swiss”, the
following K-Swiss entities regularly trade under the name “Palladium” or
“Palladium Boots”:

 

 

K•Swiss Inc.

 

K-Swiss Sales Corp.

 

K-Swiss International Ltd

 

K-Swiss Europe BV

 

1166789 Ontario Inc.

 

 

56